Employer of Record & Global Hiring
When to use an EOR, when to open an entity, and where the real cost and risk sit.
What an EOR actually does
An employer of record legally employs your worker in a country where you have no entity. It runs payroll, withholds and remits taxes, provides statutory benefits and issues a compliant employment contract. You direct the work; the EOR carries the employment relationship and the compliance obligations that come with it.
The cost comparison is straightforward, the decision is not
EOR cost is fully loaded salary plus a per-employee monthly fee. An entity costs incorporation, local directors, accounting, payroll and annual filings, plus months of setup. The break-even is usually somewhere around ten to fifteen employees in one country, but that arithmetic ignores speed and reversibility.
Misclassification is the risk that actually bites
Hiring people abroad as contractors when they work like employees is the common shortcut. Authorities look at control, exclusivity and integration rather than at the contract wording. Reclassification brings back taxes, penalties and employment rights retroactively, and it lands on the company rather than the worker.
Local employment law is not optional
Notice periods, severance formulas, probation limits, statutory bonuses and paid leave are set by local statute and cannot be contracted away. Termination in particular varies enormously, and the cost of ending an employment relationship is frequently the number nobody modelled.
Choosing between the two
Use an EOR to test a market, hire quickly, or stay small in many countries. Open an entity when headcount justifies the fixed cost, when local contracts require a domestic legal presence, or when the market commitment is genuinely permanent. Unwinding an entity is slow and expensive, which is the asymmetry to respect.
Common questions
Can an EOR sponsor a visa?
Some can in some countries, but it varies widely and is one of the first questions to ask a provider.
Who owns the intellectual property?
It should be assigned to you through the EOR agreement and the local employment contract. Confirm both documents actually say so.