International hiring and the EOR decision

Contractor:

• Worker invoices you directly; they handle their own tax and benefits.
• Cheapest option ($0 platform fee) but exposes both sides to misclassification risk.
• Globally fine for genuine freelance / project work; problematic for full-time roles where the worker is integrated into the team, follows your schedule, uses your tools.

EOR (Employer of Record):

• A platform (Deel, Remote, Oyster, Rippling Global, Velocity Global) legally employs the worker in their country and seconds them to you.
• You see one invoice; they handle local payroll, tax, benefits, statutory leave, termination compliance.
• Cost: ~$400-700/employee/month on top of salary.
• The EOR carries the misclassification risk and the employment liability.

The decision rule:

• Full-time role + you want them long-term + you're not opening a local entity → EOR.
• Project work + worker has multiple clients + outcome-based deliverables → Contractor.
• Anything ambiguous → EOR. The cost difference vs misclassification fines + tax liability + back-benefits is dramatic.

Country-specific traps:

• Germany, France, Netherlands: contractors with one main client are presumed-employee. Misclassification is enforced aggressively.
• Brazil, Spain, Italy: strong worker-protection regimes; contractor relationships rarely survive scrutiny.
• US, UK, Canada, Australia: contractor classifications more flexible, but US (especially California) and UK (IR35) both have enforcement risk.

Stay on EOR when:

• You have <5 employees in a country
• You're still validating market presence
• The country is one of many (you'd open 8 entities to serve 8 EORs)

Open a local entity when:

• You have 5-10+ employees in one country
• EOR fees exceed local entity setup + ongoing accounting (~$10-30k/yr depending on country)
• You want to offer country-specific benefits the EOR doesn't carry (pension top-ups, education stipends)
• You want a local office / lease (EORs can't sign your office lease)

Entity setup costs (rough):

• UK Ltd subsidiary: £200-500 + ~£2-5k/yr accounting
• Germany GmbH: €5-10k setup + €5-15k/yr ongoing
• France SAS / SARL: €3-8k setup + €5-15k/yr ongoing
• Netherlands BV: €5-10k setup + €5-15k/yr ongoing
• India private limited: $2-5k setup + $5-15k/yr ongoing
• Singapore Pte Ltd: SG$2-5k setup + SG$5-15k/yr ongoing

Transition pattern: most companies use EOR to hire the first 1-3 employees, validate the market, then open an entity once they're committed. The transition (move employees from EOR to your local entity) is straightforward but requires careful continuity-of-service language so you don't reset their seniority/vesting.

Equity for foreign nationals:

• US C-corp granting options to non-US employees works, but the tax treatment depends on the employee's country.
• ISOs (US tax-advantaged) require US tax residency — usually NSOs for non-US employees.
• UK EMI scheme only works for UK-resident employees of a UK qualifying company.
• Germany and France have specific share-scheme rules (VG / BSPCE) with their own tax advantages.

The simplest pattern: US C-corp grants NSOs to all non-US employees, with country-specific tax-advice add-on. Carta / Pulley can administer this; ask the platform for "non-US grants" specifically.

Multi-country payroll mechanics:

• EOR handles it for you (their entire pitch).
• Local entity: hire a country-specific payroll provider (CloudPay for multi-country, PaySalsa for UK, Personio for Germany, etc.)
• Statutory leave varies wildly: US 0 days mandated, UK 28 days (incl. holidays), France 30+ days, Brazil 30+ days, Sweden 25 days. Budget the higher leave entitlements into headcount planning.

IP assignment — the trap nobody warns you about:

• US: standard employment IP-assignment clauses are enforceable.
• Germany: by default, employee inventions belong to the employee (subject to ArbnErfG); you need a specific compensation framework to assign IP.
• France: similar — collective bargaining agreement often dictates IP terms.
• UK: standard clauses work but PAYE registration is what makes them stick.

Fix: use country-specific employment contract templates from the EOR / payroll provider. Don't reuse your US contract for a German hire. The IP-assignment language has to match the country's labour law or you have an IP gap that surfaces during diligence years later.