Using An Employer Of Record To Build A Remote Team Without An Entity

Just 8% of organizations hiring abroad say they meet international tax and labor laws in full, based on Multiplier's 2026 Global Hiring Gap report. The talent is out there, and so is the budget, but the legal side lags behind. Opening a foreign subsidiary can take months and tie up capital. Paying people as contractors can backfire if a court decides they were employees all along. 

Payroll taxes, mandatory benefits and termination rules shift at every border. An employer of record offers a middle path for offshore hiring that many growing teams now rely on. Below, we look at how the model works, what it costs and where its limits sit.

Why Companies Hire Beyond Their Borders

The push to hire abroad often starts with a shortage at home. In ManpowerGroup's 2026 Talent Shortage Survey, 72% of employers said they have trouble filling open roles, and AI skills have become the hardest to find for the first time.

Widening the search to other countries can be the fastest fix, but it raises issues most finance teams have never handled:

• deciding which country's labor code applies to each hire
• running payroll in a currency you don't bank in
• registering staff for social security and health coverage

So what happens when the right candidate lives somewhere you have no company, no bank account and no HR staff? For many growing firms, an EOR can close that gap within days instead of months.

What an Employer of Record Does

An employer of record (EOR) is a company that already has legal entities in the countries where you want to hire. It becomes the formal employer on paper, while you direct the work day to day. EOR like Hire With Columbus describe the role in simple terms: the EOR takes care of local contracts, payroll, benefits and tax filings, while the client company manages the person's tasks, goals and performance.

The split usually looks like this:

• EOR side: employment contracts, payroll, tax withholding, statutory benefits, local filings and compliant offboarding
• Your side: hiring decisions, daily management, performance reviews, tools and team culture
• Shared: salary, start dates and any changes to the employment terms

In practice, you rent a compliant legal setup in each country instead of building one yourself.

Why Opening an Entity Can Wait

Setting up a subsidiary means registering the company, getting a business registration number, opening a bank account, appointing directors in some jurisdictions and hiring accountants to keep filings current.

A rideshare company profiled by Safeguard Global saw this firsthand. Entity setups expected to take weeks dragged on for months in some markets, and in Argentina the government lost the paperwork. Instead of freezing hiring, the company used an EOR to hire, onboard and pay staff in dozens of countries over two years, while building its own entities in parallel.

An EOR can let you test a market with one or two hires before committing capital to a full legal presence. If the market disappoints, winding down a couple of contracts can be far simpler than dissolving a company.

Contractors vs. EOR Employees

Many companies start by paying overseas workers as contractors. For short, project-based work, that can be fine. Trouble starts when a "contractor" works fixed hours, reports to a manager and does the same job as your staff.

The Australian case of Pascua v Doessel Group shows the risk. A Queensland business engaged a paralegal in the Philippines under an independent contractor agreement. When it ended the arrangement, she filed an unfair dismissal claim, and the Fair Work Commission ruled she was an employee, a finding upheld on appeal. The level of control the company held over her work weighed heavily.

Labels on a contract carry little weight if the day-to-day reality looks like employment. An EOR can remove much of that gray zone by putting the worker on a proper local employment contract from day one.

How the Setup Works

Getting started with an EOR usually follows a short, predictable path:

1. Pick the country and role, and check local rules on probation, notice periods and mandatory benefits.
2. Request a quote that breaks out the service fee, employer contributions and any deposit.
3. Sign a service agreement with the EOR, ideally with clear terms on IP ownership and data handling.
4. Approve the local employment contract the EOR drafts for your hire.
5. Onboard the person into your own tools, meetings and workflows.
6. Pay one consolidated invoice each month while the EOR runs payroll locally.

Some hires can start within a week, while places with work permit requirements or strict contract rules may take longer. Ask early about deposits, since some providers hold one or two months of salary as security.

What You Pay For

EOR pricing usually has two layers. The first is the provider's fee, often a flat monthly amount per employee. The second is the real cost of employment in that country, which you pay through the EOR.

Employer social security contributions, health insurance, pension payments and mandatory bonuses can add a sizable chunk on top of gross salary. The Philippines and Brazil require a 13th-month salary. In Europe, countries with some of the highest income taxes, such as Belgium and France, also tend to carry heavy employer charges.

A few cost points to check before you sign:

• currency conversion markups on payroll funding
• fees for terminations, contract changes or benefit upgrades
• who legally employs your hire: the provider's own entity or a local partner

Comparing two or three quotes for the same role can reveal big gaps.

Risks an EOR Won't Fully Remove

An EOR shifts a lot of employment risk, but some of it stays with you.

• Permanent establishment: if your hire signs contracts or closes deals on your behalf, tax authorities may decide your company has a taxable presence in that country.
• Intellectual property: local law shapes how IP transfers, so check that the contract chain assigns work product to your company.
• Data protection: moving employee or customer data across borders can trigger rules such as the GDPR.
• Provider quality: some EORs rely on in-country partners, which can slow answers and blur accountability.

None of these are reasons to avoid the model. They are reasons to read the agreement closely and consult a local adviser for senior or sales hires. An EOR handles the employment, but the business decisions remain yours.

When to Open Your Own Entity

Many companies outgrow an EOR in certain countries. GitLab, an all-remote company, lays out its approach in a public handbook. It hires through its own entities in some countries and through EOR partners such as Remote.com in others, then uses a country conversion process to move people from contractor setups to an EOR, and from an EOR to its own entity.

How do you know it's time to switch? A few signals tend to show up:

• headcount in one country keeps climbing and EOR fees start to rival entity running costs
• you need to sign local client contracts or hold a local license
• you want to offer equity or perks the EOR can't administer

At that point, forming a local company looks a lot like setting up a Hong Kong business: registration, banking and filings.

Global Talent, Lean Legal Footprint

For founders and business owners who already think carefully about where their companies sit, an EOR fits a familiar logic: keep the structure as light as the business allows. It can let you hire a developer in Colombia or an accountant in the Philippines without adding a subsidiary, a local bank account or another set of annual filings.

The model works best as one tool in a wider plan. Use it to test markets and fill hard roles quickly. Track headcount and revenue in each country, and if a market becomes core to the business, weigh a move to your own entity with a tax adviser.

Handled with care, an EOR can give a small company the hiring reach of a larger one, while its corporate structure stays simple and easier to protect.