Key takeaways
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Speed and simplicity of EOR: An employer of record (EOR) lets you onboard employees in minutes without a local legal entity.
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Compliance and risk: With a local entity, your company is fully responsible for legal, tax, and HR compliance, whereas an EOR takes on this legal responsibility, managing local labor laws and payroll taxes for you.
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Cost efficiency: EORs have predictable fees. Establishing an entity has high upfront costs like registration and legal fees, plus ongoing local operational expenses.
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Control vs. agility: A local entity gives you full control and is best for long-term market commitments. An EOR is great for agile scaling, market testing, and building globally dispersed teams.
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Strategic flexibility: An EOR can serve as a bridge while you’re establishing an entity, or replace an existing entity to simplify administration.
With economic pressures mounting globally, companies are using global employment to diversify revenue streams and achieve strategic growth.
There are two main ways to hire globally: work with Employers of Record (EORs) or establish a local entity. The decision depends on your unique business needs and priorities. This guide will explain the differences between EORs and entities to help you make an informed choice.
The EOR model
An EOR legally employs professionals on behalf of another company. This model allows you to hire anywhere and build a global workforce without establishing legal entities in each country. EORs manage compliance with local labor and employment laws and handle payroll, taxes, benefits, and other HR processes. Using an EOR streamlines the entire employment lifecycle and allows you to focus on core business activities.
The global entity model
Establishing a legal entity is the traditional approach to global employment. There are two main types of entities:
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Subsidiary: An independently operating legal entity of which the parent company has full or partial ownership. The subsidiary is responsible for its own compliance, but the parent company may be protected from liabilities, depending on local laws and regulations. The parent company's investment in the subsidiary is at risk if compliance issues occur.
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Branch: Rather than being a distinct legal entity, a branch is a registered international office that the parent organization uses to do business from. The parent company retains full liability for compliance.
Global entity setup is an extensive process that involves:
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Researching the market and regulatory landscape
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Choosing an entity type
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Registering and incorporating with local authorities
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Obtaining licenses and permits
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Opening a local bank account
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Establishing HR and payroll processes
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Ensuring ongoing compliance with employment, labor, and tax laws
Scaling quickly into new markets was critical for Boston Dynamics, but establishing entities in every country would have slowed them down. With G-P’s global infrastructure, they entered nine markets efficiently while staying fully compliant. Rachel Salamone, their Chief People Officer, noted: “G-P made hiring across multiple countries feel seamless. What used to take months now takes days, and we can focus on finding the right talent instead of navigating compliance.”
EOR vs. global entity: side-by-side comparison
EORs and global entities each have their own benefits and serve companies differently. Here's how they compare in terms of setup time, complexity, cost, flexibility, and compliance risks.
EORs give you easy access to global markets. With an EOR, you can start onboarding employees immediately. You don't have to incorporate, learn each country's labor and employment laws, or navigate the complexities of payroll and taxes. EORs manage these responsibilities while providing local expertise and ongoing compliance support.
Where in the world are companies hiring?
Companies of all sizes use EORs to explore new international markets, without the lengthy process of entity setup. The following data reflects current global talent trends by role.
Important: Always cross-reference this information with your specific business needs and the most up-to-date market conditions.
If you're seeking stakeholder buy-in for global scaling, the convenience of working with an EOR can help you make a strong case. The global entity approach is more complex and time-consuming, requiring you to:
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Research local laws and regulations.
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Align legal documentation and processes with compliance standards.
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Navigate payroll, taxes, and other HR functions in a new location.
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Assume legal employment responsibility.
EOR vs. entity setup cost
Both the entity model and the EOR model come with expenses that you must factor into your budget.
EORs typically charge a fee to cover their services. This fee is either a fixed amount or a percentage of the employee's salary.
Global entity setup expenses include:
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Registration fees: Creating a local entity involves registration fees, legal fees, and accounting fees. The exact costs depend on the country of incorporation.
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Operational expenses: Recurring expenses include office space, utilities, and salaries for local HR, legal, and finance team members.
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Tax compliance expenses: Local entities are responsible for preparing and filing tax returns, as well as managing VAT where applicable.
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Auditing fees: Compliance and financial audits are important to keep the entity in line with local requirements.
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Potential fines: Assuming responsibility for compliance means accepting the financial risk of errors, such as payroll tax errors, immigration violations, and employee misclassification.
