Employer of Record (EOR) vs setting up your own entity in Egypt: Which is better?
- Gegidze • გეგიძე | Marketing
- Jul 10
- 10 min read
Updated: Aug 19
Table of contents:
Introduction
Your first Egyptian engineer, brilliant, qualified, and eager to start, just accepted your offer. Your roadmap finally feels within reach. But then your HR lead drops an email titled: “Egypt Setup Issues.” Suddenly, the excitement fades into questions:
How do we register a company in Cairo?
What about payroll compliance and taxes?
Do we really need to wait weeks just to get started?
This is the crossroads many global companies face when hiring talent in Egypt: Should you set up your own entity or use an Employer of Record (EOR)?
Setting up your own legal entity in Egypt gives you control, but it also comes with a mountain of paperwork, strict compliance rules, and unpredictable hidden costs. On the other hand, hiring through an EOR means you get speed, simplicity, and guaranteed compliance from day one, but you trade off some direct operational control.
This guide walks you through the real differences between these two routes. We’ll unpack the practicalities of each choice, highlight compliance pitfalls you’ll want to avoid, and provide actionable insights to help you confidently decide how to scale your team in Egypt.
Understanding Employer of Record (EOR) services in Egypt
An Employer of Record (EOR) in Egypt is a local, legally registered company that hires employees on your behalf. They become the legal employer on paper, but your company directs the work, manages the team, and retains full operational control.
In short, you manage the people, and the EOR manages the paperwork.
What an EOR in Egypt actually does
When you hire through an EOR like Team Up, you're not just outsourcing admin; you’re locking in a compliant hiring structure from day one.
Here's what’s handled for you:
Employment contracts drafted in Arabic (and optionally in English)
Payroll processing in Egyptian pounds, including income tax deductions and payslips
Tax filings and compliance with Egypt’s Tax Authority and Social Insurance Fund
Employee benefits, including paid leave, social insurance, and termination payouts
Onboarding and HR documentation, fully aligned with Egyptian labor law
Legal risk mitigation through compliant hiring structures and local oversight
You get one monthly invoice. We handle the rest.
Why companies choose EORs in Egypt
Egypt has become a go-to hub for global remote hiring, especially for engineering, customer support, marketing, and finance roles. With its growing tech ecosystem, competitive salaries, and time zone alignment with Europe and the Gulf, Egypt checks all the boxes for international teams.
But here’s the catch: Egypt’s employment laws are rigid, written in Arabic, and unforgiving if misunderstood. If you misclassify a contractor, use the wrong contract, or skip a tax filing, expect fines, legal issues, or worse.
That’s why global startups and mid-sized companies are turning to EORs in Egypt:
To avoid entity setup delays
To stay legally clean while hiring fast
To scale remote teams across MENA without the local legal burden
If you're building your first team in the region or simply want to test the market before investing in infrastructure, EOR is the leanest and safest way to do it.
What it takes to set up your own entity in Egypt
Opening your own legal entity in Egypt gives you full control, but it also puts you face-to-face with slow-moving bureaucracy, multilingual paperwork, and a web of government departments that don’t always sync.
If you're planning to hire a large local team, open a physical office, or participate in government tenders, this might be the right move. But it’s not for the impatient.
Step-by-step: How to legally establish your company in Egypt
Choose your legal structure: Most foreign companies go with a Limited Liability Company (LLC). It requires at least one local director or representative and a physical address in Egypt.
Prepare incorporation documents: These include your articles of association, company name in Arabic, proof of shareholder identity, and corporate governance documents, all in Arabic and legally notarized.
Submit to the General Authority for Investment and Free Zones (GAFI): GAFI is your first gatekeeper. Their approval is needed to proceed with tax registration, banking, and commercial licensing.
Obtain a Commercial Registry number: Once GAFI approves your documents, you’ll receive a Commercial Registration certificate—this is the official recognition of your legal entity.
Register with the Egyptian Tax Authority: You’ll receive a Tax Identification Number (TIN) and must enroll for VAT if your turnover exceeds EGP 500,000 (~$10,000).
Register for Social Insurance: You’ll need to open a social insurance file and enroll all employees, both local and foreign, into Egypt’s public pension and benefits system.
Open a corporate bank account: Egyptian banks require a certified TIN, Commercial Registry, and GAFI approval. This process can take 2–4 weeks on its own.
Timeframe and roadblocks
Realistically, setting up an entity in Egypt takes 6 to 12 weeks, and that’s with a good local advisor.
Common hurdles include:
Delays at GAFI or the Tax Authority
Lost paperwork or missing stamps
Translation errors (all documents must be Arabic-certified)
Regulatory confusion across departments
Random holidays or unofficial “waiting periods”
Even seasoned firms hit unexpected slowdowns—so budget extra time and patience.
Who should go this route?
