Hiring Employees Abroad Without Setting Up a Local Entity

There are four routes, and they solve different problems:

1. Employer of record (EOR). A local provider becomes the legal employer, issues a compliant local contract and runs payroll, while you manage the work. Good for one to a handful of hires in a country, or for testing a market.
2. Independent contractor. The person invoices you and handles their own taxes. It's appropriate for truly independent work, such as a defined project, and risky when the person works like an employee: fixed hours, exclusive to you, using your tools, managed by you. Misclassification can bring back pay, taxes and penalties. See the international contractor misclassification checklist.
3. Your own local entity. You register a subsidiary or branch and employ people directly. It gives full control but takes time and ongoing accounting, filing and legal costs.
4. Global PEO-style arrangements. Some countries and providers offer co-employment models with different trade-offs. See PEO vs EOR vs owned foreign subsidiary.

The right pick depends on how many people you'll hire, how long you'll stay and whether the role is truly independent work.

The process is similar across providers, though the details depend on the country:

1. Confirm the country is supported and ask about roles you plan to hire, including any restrictions on regulated professions.
2. Agree on the role and compensation. Ask the EOR to show the full employer cost, including mandatory contributions, benefits and any statutory bonuses, before you extend an offer.
3. The EOR issues a local employment contract that meets that country's rules on notice, probation, leave and termination.
4. Set up intellectual property and confidentiality terms. Make sure the contract assigns work product to you as the client, and check that local law supports the assignment.
5. Onboard and pay. The EOR runs local payroll and benefits and invoices you monthly.
6. Manage day to day as their manager, but route contract changes, raises and terminations through the EOR.

Budget for recruiting separately. SHRM's 2025 benchmarking reports a median cost per hire of $1,200 for nonexecutive hires¹, and that's before any EOR fee.

Not entirely. Permanent establishment (PE) is a tax concept: if an employee abroad has authority to conclude contracts for you, or your business is effectively run from a fixed place in their country, the local tax authority may claim your company has a taxable presence there. An EOR doesn't automatically prevent that, since PE depends on what the person does, not who employs them.

You can reduce risk by keeping roles in the country limited to work that doesn't include signing customer contracts, negotiating deals or running a local office, and by documenting what each employee does. Roles like software development or customer support are generally lower risk than sales leaders who close deals locally, though rules differ by country and treaty.

Ask a cross-border tax advisor to review any role with sales authority or senior decision-making before you hire. Also consider payroll tax registration, transfer pricing and data protection obligations that apply when you employ people in a new country.

Compare the total employer cost, not just the offered salary. Ask for these items in writing:

• EOR fee: commonly a monthly fee per employee, and sometimes a percentage; confirm the structure and any minimum term.
• Employer taxes and social contributions: these vary widely by country and can be a large part of total cost.
• Statutory benefits: paid leave, holidays, pensions, health contributions and, in some countries, mandatory extra payments such as a thirteenth-month salary.
• Equipment, relocation or visa costs, if any.
• Currency exchange costs, if you pay in one currency and the employee is paid in another.
• Termination costs. Notice periods and severance rules differ by country, and an EOR passes those costs to you.

Say a role costs a certain amount in salary; the full employer cost may be noticeably higher once contributions and fees are included. Ask the provider for a sample cost breakdown for your country, and see EOR cost by country for a comparison of how these vary.

Consider an entity when several of these are true:

• You plan to keep hiring in that country and expect a meaningful team.
• You need to sign local customer or vendor contracts, or want a local bank account.
• You have roles that would create PE risk regardless of employer.
• The recurring EOR fees now exceed the cost of running your own compliance.
• You want direct control over benefits, equity plans and employment terms.

Many companies start with an EOR and transition to an entity as headcount and commitment grow; a good EOR can help with the handover. Provider fit matters here. Deel is commonly used to hire employees and contractors in many countries through its employment arrangements, and Remote positions itself around local employment through entities it owns. For a side-by-side view, see Deel vs Remote for tech startups. Before you sign, ask each provider about country coverage, contract terms, exit clauses and what happens to your employees if you leave.