Taking all expenses and administrative hurdles into account, an EOR is the most cost-effective choice. Finance platform OneStream can vouch for this through their experience partnering with G-P. “All our invoices live in one place and the costs are easy to understand. G-P helped us eliminate confusion, discrepancies, and the need to manage multiple sources of information,” says Martha Angle, Vice President of Culture, Diversity, and People at OneStream.
Entity vs. EOR management and flexibility comparison
Setting up an entity gives you complete control over your operations and employees. You're also fully responsible for compliance and financial investments in the entity infrastructure. This gives you flexibility in daily management, but enhances risks and limits your ability to quickly scale up or down.
An EOR also gives you control over your operations and employee-related decisions, such as promotions and terminations. The main difference is that EORs handle compliance, payroll, and benefits administration, so you can expand while minimizing your risks.
By using the EOR’s entity infrastructure, you have the flexibility to scale up or down as needed.
Whether you use an EOR or establish a global entity, you'll need to plan for compliance in areas such as:
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Employment law: You must meet local requirements for employment contracts, working conditions, benefits, and termination procedures.
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Payroll compliance: Payroll administration involves withholding the correct taxes and making all the necessary employer contributions.
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Data protection: Countries have varying data privacy protections, including standards for data collection and storage.
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Immigration: Visas and work permits ensure every employee at your company has the legal right to work.
Local entities can bring more legal risks than working with an EOR if not properly managed. A best-in-class EOR has a team of legal and HR experts to navigate complex compliance requirements, so you don't have to.
If taking the global entity setup approach, make sure your in-house HR team has the time, tools, and knowledge to stay on top of evolving compliance obligations.
Challenges in global entity management
For many years, establishing a legal entity was the default way to expand globally. EOR solutions emerged to simplify the administrative, compliance, and financial burden of global entity management systems.
1. Compliance framework challenges with global entities
Establishing a global entity requires navigating labor and employment laws and tax requirements that vary across countries. Undetected compliance gaps can lead to costly fines and reputational damage. Maintaining an entity requires local expertise and close monitoring of regulatory changes.
An EOR does all of this for you and provides the skills, support, and technology to mitigate compliance risks.
2. Administrative workload challenges with entity setup
Managing international payroll, benefits, and HR functions creates major administrative burdens. The 2026 Workforce Trends report highlighted that 35% of HR leaders spend too much time on administrative tasks, and 61% struggle to keep pace with evolving regulations.
With a legal entity, you'll have to handle all these processes while meeting local data protection standards. An EOR protects productivity in core business activities by streamlining administrative duties for efficient global operations.
3. Financial management challenges with entity management
Legal entities have to navigate fluctuating exchange rates, varying tax regulations, and diverse reporting requirements. An EOR can guide you through these complexities and provide the infrastructure you need to streamline financial management in global markets.
When energy giant Repsol decided to close an entity, they needed a way to retain key employees seamlessly. Partnering with G-P allowed them to transition roles to an EOR model, avoiding disruptions and saving roughly USD 3.7 million in onboarding and administrative expenses. Nick Cheesman, Head of HR North America, highlighted the impact: “G-P enabled us to retain key talent, oversee the closure of our Canadian entity, and ensure compliance with all legal and financial obligations, allowing us to concentrate on business operations.”
When to use an EOR vs. an entity
Consider these three factors to decide if an EOR or a global entity is best for your company:
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Business goals: Do you have a long-term commitment to this market or region?
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Budget and resources: Do you have the resources to cover the varying expenses of managing an in-country entity infrastructure? Or are you looking for a more affordable entry point with predictable fees?
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Risk tolerance: Can you manage compliance risks and administrative challenges on your own? Or would you prefer a team of local experts to manage these responsibilities for you?
When to choose an EOR
An EOR is the best solution if you:
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Need to minimize risks and limit liability exposure in unfamiliar legal environments
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Want to test new markets while maintaining agility
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Plan to hire employees in multiple regions or operate in several countries simultaneously
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Want to relocate employees to another country
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Prefer predictable expenses
When to establish an entity
Establishing a global entity is best if you:
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Have a long-term commitment to a specific market
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Have the resources to absorb higher upfront expenses and variable monthly expenses
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Can manage HR tasks and administrative duties internally
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Operate within certain regulated industries that require a legal entity to operate in the country
If your company plans to establish a local entity, you can use an EOR as a temporary solution while completing the setup process. Or you can wind down a global entity and easily transition to an EOR to streamline HR functions and simplify compliance.
