Employer of Record vs. Setting Up a Legal Entity in Egypt: Which is Better?
Emmanuel Amegah
October 21, 2025
Expanding your business into Egypt offers access to a rapidly developing market and a diverse, skilled workforce. However, companies entering Egypt face a key decision: Should they use an Employer of Record (EOR) or establish a local legal entity? This guide explores the advantages and challenges of both options, updated for Egypt’s 2025 payroll, tax, and labor law reforms.
Understanding an Employer of Record (EOR)
An Employer of Record is a third-party organization that legally hires employees on your behalf. The EOR handles payroll, taxes, compliance, and HR management, allowing your company to quickly and easily engage talent without the need to establish its own legal presence in Egypt. EORs ensure:
- Full compliance with Egypt’s labor and tax laws
- Accurate payroll processing and timely salary payments
- Filing of employment taxes and social insurance contributions
- Management of employment contracts, onboarding, and statutory benefits
Setting Up a Legal Entity in Egypt
Establishing a legal entity involves:
- Registering your business with Egyptian authorities
- Opening local bank accounts
- Securing office space and obtaining licenses
- Managing payroll, tax, and compliance internally or through local advisors
- Direct responsibility for all employment, tax, and regulatory obligations
Comparing Employer of Record vs. Legal Entity in Egypt
| Criteria | Employer of Record (EOR) | Legal Entity |
|---|---|---|
| Time to Hire | Hire in days; rapid onboarding | Weeks to months; lengthy registration |
| Upfront Costs | Minimal; predictable monthly fees | Significant (legal, registration, office, staff) |
| Compliance | EOR manages payroll, taxes, social insurance | Company is fully responsible |
| Regulatory Risk | EOR assumes compliance risk | High; direct exposure to penalties |
| Flexibility | Easy to scale up/down, ideal for market testing | Best for long-term, large-scale operations |
| Control | EOR is legal employer; you manage day-to-day work | Full control over HR, culture, and policies |
2025 Payroll & Compliance Essentials in Egypt
- Income Tax Brackets (2025):
- Up to EGP 40,000: 0%
- EGP 40,001 – 55,000: 10%
- EGP 55,001 – 70,000: 15%
- EGP 70,001 – 200,000: 20%
- EGP 200,001 – 400,000: 22.5%
- EGP 400,001 – 1,200,000: 25%
- Above EGP 1,200,000: 27.5%
- Social Insurance Contributions:
- Employer: 18.75%
- Employee: 11%
- Maximum insurable salary: EGP 9,400/month
- Annual Leave:
- 21 days after 1 year of service; 30 days after 10 years or age 50
- Payroll Reporting:
- Submit payroll and social insurance reports monthly
- Keep records for at least 5 years
- Penalties for late filings: EGP 5,000–50,000
- 2025 Tax Reform:
- SMEs (turnover ≤ EGP 20 million) may access reduced tax rates (0.4%–1.5%) and compliance incentives if registered
When to Choose an Employer of Record
- Fast market entry into Egypt
- Avoid heavy upfront investment and complex bureaucracy
- Mitigate compliance risks with expert support
- Market testing or short-term projects
When to Establish a Legal Entity
- Long-term, substantial investment in Egypt
- Complete operational control and brand presence needed
- Sufficient resources to manage local regulatory complexities
- Large-scale expansion
How Cadana Supports Your Expansion into Egypt
Cadana’s Employer of Record services streamline your entry into Egypt by managing all employment responsibilities-from compliance and payroll to tax management and employee onboarding. By partnering with Cadana, businesses can rapidly establish their workforce, ensure full compliance with 2025 laws, and avoid the complexities of setting up a local entity.
Summary
Choosing between an Employer of Record and setting up a local legal entity in Egypt depends on your strategic goals, resources, and timeline. Companies seeking quick, flexible, and compliant market entry benefit from Cadana’s EOR solutions, while those with long-term growth and extensive operational needs might prefer establishing a local entity.
Ready to grow your business in Egypt efficiently? Connect with Cadana today and explore the best path forward for your expansion.
Emmanuel Amegah