Using an Employer of Record in Remote Hiring: Your Guide to Global Expansion Without the Headaches
You've found the perfect candidate. They have the exact skills your team needs, the cultural fit is obvious, and they're genuinely excited about your mission. There's just one problem: they live in Brazil, and your company is based in Atlanta. Maybe they're in Cape Town while your operations center in San Francisco. Perhaps they're in Lagos while you're in London.
A few years ago, this would have meant either asking the candidate to relocate, hiring them as a contractor and hoping for the best, or walking away from an ideal match. But today, there's a better solution: an Employer of Record.
At Nossa, we've built our business connecting companies with world-class talent across borders. We've seen firsthand how Employer of Record services transform global hiring from a compliance nightmare into a strategic advantage. If you're considering remote hiring across borders, here's everything you need to know about using an EOR and why it might be the smartest decision you make this year.
What Is an Employer of Record?
An Employer of Record is a third-party organization that becomes the legal employer for your remote workers on paper, while you maintain complete control over their day-to-day work, responsibilities, and performance.
Think of it this way: when you hire someone in Germany but your company is based in the United States, someone needs to be the legal employer in Germany. That employer must handle local employment contracts, payroll in euros, tax withholdings according to German law, and compliance with German labor regulations. Without an EOR, that "someone" would be you. This means establishing a legal entity in Germany, registering with German tax authorities, becoming an expert in German employment law, and managing all ongoing compliance obligations.
With an EOR, they handle all of that while you focus on what actually matters: managing your employee's work and helping them succeed in their role.
Division of Responsibilities
The EOR handles:
Employment contracts that meet local legal standards
Payroll processing in local currency with appropriate tax deductions
Benefits administration according to local requirements
Compliance with labor laws and termination procedures
Social security contributions and government program management
You control:
Setting salaries and compensation
Managing day-to-day tasks and responsibilities
Conducting performance reviews and feedback
Making promotion and development decisions
Determining if and when employment should end
The Problems EOR Services Solve
The Entity Establishment Burden
Setting up a legal entity in a foreign country isn't just expensive. It's extraordinarily complex. The upfront costs include legal fees for entity registration, accounting and tax consultation, compliance audits, minimum capital requirements, and potentially office space requirements.
Establishing an entity typically takes three to six months. During this time, your ideal candidate might accept another offer or your business opportunity might pass you by. For companies hiring just a handful of employees in a new market, these costs and timelines simply don't make sense.
The Contractor Misclassification Risk
Faced with entity establishment costs, many companies resort to hiring international workers as independent contractors. This seems simple until you understand the risks.
When you treat someone like an employee (setting their hours, providing equipment, directing their daily work) but classify them as a contractor, you expose your company to significant legal and financial penalties including back taxes, fines, and interest.
Real-world consequences are severe. In 2022, Uber paid $100 million to New Jersey after misclassifying nearly 300,000 drivers. In 2024, Arise was ordered to pay $3 million total for misclassifying customer service workers in the District of Columbia.
Beyond financial penalties, misclassification can result in stop work orders or even bans on doing business in that jurisdiction. For a company trying to expand internationally, losing access to a valuable market can be devastating.
The Compliance Complexity Challenge
Even if you successfully establish an entity, ongoing compliance is a full-time job. Every country has unique requirements around employment contracts, working hours, paid time off, termination procedures, health insurance, retirement contributions, parental leave, and data privacy.
These requirements change regularly. Without dedicated local expertise, staying current with evolving regulations across multiple jurisdictions becomes nearly impossible for companies focused on their core business.
How EOR Services Work
Here's what the typical engagement looks like:
You find and select the talent. EORs don't recruit. You identify the candidate, conduct interviews, and make your offer. The EOR steps in after you've decided who to hire.
The EOR creates the employment relationship. Once you've agreed on compensation, the EOR drafts a locally compliant employment contract between them and the employee, including all required local provisions.
Quick onboarding. The employee receives onboarding materials, tax forms, and benefits information from the EOR. They're set up in payroll systems and enrolled in benefits programs, typically within one to five days.
Ongoing management. Each pay period, you provide information about hours worked and any adjustments. The EOR processes payroll, withholds taxes, manages benefits, and maintains compliance. You direct your employee's daily work just as you would any other team member.
