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Insights   >   Employer Of Record (EOR) Vs Subsidiary In KSA: Which One To Choose?

Employer Of Record (EOR) Vs Subsidiary In KSA: Which One To Choose?

Author: Daniyal Chishti
Dec 21, 2022
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Employers • KSA

Are you a business leader pondering the advantages of an Employer of Record versus a Foreign Subsidiary in Saudi Arabia? Investing in KSA can help open up lucrative global markets and increase your international outreach. But it's vital to weigh all options before choosing between establishing an Employer of Record or setting up a foreign subsidiary operation.

In this blog post, we'll explore both approaches so that you're armed with the knowledge required to make the best decision for your business.

What Is An Employer Of Record (EOR) In Saudi Arabia?

An Employer of Record (EOR) in Saudi Arabia enables businesses to hire, onboard employees, manage payroll, and ensure compliance with Saudi Arabian labour laws.

Global expansion can be difficult and is characterized by several formalities that slow down the process and cost time and money. Furthermore, failing to comply with established laws and regulations exposes the organization to hefty fines and penalties, leading to long-term losses and reputational damages for an organization. Read our blog ‘Top 4 Common Legal Issues Businesses Face In KSA’ for more information.

What Services Does An EOR Offer In Saudi Arabia?

Organizations that partner with an Employer of Record (EOR) like ours in Saudi Arabia are protected from legal risks because the EOR acts as the organization's legal employer, bearing all employment-related risks and responsibilities. Some of the EOR services that we provide include:

  • Hiring contractors and full-time employees
  • Onboarding talent
  • Managing payroll for global organizations
  • Enabling accurate and timely payments to employees anywhere in the world
  • Management of comprehensive benefits packages
  • Ensuring compliance with Saudi Arabian labour laws

Benefits Of An Employer Of Record In Saudi Arabia

An Employer of Record (EOR) allows organizations to conduct all employment-related activities in Saudi Arabia without establishing an entity or a subsidiary.

An Employer of Record offers much more to organizations looking to expand or hire in Saudi Arabia. Some of the advantages of a global Professional Employer Organization (PEO) platform in Saudi Arabia are as follows:

Recruiting and Onboarding New Talent

Hiring and onboarding talent that fits into your organization's culture is a primary goal for any organization entering any market, particularly the Saudi Arabian market. While finding the right talent is difficult, hiring in Saudi Arabia, with its rapidly updated employment laws, can be overwhelming.

Partnering with an Employer of Record (EOR) like TASC in KSA streamlines the process of hiring contractors and full-time employees. Our EOR services also enable organizations to quickly onboard talent while avoiding compliance issues across the Kingdom. Outsourcing has multiple benefits, to learn more, check out our blog, ‘Outsourcing and why the world's leading companies adopt the practice’.

Payroll Management That Works

Payroll management is essential for any company that is concerned with maintaining and increasing employee productivity. While paying employees for local organizations on time, every time can be difficult, managing payroll for employees from different countries may be even more challenging.

On the other hand, partnering with a leading EOR in Saudi Arabia like TASC will ensure that employees receive their payments in their preferred currency quickly, no matter where they are in the world.

Establishing A Team Without A Physical Presence In KSA

Creating an entity or a subsidiary is a time-consuming process that includes obtaining a SAGIA/ MISA license, registering with the Tax and Zakat authority in KSA, renting office space, and handling all corporate and legal obligations.

While this process is typically time and resource intensive, partnering with an EOR service provider will allow organizations to kickstart their business activities in Saudi Arabia and understand their potential in the Saudi market without establishing a subsidiary.

What Is A Foreign Subsidiary Company In Saudi Arabia?

When a company decides to expand internationally and enter new and emerging markets like Saudi Arabia, it usually needs to establish an international entity. A subsidiary company is an organization that is either wholly owned or partially controlled by the parent company of another organization.

There are various types of legal entities, the most common of which are representative offices, branch offices, and subsidiary companies. Moreover, a subsidiary company reduces the parent company's exposure to local laws and taxation.

Benefits Of Establishing A Foreign Subsidiary In KSA

Establishing a foreign legal entity in Saudi Arabia is an excellent option for any business looking to expand operations in the Middle East. Saudi Arabia is one of the most stable, secure, and prosperous countries in the region and provides foreign businesses with a broad range of benefits that can help them thrive.

Access To A Dynamic Market

First and foremost, establishing an entity in Saudi Arabia gives companies access to its dynamic market, which has seen significant growth over recent years. The Kingdom offers investors a wide variety of incentives such as reduced corporate tax rates, generous repatriation policies, and access to world-class infrastructure. Additionally, foreign investors can take advantage of a wealth of natural resources and support from local authorities when investing in the country. If you need more reasons, check out our blog, ‘Here’s Why Businesses Should Setup In Saudi Arabia.’  

Strategic Location

In addition to access to lucrative opportunities within the Kingdom, setting up a legal entity in KSA also gives investors preferential status when transacting or doing business elsewhere in the Gulf Cooperation Council (GCC). In this way, it serves as a gateway for participating in regional economic activities across the Middle East and North Africa (MENA) region. It also allows investors to benefit from lower shipping costs due to its strategic location at the crossroads between Europe, Asia, and Africa.

Greater Control Over Business Operations

An EOR might offer less control over employee data or hiring decisions than having a fully-fledged foreign subsidiary operating in the Kingdom. Additionally, multinational companies looking to develop a brand presence in Saudi Arabia may want to consider establishing their foreign subsidiary because they can retain direct control over essential operations like human resources management and marketing. This would help in establishing their brand recognition and increase their overall share in the market.

So, Which One's Best?

Whether an Employer of Record solution or establishing a foreign subsidiary company is the best option for your company depends on the stage of your global expansion project and your business goals. Answering the following questions can help determine which strategy will work best for your organization.

  1. What is the scale of your planned expansion?

    Are you only interested in a short-term presence in the market, or are you in it for the long haul? How many employees will you require to meet your business objectives? Will you even need office space? Do you want to establish a presence in one or more foreign markets?

  2. What stage are you at in the expansion process?

    Do you already know the local market, and are you willing to invest in it? Or are you still in testing mode? If the latter is the case, it may be prudent to take your first steps into a new market with the assistance of an experienced Employer of Record like TASC.

  3. What is your knowledge of Saudi labour laws, compliance, taxes, and employee payroll?

    Are you familiar with local labour laws, taxation, and reporting requirements? Or would you have to spend a lot of money and human resources to hire new employees in the new country?

  4. Are you looking to expand quickly?

    If you need to move quickly and don’t have the time to go through the steps required to set up a legal entity, using an Employer of Record will allow you to expedite your expansion project.

There is no one-size-fits-all solution for global expansion. The decision between establishing a foreign subsidiary and hiring local employees through an Employer of Record is largely determined by the scope of your expansion project, the timeline for completion, and your knowledge of operating in the new target market.

Start Your Global Expansion With TASC's Leading EOR Services

An Employer of Record provides excellent employment solutions for companies looking to expand or build a team in Saudi Arabia. It ensures compliance with employment laws, reduces the cost of establishing an entity in the country, and handles the legal requirements of launching a business in Saudi Arabia.

TASC's EOR solution makes it easy to compliantly hire new employees in foreign countries and create a strong global team that will turn your global expansion into a complete success. Beat your competition and be the first to test an emerging market like KSA without worrying about compliance risks and capital requirements.

Contact us now to get started with your business expansion in KSA.

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