When you decide to hire in a new country, one of the first questions is how you will actually employ people there. The two most common routes are using an employer of record or setting up your own local entity. Both can work well. The right choice depends on how many people you plan to hire, how quickly and how long you expect to stay.

What an employer of record does

An employer of record, often called an EOR, is a company that legally employs people on your behalf in a country where you have no entity. The employee works for you day to day, but the EOR is the formal employer.

The EOR typically handles:

  • Employment contracts that follow local requirements
  • Payroll, tax withholding and social security contributions
  • Statutory benefits and mandatory insurance
  • Local HR administration, such as leave records and contract changes

You stay responsible for managing the work, setting goals and deciding who to hire. You pay the EOR a service fee on top of employment costs.

When an employer of record makes sense

In our experience, an EOR is usually a good fit in these situations:

  1. You are testing a market. You want to hire a few people and see how it goes before making a long-term commitment.
  2. You need to move quickly. Hiring through an EOR can be much faster than registering an entity, setting up payroll and opening bank accounts.
  3. You are hiring one or two people. For a small number of hires, the cost and effort of running an entity is often hard to justify.
  4. You are hiring across many countries. If your team is spread out, one EOR relationship can be simpler than several entities.

When a local entity makes more sense

An entity is your own registered company in the country. It takes longer to set up and needs ongoing accounting, payroll, legal and tax support. In return you get full control.

A local entity is usually worth considering when:

  • You plan to build a team of meaningful size, where EOR fees add up
  • You want to sign local commercial contracts, lease an office or invoice local customers
  • You want full control over employment terms, benefits and HR policies
  • You expect to be in the country for the long term

The point at which an entity becomes more economical varies by country and by provider, so it is worth modelling both options with an adviser rather than relying on a rule of thumb.

Risks and practical points to check

Whichever route you choose, a few points deserve attention:

  • Permanent establishment. Having people working for you in a country can, in some circumstances, create a taxable presence. Take tax advice, particularly if employees will sign contracts or generate revenue locally.
  • Contractor misclassification. Engaging people as freelancers when the relationship looks like employment can lead to penalties. An EOR or entity is usually safer for long-term, full-time roles.
  • Intellectual property. Make sure contracts clearly assign work to your company, especially when using an EOR.
  • Moving people later. If you start with an EOR and later set up an entity, employees will need to transfer. Plan how that will work and how it will be communicated.

Employment and tax rules differ by country and change over time, so always check current local requirements with a qualified adviser before you decide.

How recruitment fits in

The employment model affects how you hire. Candidates will ask who their employer is, what benefits they receive and how secure the arrangement is. Being clear about this from the first conversation builds trust, especially in markets where candidates are used to choosing between several offers. It also helps to agree the model before you start sourcing, so offers are not delayed while the structure is being finalised.

Next steps

We work alongside the employment set-up you choose, whether that is an EOR or your own entity. If you are planning your first hires in a new country, our local recruiters can help you understand the market and reach the right people from day one.