How to Hire International Employees Without Setting Up a Local Entity

Back to Blog

Introduction

As skill gaps widen across local labor markets, companies are increasingly forced to look beyond borders to access experienced operators, specialists, and leadership talent. Global hiring is no longer a strategic ambition. For many businesses, it is a practical requirement to sustain execution.

However, employing international talent traditionally requires setting up legal entities in each country of operation. This approach introduces cost, delay, and regulatory complexity that often outweigh the immediate hiring need. As a result, companies are turning to alternative employment models that allow international hiring without permanent local infrastructure.

This article explains how companies hire international employees without setting up local entities, and the conditions under which each approach is appropriate.

The Core Constraint: Legal Employment

Hiring internationally is not primarily an HR problem. It is a legal one.

In most jurisdictions, employing someone requires:

• A locally registered legal entity
• Compliance with labor laws and statutory benefits
• Payroll tax registration and reporting
• Adherence to termination and employee protection rules

Without a local entity, companies cannot legally employ workers directly. Any solution that bypasses entity setup must address this constraint first.

Common Approaches to Hiring Without a Local Entity

There are three primary models companies use to hire internationally without establishing local entities. Each carries different tradeoffs.

Option 1: Independent Contractors

Hiring contractors is often the first option companies consider due to its simplicity.

This model is only appropriate for genuinely independent, project-based work. It breaks down quickly for long-term or full-time roles.

Option 2: Partnering With a Local Company

Some organizations rely on local partners or subsidiaries of third parties to place employees on their payroll.

This approach introduces structural risk and rarely scales cleanly across multiple markets.

Option 3: Employer of Record (EOR)

An Employer of Record provides a formal employment framework without requiring the company to establish a local entity.

Under this model:

• The EOR becomes the legal employer
• The company retains operational control
• Compliance, payroll, and statutory obligations are handled locally

This approach enables companies to hire full-time international employees legally and quickly, while maintaining centralized oversight.

How the EOR Model Enables Entity-Free Hiring

The EOR model separates legal employment from operational execution.

This structure allows companies to hire internationally within days rather than months, without committing to permanent legal infrastructure.

When Hiring Without an Entity Makes Sense

Hiring without setting up a local entity is appropriate when:

• Roles need to be filled quickly
• Headcount in a country is small or uncertain
• Markets are being tested before making long-term commitments
• Specialized skills are unavailable locally
• Internal HR and legal teams lack regional expertise

In these situations, speed and execution typically matter more than ownership of local infrastructure.

Cost and Operational Considerations

Entity setup involves fixed costs that scale poorly with small teams. These include legal registration, accounting, audits, compliance reporting, and local administration.

An EOR replaces fixed structural costs with variable, per-employee pricing. For early-stage expansion or distributed teams, this model is often more cost-effective and operationally efficient.

Risk Management and Compliance

Employment laws vary significantly across jurisdictions and are subject to frequent change. Missteps around classification, termination, or benefits can lead to financial penalties and reputational damage.

Using an EOR transfers day-to-day compliance execution to a partner with local expertise, reducing exposure while maintaining legal clarity.

Transitioning From EOR to Entity Setup

Hiring through an EOR does not prevent future entity establishment.

Many companies:

• Begin hiring through an EOR
• Validate market demand and talent availability
• Transition to a local entity once scale is justified

This phased approach aligns structural investment with operational certainty.

How Entropy Supports International Hiring

Entropy supports companies hiring internationally in environments where regulatory complexity and execution risk are closely linked. With a focus on emerging and high-growth markets, Entropy enables compliant hiring without requiring companies to build and manage local entities.

By combining Employer of Record services with on-ground operational insight, Entropy helps organizations access global talent while maintaining control, speed, and compliance.

Conclusion

Hiring international employees without setting up a local entity is not a shortcut. It is a structured approach to solving skill gaps while avoiding unnecessary operational drag.

For companies prioritizing execution, capability, and speed, models such as Employer of Record provide a practical path to global hiring without long-term structural commitment.