Setting up your own entity in Egypt makes sense if:
You're building a team of 20+ people
You want to bid on public sector projects
You’re investing in long-term physical operations
You need your brand to be legally present for contracts, licenses, or clients
If that’s your scenario, owning the entity gives you long-term stability and control.
But for everyone else? You’re likely paying to build infrastructure you don’t need yet.
Key differences at a glance
Hiring in Egypt isn’t just about cost; it’s about how fast you can operate, how much risk you’re willing to take, and whether you want to deal with local legal systems firsthand.
Here’s a clear side-by-side view of what you’re getting with an Employer of Record (EOR) versus setting up your own legal entity in Egypt:
Feature | EOR in Egypt | Own Entity in Egypt |
Setup Time | ~10 business days | 6–12 weeks |
Monthly Costs | Flat fee + employee salary | Salary + legal, tax, HR admin fees |
Compliance Risk | Managed by EOR | Entirely your responsibility |
Operational Control | Limited, legal employer is EOR | Full control over employment/legal ops |
Ideal Use Case | Remote, lean teams testing the market | Large teams, long-term physical presence |
If your goal is to hire quickly and stay lean, the EOR model is hard to beat.
If you're building a local HQ, investing long-term, or need full independence for licensing or tenders, setting up your own entity may be worth it.
Cost comparison in detail
On paper, setting up your own entity in Egypt might sound like the more “serious” business move. But when you break down the actual costs, especially in the first year, EOR often wins on flexibility, speed, and financial sense.
Let’s look at the numbers.
Hiring through an EOR: simple and predictable
Team Up’s cost to use EOR services in Egypt is €199 per employee, per month, depending on the level of support you need.
Here’s what that monthly fee includes:
Legally compliant employment contracts (in Arabic and English)
Payroll processing, salary payments in EGP
Tax calculations and monthly filings
Social insurance contributions
Local HR administration and record keeping
Full termination and offboarding support
No hidden setup charges. No surprise bills. One flat fee that covers everything.
Setting up your own entity: upfront + ongoing costs
Setting up a legal entity in Egypt means upfront and recurring expenses, many of which kick in before your first hire even starts.
Typical Year-One Costs:
Item | Estimated Cost (USD) |
Legal & incorporation fees | $3,000–$5,000 |
Notarization, translations, stamps | $500–$1,000 |
GAFI approval, Commercial Registry | $1,000–$2,000 |
Accounting + tax advisory (monthly) | $300–$600/month |
Payroll system or service | $100–$300/month |
HR/admin staff or contractor | $500–$1,000/month |
Total in Year 1: Easily $8,000–$15,000+, depending on how lean or well-supported you go.
And remember: this doesn’t include salaries or benefits, it’s just to stay operational and compliant.
Let’s compare two scenarios
Scenario A: 3-person remote team in Cairo
Option | Year 1 Estimated Cost |
EOR | €199–299 × 3 × 12 = €7,164–€10,764 |
Entity | Setup + monthly admin = $11,000+ |
→ EOR is faster, cheaper, and lower risk.
Scenario B: 25-person in-house team, physical office
Option | Year 1 Estimated Cost |
EOR | €199–299 × 25 × 12 = €59,700–€89,700 |
Entity | Setup + admin ≈ $15,000 + ongoing HR payroll fees |
→ Entity setup becomes cost-efficient at scale, but slower and heavier to manage.
Why startups start with EOR
No need to invest $10K+ just to test a market
Hiring happens in days, not months
Easy to scale up—or down—without long-term commitment
Full legal protection with zero in-house infrastructure
That’s why early-stage companies and fast-moving teams use EORs to enter Egypt. You can always switch to your own entity later, once the market proves worth the investment.
Payroll, taxes, and compliance in Egypt
Remote hiring in Egypt means navigating a payroll system that’s loaded with details and unforgiving when ignored. Income taxes, social insurance, labor law updates, Arabic filings, mandatory reports, it’s a lot, especially for companies without a local HR or legal team.
This is where the true value of an EOR becomes clear.
What payroll compliance actually looks like in Egypt
If you're running your own entity, here’s what you’re responsible for:
Income Tax
Egypt uses a progressive tax system:
0% on income up to EGP 15,000
2.5%–25% on higher brackets
An additional 2.25% for the stamp tax
You must calculate, withhold, and file monthly tax reports for every employee
Social Insurance
Mandatory for all Egyptian employees:
~11% from the employee (deducted from salary)
~18.75% from the employer (paid monthly)
Filed through the Social Insurance Authority using Arabic-only systems
Filing Deadlines
Monthly payroll tax and social insurance submissions
Annual reports to the Egyptian Tax Authority (ETA)
Contracts and employment records must be archived and available for audit
What happens if you get it wrong?
Late or inaccurate filings → Fines, interest, and blocked operations
Misclassification → Retroactive taxes, lawsuits, and termination bans
Non-compliant contracts → Labor court actions in favor of employees
Unregistered payroll → Risk of being flagged by the Ministry of Manpower
And yes, authorities do check. Egyptian labor law is employee-friendly and highly protective.
