The three routes at a glance

Three ways to engage a worker in another country
Question	Employer of record	Your own local entity or registration	Independent contractor
Legal employer	The EOR	Your company	No employer; a business-to-business contract
Registers the person for local social insurance	The EOR	Your company	The contractor, on their own
Who directs the work	You, while the EOR holds the contract	You, as the employer	The contractor, who agreed to deliver results
Setup for you	A service agreement	Registration, local payroll and filings	A contract and invoices
What drives the cost	The EOR’s charge on top of pay and contributions	Running local payroll, accounts and advice	Invoices, plus back contributions if it is really employment
Where it meets limits	Countries that restrict worker supply or leasing	Time and cost to set up and run	Countries’ tests for who is really an employee
Extra benefits on top	Varies by EOR service	Yours to choose	Usually none from you
Often suits	One or a few hires in a new country	A lasting team in that country	Independent, project-based work

The short version: an EOR lets you employ one person in a new country without your own entity, your own entity carries the most work but the most control, and a contract is the lightest setup only when the person genuinely runs their own business.

One hire or a team, a short stay or a long one

Headcount and time frame settle most of the choice. A single hire testing a new market leans toward an EOR or, for genuinely independent work, a contract. For a team you expect to grow, the fixed work of registering, running payroll and filing returns is spread across more people, and your own entity starts to make sense.

Several countries also treat an EOR placement as supplying a worker to another business, and license it, cap how long it can run or ban it outside narrow cases, so a hire you expect to keep for years may belong on your own payroll. The staffing limits column in our employee health rules by country table shows where such rules apply. Each of these is a legal question in the country concerned, so check with a local employment adviser before you sign an EOR agreement, register as an employer or issue a contract.

How much control each setup leaves you

With your own entity you write the employment contract, choose the benefits and set the workplace policies. With an EOR you still direct the daily work, but the contract, payroll and any dismissal run through the EOR under local labor law. A professional employer organization is different again: EOR providers say a PEO’s co-employment model needs your own entity in the country.

A contract gives you the least say over how the work is done, and that is the point of it. If you begin setting hours, methods and tools the way you would for staff, the relationship starts to look like employment whatever the contract says. The California version of that test is in employees vs. independent contractors in California.

What drives the cost, in plain terms

Salary and statutory contributions are owed in every employee setup, so the difference is what sits around them. An EOR adds its charge for each person it employs, and what that charge includes varies between providers. Your own entity carries costs that stay much the same whether it employs one person or ten: registration, local payroll, accounting, filings and legal advice. Some countries ease that by letting a foreign company register directly as an employer or run payroll through a local provider.

A contractor is the lightest to administer, but the hidden cost is reclassification: if the relationship turns out to be employment, the unpaid contributions and taxes can come due.

How long each setup takes to put in place

An EOR route starts with a service agreement, after which the EOR issues the local employment contract and adds the person to its payroll. Your own entity has more steps before the first payday: registering as an employer, opening a local payroll, setting up filings and sometimes forming the company. A contract can be signed once both sides agree its terms. Ask each EOR provider how long its onboarding runs in the country concerned.

Work permission can reorder the steps. In some countries, Singapore among them, an EOR cannot apply for a work pass for someone working for an overseas company, so the entity has to come first.

What each setup means for health cover

In general terms, health cover follows the legal employer. With your own entity, you register the employee for the statutory schemes, pay the employer share and decide on anything extra. With an EOR, the EOR handles that registration and the contributions in most countries, and any extra cover comes from the EOR service you choose. A genuine contractor arranges their own cover as a self-employed person. Where an international plan is used, it usually adds to the local base rather than replacing it.

In a few countries, such as the Netherlands and Switzerland, the employee buys the required basic health policy personally, whoever the employer is. Who enrolls whom differs by country. Our guide to health coverage for EOR employees and contractors abroad works through the enrollment examples, and the country table mentioned above lines up the public scheme, employer contribution and staffing rules for 45 countries.

The insurance side of each route

The route also changes what we ask insurers. List EOR hires and contractors when you request employment practices liability terms, and the insurer decides how its form treats them; how a US workers’ compensation policy treats work abroad is also the insurer’s call. Our page on insurance changes for remote teams covers those lines and cyber.

Health cover once the route is set

Once you know who the legal employer will be, use the quote form on this page to list the country, the headcount and how each person is engaged. We will pass it to a benefits partner that handles international and remote-team health coverage, and the partner and the insurer decide eligibility, plans and pricing.

A few useful answers

Common questions

Can an employer of record be used in every country?

Not on the same terms everywhere. Some countries license, time-limit or restrict the supply of workers to another business, and some will not let an EOR sponsor a work permit for someone working for an overseas company. Our employee health rules by country table marks where staffing limits apply.

When does a local entity make more sense than an EOR?

Usually when you plan a lasting team there, need to sponsor a foreign national’s work permit, or face local leasing limits.

Does a PEO or other co-employer remove misclassification risk?

Not by itself. Providers note that bringing in a co-employer does not on its own remove the client’s exposure if it still directs the work like an employer, and each country applies its own test. A PEO also needs your own entity in the country, which is why an EOR is the usual route without one.

Can Mithril1 help arrange health cover for staff abroad?

We can introduce you to a benefits partner that handles international and remote-team coverage. The partner and the insurer decide who qualifies, which plans apply and the pricing.

Employer of Record vs. Local Entity vs. Contractor