Hiring remotely across borders: contractor, EOR or entity

You found the right person. They live somewhere you have no legal presence. These are your three options, and the trade-offs are not subtle.

Contractor agreements

The fastest and cheapest route: the person invoices you, handles their own tax and social contributions, and carries their own benefits. Setup is measured in days.

The risk is misclassification. Most jurisdictions test the substance of the relationship, not the label on the contract. If you set their hours, supply their equipment, direct their daily work and they have no other clients, many tax authorities will treat them as an employee regardless of what the agreement says. Penalties usually land on the company, and they are retroactive.

Contractor status suits genuinely independent, project-shaped work. It does not suit a full-time person embedded in your team for three years.

Employer of record

An EOR is a company that already has an entity in the country. It employs the person formally, runs local payroll, provides statutory benefits and handles compliance; you direct the work and pay the EOR a fee.

Typical pricing runs a few hundred dollars per employee per month on top of salary and employer contributions. That is significantly cheaper than incorporating for a small headcount, and it removes the misclassification exposure.

The trade-offs are real: less flexibility in contract terms, occasional friction around equity, and a dependency on the provider. It is the right answer for most companies hiring one to ten people in a country.

Your own entity

Incorporating locally makes sense once you have enough people in one country that EOR fees exceed the cost of an entity plus local accounting — often somewhere around five to ten employees, though it varies widely.

It brings full control and the lowest per-head cost at scale, along with permanent obligations: local filings, statutory reporting, and a wind-down process if you ever leave.

What to publish in the job posting

State which arrangement the role uses and which countries you can hire in. A candidate who cannot legally be engaged should learn that from the advert, not from an email after three interviews.

State the salary range and the currency. Where an EOR is involved, be clear about whether the range is gross salary or total cost, because the difference can be a third.

  • Arrangement: employment, EOR or contractor
  • Countries or regions you can actually hire in
  • Salary range and currency, and what it includes
  • Overlap window required, in UTC
  • Whether equity is available under that arrangement

Common questions

Can we just pay everyone as a contractor?

You can, until a tax authority disagrees. The test is the substance of the working relationship, not the wording of the contract, and the liability sits with the company. For full-time embedded staff, an EOR is usually the cheaper decision once risk is priced in.

Does an EOR affect equity?

Often, yes. The person is employed by the EOR, not by you, so option grants may need a separate agreement and the tax treatment varies by country. Raise it early, because it is a common late-stage surprise in offer negotiations.

Put this into practice

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