Four ways to employ someone in another country
You have found the person you want. They live somewhere your company does not exist as a legal entity. There are four routes from here, and picking the wrong one is expensive in ways that take about eighteen months to surface.
This guide covers all four honestly, including the situations where the option we sell is the wrong one.
Route 1: incorporate locally
Set up your own legal entity in the country, register as an employer, and hire directly.
When it is right. You are committing to the market long term, you expect to employ a substantial team, or you need to trade locally, hold local contracts, or own local assets. Beyond roughly fifteen to twenty employees in one country, the economics usually favour your own entity.
What it costs. Incorporation fees, paid-up capital requirements in some jurisdictions, a registered address, a local director in many countries, annual audit and filing obligations, and either a local finance function or an outsourced one. Timeline is typically two to six months before you can legally pay anyone.
The part people underestimate. An entity is not a one-off cost. It is a permanent compliance obligation with annual filings, tax registrations and statutory reporting, and unwinding it later is slower than setting it up.
Route 2: engage them as a contractor
Pay them on invoice as an independent contractor.
When it is right. Genuinely project-based work with a defined end, a specialist engaged for a discrete piece, or someone who works for several clients and controls how they deliver.
The risk, stated plainly. Misclassification. If the person works set hours, uses your systems, reports to your manager, and has no other clients, most jurisdictions will treat them as an employee regardless of what the contract says. The consequences fall on you: back taxes, unpaid social contributions, statutory entitlements, penalties, and in some countries the relationship converting retroactively to permanent employment.
Authorities have become considerably more active on this. Treating a full-time team member as a contractor because it is administratively easier is the single most common and most expensive mistake in cross-border hiring.
Route 3: an Employer of Record
A third party who already has a legal entity in that country employs the person on your behalf. They are the legal employer; you direct the work day to day.
When it is right. You want one to fifteen people in a country, you want them as permanent employees rather than contractors, and you do not want an entity. This covers most companies hiring their first offshore team.
What it costs. A monthly fee per employee on top of salary and statutory employer costs. Typically some form of deposit as well, which varies by provider and country.
What it does not solve. An EOR does not let you trade locally, hold local contracts, or own local assets. If you need commercial presence rather than just people, you need an entity.
And one thing it does not decide. An EOR settles who employs the person. It does not settle your own tax position in that country, because that turns on the authority the role holds rather than on whose payroll it sits on.
A role with authority to negotiate and conclude customer contracts can create a taxable presence for your company whatever the employment structure says, which is why a sales hire needs more thought than an engineering one. For how that works in Indonesia, see permanent establishment risk for sales teams.
Route 4: a PEO
A co-employment arrangement where you and the PEO share employer responsibilities.
The important distinction. True co-employment generally requires you to have your own local entity already. In much of the world the term PEO is used loosely and often describes what is functionally an EOR. If a provider offers you a PEO arrangement in a country where you have no entity, ask them precisely who the legal employer is and which entity appears on the employment contract.
Choosing between them
The decision usually comes down to three questions.
How many people, in how many countries? One to fifteen in a country points to an EOR. Substantially more points to your own entity. Spread thinly across many countries points to an EOR almost regardless of headcount.
Do you need commercial presence, or just people? If you need to invoice locally, sign local contracts or hold assets, an EOR does not solve it.
Is the work ongoing or genuinely finite? Ongoing work performed under your direction is employment, whatever you call it. Only genuinely project-bound work belongs on a contractor arrangement.
The questions that matter when comparing providers
Most EOR comparisons focus on the monthly fee, which is rarely the largest variable.
Who is the legal employer? Ask which entity signs the contract, and whether the provider holds it or subcontracts to a local partner. Both models exist and both can work, but you should know which you are buying.
What is the deposit? Terms vary widely and are often expressed as a multiple of monthly charges rather than salary.
What happens at termination? Statutory notice and severance vary enormously by country and the provider does not absorb them.
Who does the employee actually talk to? If the answer is a ticketing system in another timezone, expect retention problems.
What is included versus priced separately? Equipment, workspace, benefits above the statutory floor and HR support are sometimes bundled and sometimes modules.
A worked example: Indonesia
Indonesia is a useful case because the gap between the routes is unusually wide.
Setting up a PT PMA, the foreign-owned company structure, involves paid-up capital requirements, a multi-month timeline and ongoing filing obligations. For a company that wants three engineers or a small support team, the entity is disproportionate to the need.
Employing through an EOR instead means the employees are on compliant Indonesian contracts, specifically PKWTT permanent contracts for ongoing roles rather than fixed-term PKWT, registered for BPJS health and employment cover, receiving THR, the mandatory annual religious holiday allowance, and with PPh 21 income tax withheld and filed monthly.
None of that requires you to exist in Indonesia. Our complete guide to Employer of Record in Indonesia covers the framework in detail, and the PT PMA versus EOR comparison covers the point at which incorporating becomes the better answer.
Legal note. This is general information about employment structures and is not legal advice. Rules differ by country and change. Take advice from qualified counsel in the relevant jurisdiction before deciding how to employ someone.
Where to start
If you are weighing an entity against an EOR for a small team, the cost calculator gives you an all-in monthly figure to compare against your incorporation quote. If you want to talk it through, including the cases where we are not the right answer, book a free consultation.
Who you would actually be working with
Worth being specific about the calibre, because "offshore" carries an assumption that does not apply here. We recruit the way a corporate employer recruits. The professionals we place hold degrees from Indonesia's top universities, and under the QS World University Rankings 2026 that means institutions like Universitas Indonesia at 189 globally, Universitas Gadjah Mada at 224 and Institut Teknologi Bandung at 255, with 26 Indonesian universities ranked overall.
They average six years of professional experience, most of it inside multinationals and global agencies, and they range from individual contributors through team leads to managers. This is a different population from a volume seat based operation, which staffs for cost per seat and trains to a script.
It is also a different proposition from a contractor, a freelancer or a virtual assistant. Those arrangements give you someone splitting attention across several clients, with no continuity when they move on and nobody accountable when something goes wrong. Ours are permanent employees, dedicated to you, with twelve-month retention above 90%.