6 factors to consider when switching from a global entity to an EOR?
Detailed planning and execution is required when transitioning from a global entity to an EOR. To ensure a successful transition, it is essential to seek the expertise of an industry-leading EOR provider. Key factors to consider before making the switch include:
1. Choosing the right partner carefully
“Having an EOR that cares about your workforce makes a difference,” Kathryn Barnes, Senior Legal Counsel at G-P said, “as this translates into your employees continuing their faith in you, which ultimately means continuing their employment with you, ensuring you still have a workforce tomorrow.” The first crucial decision for companies is selecting an EOR that will treat team members with care and empathy. Companies should make sure that the EOR can handle the number of retained professionals and facilitate a smooth transition.
2. Asking the right questions
Before finalizing an agreement with an EOR, conducting due diligence is important, mainly by asking targeted questions regarding the level of team member guidance and support provided, such as:
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Does the EOR have HR and legal teams with local expertise to guide professionals and ensure compliant operations?
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How can the EOR assure that team members will be compliantly classified?
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How can the EOR guarantee timely and accurate salary payments, and what other aspects of compensation will professionals receive?
As software company Canidium expanded across multiple regions, the company needed confidence that team members would be classified correctly and onboarded compliantly. G-P provided local HR and legal guidance, handled classification, and streamlined payroll, giving Canidium peace of mind while scaling globally. Annie Diiorio, HR Manager, explains: “We now have confidence that both EOR professionals and contractors are classified correctly, reducing legal risks and penalties. Onboarding new hires is easy for both our admin team and our global team members.”
3. Obtaining team member consent
In several countries, laws require your team members’ consent before a transfer to an EOR can take place. Companies risk losing valuable talent if the EOR partner is not equipped to deal with key aspects of team management, such as employment contracts, benefits, and seamless payroll transactions.
Once successfully transitioned to an EOR, companies will gain the flexibility to enter and exit markets with ease, which can be very beneficial in times of uncertainty or crisis. Unlike the initial burden of an entity wind down, EORs ensure that future downsizing and switching hiring markets can be done quickly and effortlessly.
4. Strategically consolidating your global entities
An EOR is the best way to simplify the transition from a direct subsidiary model. Winding down your entities and shifting to an EOR frees you from the admin burden of managing multiple local setups.
EORs have expertise in local tax regulations, which minimizes the risk of compliance issues and fines you’d face managing global entities yourself. It replaces complex, multiple legal structures with one simple way of operating.
5. Maximizing your operational efficiency during transition
The main benefit of moving to an EOR is the reduction in administrative work. A global entity requires separate accounting systems and localized HR teams for every country. An EOR joins these functions into one platform. This removes the need for manual data across different management systems.
Data centralization gives you a clearer view of all labor costs. This insight allows for faster strategy changes and frees up internal staff who were previously busy managing separate entities.
6. Ensuring reporting accuracy and cross-border compliance
Using an EOR reduces the risk of breaking different international labor laws. EORs provide a built-in safety net of experts to manage payroll, benefits, and legal filings, ensuring compliance with all local laws.
Your financial reports are always ready for an audit and compliant with both local and global rules. Since we handle these complex tasks, your internal accounting teams are no longer stretched thin by country-specific nuances. Instead, they can focus on important financial strategy, trusting that the underlying employment compliance is managed accurately by experts.
Why trust G-P
As the recognized leader in global employment, G-P helps companies of all sizes build and manage global teams in 180+ countries without the need to establish new entities. Our industry-leading global employment products and EOR solutions are backed by the largest team of in-country HR, legal, and compliance experts to streamline and simplify the entire global employment lifecycle.
We’ve helped hundreds of customers reach their global employment goals with ease. For example, we supported Karger Publishers in scaling to 15 countries, while ensuring full compliance with labor laws in each location.
Build global teams quickly and compliantly with G-P
For companies seeking easy access to new markets with built-in compliance and zero legal guesswork, an EOR is the best choice.
Book a demo to learn how our EOR solutions can help you go global and stay compliant.
