Cross-Border Payroll Compliance: Employer of Record vs Local Entity
Hiring your first employee in a new country? Here's how to choose between an Employer of Record and setting up a local payroll.
7 min read · 27 April 2026
Employer of Record: the fast path
An Employer of Record (Deel, Remote, Oyster, Rippling EOR) legally employs your worker in the target country on your behalf. You pay the EOR; they handle payroll, tax withholding, social contributions and employment law. Typical cost: $500–$700 per employee per month.
EORs are ideal for 1–5 hires per country and for testing markets before committing to an entity.
When to set up your own entity
Above roughly 10 employees per country, or when local sales activity creates permanent establishment risk, a local entity typically becomes cheaper and cleaner. It also gives you full control over benefits, IP ownership and equity grants.
Set-up costs vary wildly — a UK Ltd is a few hundred pounds; a UAE mainland entity can run to tens of thousands in year one.
Permanent establishment and social security
Even without an entity, having employees performing sales or contract negotiation in a country can create a taxable permanent establishment for the parent. Social security totalisation agreements can keep an employee on the home country's system for temporary assignments, but the rules are country-specific and time-limited.