How to Hire International Employees Without a Local Entity

Why Hire Internationally Without a Local Entity?

Before we get into the “how,” it’s worth asking why so many companies are moving away from setting up entities in the first place. The reality is simple: entities are slow, expensive, and rigid. For startups and SMEs that need to move fast and keep costs lean, that just doesn’t fit. But if your company has long-term plans in a region and your timeline is flexible, then setting up your own entity is still a viable option. Let’s drill down into the detail a bit:

How Much Does it Cost to Set Up Your Own Entity?

To give you a sense of scale: in many countries, it costs about U.S. $15,000 to US $20,000 just to establish a legal entity, and annual maintenance costs (accounting, legal, compliance, payroll oversight, local HR, etc.) can run you upwards of US $60,000 (or more, depending on headcount and the complexity of the legal landscape in the country you’re expanding into).

In many European countries for example, even before hiring staff, you’ll often need to pay registration/licensing fees, legal setup, a local director or statutory representative, and secure a physical or registered office.

In places like the UK, on the other hand, forming and registering a company may carry relatively low government registration fees, but you still need to budget for legal counsel, payroll system setup, compliance, accounting, local benefit programs, and ongoing statutory filings. Over time, those add up.

These costs come with other drawbacks:

• Slow To Launch: Setting up a new entity can take several months, sometimes 4–12 months depending on local bureaucracy, required approvals, bank account setup, etc.
• Regulatory Rigidity: Once you’re up and running, you’re bound by local labour laws, employment protections, benefits mandates, pension or social security rules, taxes, reporting, audits, etc. These vary widely (and change often), so you’ll need local legal/HR teams or consultants to stay compliant.
• High Fixed Costs: Even if you hire only one or two people, you’ll still have to maintain the entity’s registration, filings, local representation, legal obligations, and possibly local office or registered address, all of which are fixed regardless of how many employees you have.

While creating a local entity is still a viable and sometimes necessary option – especially if you have long-term certainty in a region, plan to build a larger local staff, want full control, or need physical presence – it may not be the best path if you're experimenting, moving fast, or entering multiple markets more tentatively.

What is the Alternative to Setting Up Your Own Entity?

If traditional entities are slow and rigid, what are your other options? Today, there are a couple of different models that make international hiring faster and more cost-effective:

• Employer of Record (EOR): A third-party provider that becomes the legal employer on your behalf, handling payroll, taxes, and compliance while you manage the employee’s day-to-day work. This lets you hire in new countries within days instead of months.
• Professional Employer Organization (PEO): Similar to an EOR but typically requires you to already have a local entity. A PEO co-employs your workers and manages HR, benefits, and compliance alongside you.
• Contractors and Freelancers: For certain roles, engaging independent contractors can be a flexible way to test a market. However, this comes with misclassification risks if the person functions like an employee under local law.
• Relocate Your Team: In some cases, transferring existing employees abroad (on secondment or expat contracts) can fill talent gaps, though this is often more expensive and suited for specific leadership or specialist roles.

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We Helped Modelwise Save $65K+ Annually

Not all EORs are created equal. Many offer decent software, but few deliver true partnership. Playroll is trusted for its human support, flexible solutions, and intuitive tools that make global hiring simple and scalable. All at affordable fees that fit any budget.

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3 Ways to Employ International Employees Without a Legal Entity

There’s no single way to hire globally. Your choice depends on whether you need speed, compliance coverage, or flexibility. Below, we’ll walk through three practical methods: hiring contractors, using an EOR, and working with a PEO.

1. Hire International Contractors

For many founders, working with international contractors is the natural first step into global hiring. It’s fast, flexible, and cost-effective. You can draft a contract, pay invoices, and have your new teammate contributing almost immediately. This approach is great for testing new markets or filling short-term skill gaps.

That said, it’s important to be aware of the risks. Many countries have strict rules around who qualifies as a contractor versus an employee. If someone is effectively working like a full-time employee, misclassification could lead to back taxes, penalties, or liability for missed benefits. Used thoughtfully, though, contractors can be a valuable option for expanding across borders – especially when paired with the right compliance partner.

• Pros: Lowest upfront cost, maximum flexibility, near-instant onboarding.
• Cons: High risk of misclassification, no benefits or protections, weaker long-term loyalty.
• Best For: Freelancers, part-time specialists, or short-term projects where flexibility matters more than compliance.

2. Use an Employer of Record (EOR)

For most growing companies, partnering with an Employer of Record strikes the best balance between speed, compliance, and scalability. You manage the employee’s day-to-day work, while the EOR acts as the legal employer – handling onboarding and offboarding, global payroll, contracts, benefits, and local compliance. It’s a way to hire “like a local company” without setting one up yourself. Plus you can access talent anywhere in the world through the EORs entity infrastructure.

• Pros: Onboarding in days, built-in compliance, predictable costs that scale with headcount.
• Cons: More expensive than contractors, and you hand over some admin control to the EOR.
• Best For: Full-time, long-term employees in markets where you don’t want to invest in an entity but still need stability.

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Thinking About Using an EOR?

There are a lot of EOR service providers out there, and costs can vary more than you’d expect. Before you commit, it’s worth comparing what’s on the market so you know you’re getting the right fit for your team and your budget.

Compare Top Options

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3. Partner with a Professional Employer Organization (PEO)

A PEO is often confused with an EOR, but the difference is key. A PEO only works if you already have a local entity – it can’t be the legal employer for you. What it does is take on HR, payroll, and compliance operations for that entity. That makes it a strong option for companies that already set up subsidiaries but don’t want to build HR infrastructure from scratch.