Compliant offboarding. If employment ends, the EOR handles the legally compliant termination process, including final payments, accrued vacation payouts, severance obligations, and required paperwork.
The Real Costs
EOR pricing typically ranges from $199 to $1,000 per employee per month, depending on the provider, country, and complexity of services.
Two Primary Pricing Models
Flat fee per employee: A fixed monthly amount (typically $500-$1,000 for quality providers) regardless of salary. This offers predictable budgeting and is cost-effective for higher-paid employees.
Percentage of salary: Between 8% and 20% of gross monthly salary (most providers charge 10-15%). This can be economical for lower-paid employees but becomes expensive as salaries increase.
Additional Costs
Setup fees: $500-$2,000 per employee (often reduced for multiple hires)
Security deposits: One to three months of salary (refundable)
Currency exchange fees: 2-10% for foreign currency
Offboarding fees for exit paperwork
VAT or sales tax in some countries
Total Cost Example
If you hire a marketing manager in Germany at €5,000 monthly:
€5,000 salary
€900 employer contributions
€800 benefits
€500 EOR fee
Total: €7,200 monthly
Compare this to establishing a German entity: $10,000-$50,000 in initial setup plus $20,000-$100,000 in annual ongoing costs for legal, accounting, and HR management.
EOR vs. Other Options
EOR vs. Your Own Entity: If you plan to hire 10-20+ employees in a country with long-term operations, establishing your own entity may eventually make sense. Below that threshold, EOR services are almost always more cost-effective and faster.
EOR vs. Contractors: If someone truly operates as an independent contractor (controlling their schedule, working for multiple clients, operating their own business), that classification may be appropriate. But if you're directing their work and treating them like an employee, you need an employment relationship. An EOR provides that legally.
EOR vs. PEO: A PEO requires you to already have a legal entity in the country. If you don't have an entity, you need an EOR.
What to Look for in an EOR Provider
Owned entities vs. third-party networks: The highest compliance and service quality comes from EORs that own their entities directly rather than using third-party partnerships.
Geographic coverage and expertise: Ensure the EOR has established operations in your target countries with in-house legal and compliance experts.
Technology platform: Look for systems that integrate with your existing tools, provide self-service options, and offer real-time visibility.
Speed and support: Prioritize providers with fast onboarding (days, not weeks) and responsive customer support, including dedicated account managers.
Transparent pricing: Understand the total cost, including all fees, before committing. Some providers advertise low base rates but add numerous surcharges.
Strategic Advantages Beyond Compliance
Speed to market: Hire and onboard talent in one week instead of waiting six months to establish an entity. This competitive advantage can determine success in fast-moving industries.
Market testing: Hire a few employees through an EOR to validate market opportunity before committing to entity establishment.
Access to location-specific talent: Hire the right person in the right place without geographic constraints, whether that's a developer in Eastern Europe or a Portuguese-speaking customer success rep in Brazil.
Focus on core business: Your team can focus on building your product and serving customers rather than becoming experts in international employment law.
Is an EOR Right for Your Situation?
Consider using an EOR if:
You want to hire employees in countries where you don't have a legal entity
You're testing new markets before committing to entity establishment
You need to hire quickly
You're a startup or small business without resources for international entity management
You have fewer than 10 employees per country
An EOR might not be right if:
You plan to hire 20+ employees in a single country with long-term operations
You already have entities and just need HR support (consider a PEO)
You're hiring true independent contractors
You have internal resources for international compliance and want direct control
The Bottom Line
An Employer of Record solves one of the fundamental problems of modern business: how to access the right people regardless of where they live while managing risk, controlling costs, and maintaining compliance.
For most companies hiring remote workers across borders, especially those with fewer than 10 employees per country, an EOR represents the smartest path forward. It combines speed, compliance, and cost-effectiveness in a way that neither entity establishment nor contractor relationships can match.
The world's best talent isn't conveniently located in one place. An Employer of Record ensures that when you find the perfect candidate, borders don't stand between you and building the team that will take your company where it needs to go.
Ready to hire world-class talent globally without the compliance headaches? Nossa connects you with exceptional professionals across borders and helps you navigate the complete hiring journey. Let's talk about your global hiring needs.