How an EOR handles all of this
When you hire through Team Up as your EOR provider in Egypt, we manage:
Tax registration and reporting
Monthly payroll processing with correct withholdings
Social insurance filing and contribution payments
Contracts compliant with Egyptian Labor Law (in Arabic + English)
Audit-ready employee records and legal document retention
Proactive updates when tax or labor laws change
You get fully legal employment from day one without touching a single form or hiring a local HR team.
Employment contracts and HR administration
Hiring in Egypt without a proper employment contract is like driving without a license; you might get away with it for a while, but one problem and the consequences hit hard. Egyptian labor law is clear, detailed, and strongly favors the employee.
If you're planning to set up your own entity, you’ll need to get every clause right. And you’ll need to do it in Arabic.
What does Egyptian law require in every employment contract
Contracts in Egypt must be written in Arabic; even if you include an English version for internal use, only the Arabic text is enforceable.
Each contract must include:
Full legal names of both parties (in Arabic)
Job title and duties
Salary details, stated in Egyptian pounds (EGP)
Working hours (typically capped at 8 hours/day, 6 days/week)
Leave entitlements (minimum 21 days paid annual leave, plus public holidays)
Probation clause, if used (maximum 3 months, must be specified)
Notice period (usually 2–3 months for standard terminations)
Social insurance registration clause
Termination conditions, aligned with Article 69 of the Labor Law
If any of these are missing or poorly translated, your contract can be deemed invalid in court.
HR administration: Your entity vs EOR
If you manage your own entity, you're responsible for:
Drafting and issuing Arabic employment contracts
Ensuring ongoing compliance with labor code changes
Collecting and updating employee records
Handling offboarding, exit paperwork, and final payments
Keeping documentation for audits or legal disputes
This typically requires a local HR manager, legal counsel, and payroll advisor on retainer.
If you hire through an EOR
Team Up’s EOR service in Egypt takes on all HR legal responsibility, including:
Issuing compliant Arabic contracts, including probation, leave, and tax clauses
Maintaining and storing records in accordance with local law
Handling contract amendments, promotions, and terminations
Ensuring timely onboarding and offboarding with zero risk to your company
Staying on top of labor law updates, so your documentation never falls behind
You stay focused on your team. We handle the local red tape.
EOR vs direct contractors or PEOs
Hiring in Egypt without the right legal structure isn’t just risky, it’s a fast track to fines, back taxes, and legal disputes. Egyptian authorities take employment classification seriously, and companies trying to bypass labor laws with "freelancer" contracts are under growing scrutiny.
Let’s break down your three main options: EOR, PEO, and independent contractors, and why only one of them works if you don’t have a legal entity in Egypt.
Freelancer misclassification is a real (and expensive) risk
If you're paying a full-time remote worker in Egypt as a contractor, but directing their work, setting hours, and offering ongoing tasks, you’re legally employing them.
But if you’re not reporting them to the Social Insurance Fund, issuing compliant contracts, or paying employment taxes?
You’re misclassifying. And Egyptian regulators don’t shrug that off.
Penalties include:
Retroactive social insurance payments
Income tax liabilities
Legal action from the employee
Employer blacklisting or blocked operations
Why a PEO won’t help you avoid that
A Professional Employer Organization (PEO) only works if you already have a registered local entity. It co-manages HR and payroll, but you remain the legal employer.
If you’re looking to hire in Egypt without opening a company, PEO is off the table.
Side-by-side comparison: EOR vs PEO vs Contractors
Feature | EOR Egypt | PEO Egypt | Contractors Egypt |
Local Entity Needed | No | Yes | No |
Compliance Assurance | Full | Partial | None |
Legal Employer | EOR | Co-employer | None |
Misclassification Risk | None | Medium | High |
If you're building a lean, remote team and want to stay compliant from day one, EOR is your safest path.
You get the protection of full employment without the burden of forming an entity, and your team gets the benefits and stability they expect.
Conclusion: Which option is best for your company?
If you’re expanding into Egypt, your hiring model matters just as much as your talent strategy.
An Employer of Record (EOR) gives you speed, legal compliance, and zero setup delays. It’s ideal for companies building remote teams, testing the market, or avoiding unnecessary admin in their early stages.
Setting up your own entity makes sense if you're investing long-term, planning to open a physical office, or hiring at scale, but it comes with complexity, upfront costs, and compliance risks you’ll need to manage yourself.
Here’s the honest breakdown:
Want to hire in 10 days and avoid Egyptian bureaucracy? EOR is your answer.
Ready to build a local branch with 20+ staff and a physical office? An entity might be worth it.
Still unsure? Start with EOR now. Set up your own entity later if the operation grows.
At Team Up, we help you enter Egypt with confidence, legally, fast, and without wasting time or money.
Your team focuses on growth. We handle the red tape.