• Pros: Professional HR and payroll support, often cheaper than building in-house.
• Cons: Doesn’t solve the “no entity” problem. You still need to set up the entity yourself.
• Best For: Larger firms or scale-ups with established subsidiaries who want HR expertise without hiring a full internal team.

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How Much Does It Cost To Hire Internationally Without a Local Entity?

The costs of global hiring depend on which route you take – contractors, an EOR, working with a PEO, or setting up an entity. Each has its own profile of upfront vs. ongoing costs, compliance exposure, and long-term sustainability. Knowing these numbers upfront will help you build realistic hiring budgets.

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How Quickly Can You Hire An International Employee Using an EOR?

One of the biggest advantages of partnering with an Employer of Record is speed. Entity setup by contrast is both expensive and slow. In most countries, forming a legal entity takes 3–9 months. That’s months of lawyer calls, government approvals, local bank accounts, and payroll registrations before your first hire even signs an employment contract. During that time, your dream hire is either stuck waiting, or worse, they’ve taken another role.

By contrast, EOR hiring happens in weeks, sometimes days. Because the EOR handles the local payroll setup, employment contracts, and compliance with local labor laws, you skip the mountain of bureaucracy and go straight to onboarding.

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Step-by-Step Guide to Hiring Internationally with an EOR

It’s not enough to know that EORs exist, you need a playbook that’s going to help you weed out the good from the meh. Here’s a structured, expert process you can follow to bring on your first international hire smoothly and compliantly when you partner with a good EOR.

1. Define Your Hiring Goals: Be clear on the role, location, and budget. Decide what benefits you’ll offer and whether the employee will need visa or immigration support.
2. Choose an EOR Partner: Look at coverage (do they operate where you need?), compliance expertise, and fees. Transparent pricing matters because you need to make sure you understand exactly what’s included and what isn’t.
3. Verify Compliance: Ensure employment contracts align with local labor laws. Double-check statutory benefits, notice periods, and payroll tax obligations.
4. Onboard Your Employee: Send the offer, finalize the contract, and set up benefits, all through the EOR platform. Make it seamless so your new hire feels part of the team from day one.
5. Run Payroll & Taxes: The EOR handles deductions, variance checking, and benefits contributions. You focus on managing the day-to-day work.
6. Monitor Regulations: Local labor laws and tax rules change often. A strong EOR will keep you updated with dashboards and compliance alerts.
7. Scale With Confidence: Once you’ve nailed the model in one country, you can replicate it in others, all without repeating the headaches of setting up a local entity.

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Never miss a compliance update, anywhere.

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Migrating from Other Hiring Methods to an EOR

If you’ve already been hiring internationally using contractors, setting up local legal entities, or even working with a patchwork of local payroll providers, you’re not alone. Many startups and SMEs start this way because it feels faster or more flexible in the short term. But as your team grows, these methods often become complicated, risky, and expensive.

Shifting to an EOR consolidates these challenges under a single partner. Plus you can keep your talent onboard and maintain your market presence during the transition. This unlocks major efficiencies including:

• Reduced legal and financial risk.
• Streamlined costs compared to entity setup.
• A consistent, professional employee experience globally.
• On-demand expertise in local labor laws and regulations.
• Lighter admin load, reduced risk of human error.

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Maybe it’s Time to Switch Things Up…

Thinking about hiring employees across borders or shutting down your entity? With Playroll, you can shut down costly subsidiaries and transition smoothly to a compliant global employment model, all without disrupting your team’s workflow.

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Navigating Compliance Risks Without a Local Entity

Hiring internationally without the right structures in place can expose your business to significant legal, financial, and reputational risks. Below are some of the most common compliance pitfalls and how an EOR like Playroll helps mitigate them through world-class global HR support.

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Cost and Time Savings with Playroll’s EOR Solution

On average, establishing an entity can cost $20K–$100K in upfront and annual compliance expenses, according to global employment benchmarks. Add to that the 3–9 months it often takes to get approval from local authorities, open bank accounts, and secure licenses, and your expansion timeline can grind to a halt before your first hire is even onboarded.

Playroll’s EOR model removes those roadblocks. You can hire employees in new markets in days, not months, without tying up capital in unnecessary entity structures. The difference is tangible: one Playroll client, a fintech company, reported saving 20% in hiring costs after moving from entities to EOR while simultaneously speeding up their time-to-hire.

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Choosing the Right EOR Partner

Not all EOR providers are created equal. When evaluating partners, here are five key criteria to prioritize:

1. Global Coverage: Make sure the provider supports the markets you need today and those you may expand into tomorrow. Limited coverage could force an expensive switch later.
2. Transparent Fees: Hidden costs can snowball and significantly affect your overall budget, this is particularly important when you’re expanding abroad for the first time. Look for simple, upfront pricing you can plan around.
3. Compliance Expertise: A good EOR should offer more than payroll processing. They should bring deep legal and labor law knowledge to keep you protected from misclassification and regulatory risks.
4. Technology and Automation: The best EORs provide a single platform to manage contracts, payroll, and compliance seamlessly. Automation reduces errors and gives you visibility across your global team.
5. Human Support: Behind the tech, you need responsive, hands-on service. Quick response times and support for both employers and employees are critical. Check public reviews on trusted platforms like G2 to see how real customers rate their experience.

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Get Started with Playroll’s Global Hiring Solutions

Hiring globally doesn’t have to be complicated or overly expensive. With the right partner, you can avoid the high costs of entity setup, onboard employees in days instead of months, and stay compliant with ever-changing local laws. More importantly, you can give your international team members the same professional experience as if they were sitting in your headquarters.

Playroll was built to make this process seamless. We combine global coverage, compliance expertise, and user-friendly technology to help ambitious companies scale beyond borders. If you’re ready to grow your team with less complexity and more confidence, book a demo and see for yourself how straightforward global hiring can be.