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Employer of Record & PEO
As 2025 unfolds, mid-sized companies are reassessing their operations across Asia. Whether driven by macroeconomic pressures, strategic refocus, or a need to streamline, entity closure — winding down a local legal entity — is increasingly part of the conversation.
But closing an entity in Asia isn’t as simple as filing paperwork and walking away.
From costly severance to regulatory delays, the hidden costs can catch even seasoned HR and finance leaders off guard. And without proper planning, companies risk non-compliance, reputational harm, and a lengthy, expensive re-entry if they decide to return.
Here are five lesser-known costs of shutting down an entity — and how an Employer of Record (EOR) can help you manage them more strategically.
Asia’s labor laws are highly protective of employees — and vary significantly by country.
In China, for instance, employers are required to pay severance equal to one month’s salary for each year of service, capped at three times the local average monthly wage (source). Indonesia's labor law mandates a combination of severance, long-service, and compensation payments, which can add up to 30+ months of wages depending on tenure and reason for termination (source).
Missteps here can lead to wrongful dismissal claims, union disputes, or expensive litigation. An EOR ensures your offboarding process aligns with each country’s statutory framework — avoiding overpayment, underpayment, or compliance breaches.
Even after operations stop, your tax and payroll responsibilities continue until deregistration is complete — a process that often takes 6 to 18 months in countries like China or India (source).
During this time, you're expected to file final corporate taxes, continue monthly payroll and social security reporting, and manage pension accounts. Failing to comply could result in audits, fines, or even government blacklisting — damaging your future ability to re-enter the market.
EORs provide a bridge solution by legally employing your team while your entity winds down. This avoids the cost and complexity of running payroll in a “phantom entity” that no longer operates commercially.
Entity deregistration is bureaucratically heavy and slow — and the costs add up quickly.
You’ll need lawyers, accountants, and sometimes translators or notaries to support the process. In China, the deregistration timeline can span 9–12 months for wholly foreign-owned entities, even under the "simplified" route (source). India and Vietnam are similarly complex, requiring parallel processes across ministries, tax bureaus, and labor departments.
Throughout this period, you continue paying retainers to advisors while generating no revenue from the entity — a sunk cost that many underestimate. EORs let you exit operations faster without halting business continuity.
When you close a local entity, your team is often the first casualty. That means losing in-market experience, cultural fluency, client relationships, and on-the-ground insights — all of which are hard and expensive to rebuild later.
Rehiring in Asia after a long absence is no small task. Talent acquisition, training, and rebuilding trust with vendors or clients can take months, if not years. In competitive hubs like Singapore or the Philippines, your former top performers may already be working for your competitors.
An EOR lets you retain key personnel even without a legal entity. Your business maintains market presence while reducing administrative load — and you stay ready to scale again when the time is right.
Poorly handled exits can result in lawsuits, regulatory inquiries, or damaged employer branding — especially in Asia, where reputation plays a vital role in recruitment and B2B trust.
Unpaid severance, mismanaged payroll closures, or unilateral contract terminations can spark legal disputes or bad press. Former employees may leave negative Glassdoor reviews, suppliers may initiate claims, and regulators may issue fines — all of which affect your brand long after you leave.
EORs mitigate this risk by managing the local compliance and HR processes professionally, ensuring employees are treated fairly and in accordance with the law.
Closing an entity doesn’t have to mean abandoning the market. For many businesses, an EOR model offers a smarter alternative — reducing fixed costs and compliance risk, while keeping talent and operational flexibility intact.
Instead of a hard exit, an EOR allows you to pivot. You can retain key employees, maintain customer support, or keep limited functions running — all without holding a legal presence or worrying about regulatory delays.
At AYP, we help companies make this transition smoothly. Our EOR platform spans 14+ countries across Asia, offering compliant hiring, payroll, and HR support without the overhead of entity management.
Let’s talk about how to simplify your closure while staying connected to growth.
