How to Hire Internationally Without a Local Entity — EOR Explained (2026)

One of the most common questions I get from people using my employer cost calculator is: "OK, I can see what it costs to hire in Germany — but how do I actually do it if I don't have a German company?"

The answer is an Employer of Record — and it has become one of the fastest-growing categories in HR technology over the past five years. Here is everything you need to know.

The problem: entity requirements

In almost every country in the world, to legally employ someone you need a registered local legal entity — a company, branch office, or subsidiary registered with the local tax authority, capable of running local payroll, and registered with social security institutions.

Setting up a local entity takes time (typically 2–6 months), money (legal fees of $5,000–$50,000 depending on jurisdiction), and ongoing compliance overhead (annual filings, local accountants, registered agents). For companies hiring one or two people in a new country, this cost is completely disproportionate.

What is an Employer of Record?

An Employer of Record (EOR) is a company that already has legal entities established in countries around the world. They employ your worker on your behalf — handling payroll, social security contributions, employment contracts, and compliance — while the worker functionally reports to you and does your work.

What does an EOR cost?

EOR services typically charge in one of two ways:

• Fixed monthly fee per employee: Typically $299–$599 per employee per month depending on the provider and country. Remote.com starts at $299/month, Deel at similar levels.
• Percentage of salary: Some providers charge 8–15% of gross salary instead of a fixed fee. This becomes expensive for higher-paid employees.

On top of the EOR fee, you still pay all the local employer contributions — those are pass-through costs. The EOR fee is for the service of managing compliance, payroll, and the local employment relationship.

When does an EOR make sense?

EOR is the right choice when:

• You are hiring 1–4 employees in a new country and do not yet know if you will expand further
• You need to hire quickly — an EOR can onboard an employee in days rather than the months required to set up a local entity
• You want to test a new market before committing to permanent infrastructure
• You are a startup or scale-up that cannot afford the legal and administrative overhead of multiple local entities

You should set up your own entity when:

• You have 5+ employees in the same country and the EOR fees exceed entity setup and maintenance costs
• You have a permanent strategic presence in that market
• Your business model requires local contracting capacity or a local regulated entity (financial services, healthcare, etc.)

EOR vs contractor — what is the difference?

Many companies default to hiring contractors (freelancers) for international work to avoid the complexity of employment. But as I covered in my freelancer vs employee comparison, this creates misclassification risk in many countries. If a contractor works exclusively for you, follows your working hours, and uses your tools, they may be classified as an employee regardless of what their contract says — exposing you to back-payment of years of social security contributions.

An EOR eliminates this risk entirely because the worker is a genuine, fully compliant employee from day one.

Which EOR providers should you consider?

How to use my calculator alongside EOR quotes

My employer cost calculator shows you the statutory employer contributions for any country — which represents the baseline cost of employment. When you get an EOR quote, the quote should include these statutory costs plus the EOR service fee. If an EOR quote seems significantly lower than the statutory contributions alone, something is wrong — either they are underquoting or making assumptions about benefits that may not apply.

Use the calculator to understand what you should be paying in contributions, then compare EOR quotes to verify they are pricing the statutory costs correctly on top of their service fee.