Do I Need a Local Entity to Hire in Eritrea?

In Eritrea, a "local entity" refers to a legally recognized presence that allows you to act as an employer within the country, typically a subsidiary or branch office. This setup is essential for managing payroll, tax obligations, and compliance with local labor laws.

Without establishing a local entity, your company cannot fully engage in local employment practices, such as registering as an employer, managing payroll, or adhering to mandatory labor regulations. An alternative is to use an Employer of Record (EOR), which can help you hire employees without the need for a local entity.

What is Required to Employ Someone in Eritrea?

• Local employing entity required to directly employ? Yes (a local entity is necessary for direct employment)
• Payroll registration required? Yes (you must register with the Ministry of Labor and Human Welfare)
• Withholding/tax remittance required? Yes (employers must remit taxes to the Eritrean Revenue Authority)
• Social contributions required? Yes (mandatory contributions to the Social Security Fund)
• Local employment agreement required? Yes (employment contracts must comply with Eritrean labor laws)
• Mandatory benefits to budget? Yes (statutory benefits include health insurance and pensions)
• Works council/collective agreements considerations? Usually (certain sectors may have collective agreements)

Best Options If You're Hiring in Eritrea

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but you should be cautious about misclassification risks.

While hiring contractors in Eritrea doesn't require a local entity, you must ensure that the contractor operates independently. Misclassifying a contractor as an independent worker when they function like an employee can lead to legal issues. It's crucial to define the working relationship clearly and ensure that the contractor has autonomy over their work.

Consider these factors when hiring contractors:

• Ensure the contractor has multiple clients and isn't exclusively working for you.
• Allow them to set their own hours and methods of work.
• Keep the contractor's role separate from core business functions to avoid misclassification.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to establish an entity in Eritrea, depending on the required registrations and approvals.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 5,000–15,000 ERN per month ($335–$1,000)
• Payroll provider: Estimated 500–1,500 ERN per employee per month ($33–$100)
• Employer registrations and recurring compliance: Estimated 2,000–5,000 ERN per year ($133–$335)
• Corporate tax filings and annual reporting: Estimated 10,000–30,000 ERN per year ($670–$2,000)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Eritrea

Hiring in Eritrea can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Eritrea quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s managed payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.