You found a great senior engineer, but they live in a country where your company has no legal entity. For one or two hires, an employer of record (EOR) is usually the right answer: a provider legally employs the engineer in their country, runs payroll and local benefits, and you direct the day-to-day work. Expect a platform fee of roughly 400 to 700 US dollars per employee per month at the larger providers, plus the engineer's salary and the employer costs that country requires. Paying the person as a contractor is cheaper on paper, but for a full-time engineer who works only for you, it carries misclassification and IP risks that tend to surface during due diligence.
The three ways to pay an engineer abroad
1. Independent contractor
You sign a contractor agreement and pay invoices, directly or through a contractor platform. This is fast and cheap. It works well for genuinely independent work: a fixed project, a part-time specialist, someone with several clients.
It works badly when the person is, in every practical sense, your employee: full-time, working only for you, using your tools, following your process, attending your standups. Many countries look at the substance of the relationship, not the label on the contract. If a contractor is effectively an employee, you can face back taxes, social contributions, and penalties in their country, and the engineer may have claims to employee benefits they never received. We compared the trade-offs for a domestic first hire in contractor vs employee for your first engineer; the cross-border version raises the stakes.
2. Employer of record
An EOR provider already has a legal entity in the engineer's country. It becomes the legal employer, issues a locally compliant employment contract, runs payroll and tax withholding, and provides mandatory benefits. You decide what the engineer works on and manage them like any other team member.
The main costs:
- Platform fee. Published starting prices from large providers such as Deel and Remote are around 599 US dollars per employee per month, with Oyster listed around 699, and lower rates for annual billing. Some smaller providers advertise lower prices, and rates often vary by country. Check current pricing with each provider before you budget; these numbers move.
- Employer costs. Mandatory social contributions, pension, health insurance, and statutory bonuses vary widely by country. In some countries they add a small percentage to gross salary; in others they add a lot. Ask the provider for a full cost estimate for that specific country and salary before you make an offer.
- Deposit. Many EOR providers require a deposit, often equivalent to one or more months of total cost.
3. Your own local entity
Setting up a subsidiary means incorporation, local accounting, payroll, and ongoing compliance. It makes sense once you have a meaningful team in one country, typically more than a handful of people, or a business reason to be there, such as local customers. For your first or second international engineer, it is almost always too much overhead.
When an EOR is the right call
Use an EOR when all of these are true:
- The engineer will work full time and only for you.
- You want to manage them like an employee: their hours, their priorities, their tools.
- You plan to keep them for longer than a few months.
- You do not have, and do not want, a legal entity in their country.
For a senior engineer you hope will be a long-term member of a small team, that describes most situations.
The IP question diligence will ask
This is where founders get caught. Investors and acquirers want to know that your company owns the code. That means every person who wrote meaningful code needs a valid IP assignment to your company, not just to an intermediary.
With an EOR, the engineer's employment contract is with the provider. Ask the provider to confirm, in writing, how IP created by the engineer is assigned to your company. Good providers have a standard mechanism, and some offer a direct assignment agreement between the engineer and your company as well. Get it signed on day one, not when a term sheet arrives.
With contractors, the risk is larger. A contractor agreement that does not clearly assign IP, or that was never signed, is a common finding in technical diligence. We have written about fixing IP assignment before a raise; doing it at hiring time is far cheaper.
Equity for an EOR employee
You can usually still grant stock options to an engineer employed through an EOR, but the tax treatment depends on their country, and some providers have restrictions on how options are administered. Talk to your equity counsel before promising a specific option grant. If you are hiring in several countries, our post on equity parity for global engineers covers how to keep grants fair across locations.
A practical checklist before the offer
- Get a written, all-in cost estimate from at least two EOR providers for that country and salary.
- Confirm the notice period, probation rules, and termination requirements in that country. Ending employment can be slower and more expensive than in the US.
- Confirm how IP assignment to your company works, and get a direct assignment signed.
- Confirm how equity grants will be administered and taxed.
- Make sure your offer letter matches what the EOR contract will actually say, so the engineer is not surprised.
- Set up your own access controls: company accounts, laptops, repositories, as you would for any employee.
When to move off the EOR
The EOR fee is a fixed monthly cost per head. Once you have enough people in one country that the combined fees exceed the cost of running your own entity, including accounting, legal, and the time it takes to manage, it is worth looking at a subsidiary. For most startups, that point comes well after Series A. Until then, the EOR is buying you compliance and simplicity, and that is usually worth it.
Where a fractional CTO fits
Hiring across borders mixes technical judgment with operational choices most founders have not made before. A fractional CTO can help evaluate the candidate, structure the role, and make sure the access, code ownership, and onboarding are set up so the hire holds up during diligence. If you are planning distributed hiring, our fractional CTO across borders post covers the leadership side, and Fraction's pricing shows what an engagement looks like.
FAQ
Is an employer of record legal?
Yes. EOR is a well-established model. The provider is the legal employer in that country and handles local employment law, payroll, and tax. You remain responsible for managing the work and treating the employee fairly.
Is it cheaper to hire an international engineer as a contractor?
On paper, yes, because there is no platform fee or statutory employer cost. But if the person works full time and only for you, misclassification risk and IP gaps can cost far more later, especially during fundraising or an acquisition.
How long does it take to onboard someone through an EOR?
It varies by country and provider. Many providers can issue a contract within days, but background checks, local paperwork, and notice periods at the engineer's current job usually set the real start date. Ask the provider for a realistic timeline for that country.
Can I convert a contractor to an EOR employee later?
Yes, and many startups do. Do it as early as possible, and make sure IP from the contractor period is assigned to your company as part of the switch.
If you are about to make your first international engineering hire and want a second opinion on the structure, book a call.