At two staff, use the EOR. Whether is it better to use an EOR or set up a Philippine entity for two staff is a question the Philippines answers before your spreadsheet gets a say: Section 8(b) of the Foreign Investments Act reserves small and medium-sized domestic market enterprises with paid-in equity capital below the equivalent of two hundred thousand US dollars to Philippine nationals.
Two people does not get you near the exemption to that.
Outstaffer sells the alternative, so treat this as disclosure rather than a pitch: Employer of Record is a product built on exactly this arithmetic. Get advice on your own structure before you act on any of it.
The number that decides it is not the EOR fee
The Act, published in full by UNCTAD's Investment Laws Navigator, sets the floor at US$200,000 of paid-in equity capital for a foreign-owned domestic market enterprise. A lower tier of US$100,000 exists, reserved for enterprises that either involve advanced technology as determined by the Department of Science and Technology, or employ direct staff in numbers a two-person team will never reach.
The question stops being about monthly cost. It is a balance sheet question.
What does US$200,000 actually buy?
The right to own the company. It is capital rather than a fee, so it does not disappear. It stops being available, parked in a subsidiary serving two employees, at the stage where working capital is what a business of ten to fifty people is most short of.
Being the employer in Manila is a job, and the job keeps growing
The Philippine Star reported on 23 September 2026 that the Department of Labor and Employment had released Labor Advisory No. 15, dated 21 September, directing employers to run a Hazard Identification, Risk Assessment and Control process for worker exposure to air pollutants. Where air quality is unhealthy, employers monitor it, improve ventilation and supply protective equipment. Where it is acutely unhealthy, they move to flexible work arrangements. DOLE's own publication could not be retrieved this morning, so that account rests on the reporting.
One advisory is not the point. It arrived in September, nobody sent you a notice, and if the entity is yours then the duty is yours. Employer of Record versus setting up your own entity covered the Australian half of that calendar. The Philippine half moves on its own schedule.
The arithmetic for two staff
US$200,000 across two people is US$100,000 a head of capital you cannot spend, before a salary, a laptop or a single invoice. Add SEC incorporation, Bureau of Internal Revenue registration, and enrolment with SSS, PhilHealth and Pag-IBIG.
An Employer of Record needs none of that capital. Outstaffer's pricing page, checked this morning, states there are no platform, onboarding or setup fees on its Employer of Record and Contractor Management products. Whatever the monthly number is, it is an expense against this year's revenue. The US$100,000 a head is not.
Where does the money actually go?
Into a bank account you control and cannot use. That is the trade a two-person Manila entity asks you to make, and most founders only price the accountant.
The honest case for your own Philippine entity
It is a good one above a certain size. You own the employment contracts outright, the intellectual property chain is shorter, and at twenty people in Manila a per-head fee starts to look like rent on something you could have owned. The US$200,000 also stays on your balance sheet.
That case turns on intent, not on headcount today. The cheapest compliant way to hire a bookkeeper in the Philippines walks the same maths from the price end.
Related reading
- Yes, you can move from an EOR to your own entity later
- Your Philippines contractor exemption turns on a fact you never checked
Where I would land
Build the entity when the entity is the plan, not when two hires make you feel like a grown-up company. At two staff the capital rule settles it, and the compliance calendar settles it again a month later. If you want to test the other side, run a role through the platform and compare what lands on your desk against what a Philippine subsidiary would have put there.
Here is the part I am less sure about. Does anyone who incorporated at two staff regret it, or does the capital lock-up stop mattering once headcount catches up?
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