Do You Need a Local Entity to Hire Abroad?

Hiring talent from around the world is one of the fastest ways to grow your business and access new skill sets. But it also raises a big question: do you need to set up a local entity to legally employ someone abroad? The answer depends on how you plan to structure your workforce and how long you intend to operate in a given country.This guide breaks down what a local entity actually is, when you need one, and how companies today use platforms like Plane and employer of record (EOR) services to hire globally without the red tape.

Understanding the basics of international hiring

When your company hires someone in another country, you’re entering a new legal environment. Employment laws, payroll requirements, and tax obligations all vary, sometimes dramatically, from one market to another. Without a legal structure in that country, your business technically has no right to employ people there directly.That’s where the concept of a local entity comes in.

What is a local entity?

A local entity is a formal business structure established in a foreign country that allows your company to hire employees directly. This could take the form of a:

Subsidiary : a locally incorporated company that operates under your main business.

Branch office : an extension of your company that operates in another country.

Representative office: a small presence that can handle limited local operations but usually can’t hire employees directly.

Setting up a local entity takes time and resources typically involving legal registration, tax setup, and ongoing compliance maintenance. For many companies, that’s not practical, especially when testing a new market or hiring just one or two people abroad.

Why companies hire internationally

Global hiring isn’t just a cost play, it’s a growth strategy. Companies are increasingly expanding their hiring reach for a few key reasons:

Access to global talent: Hiring abroad helps companies fill skill gaps that may be hard to source locally.

Cost flexibility: Certain regions offer cost efficiencies based on market rates and operating costs.

Diversity and innovation: A more diverse team brings new perspectives, creativity, and resilience.

The role of employer of record (EOR) services

For many companies, establishing an entity in every country they hire from simply doesn’t make sense. That’s where employer of record (EOR) services come in.An EOR acts as the legal employer on your behalf, allowing you to hire talent in another country without owning a local entity.

How it works

The EOR manages all employment responsibilities locally, while you retain day-to-day control of the employee’s work. This can include:

Compliance: Managing contracts, benefits, and labor law adherence.

Payroll: Running local payroll, handling taxes, and ensuring accurate withholdings.

Onboarding: Drafting contracts, collecting documentation, and ensuring new hires meet local requirements.

Benefits of using an EOR

Speed to hire: You can onboard employees in days instead of months.

Cost savings: Save on the cost of setting up legal entities in every country where you want to hire

Reduced compliance risk: The EOR assumes legal responsibility for local employment obligations.

Simplified administration: Your HR and finance teams can focus on strategy instead of country-specific compliance.

When a local entity may be necessary

While EORs work for many companies, there are times when creating your own entity makes more sense.

Long-term market presence

If you’re planning to have a long-term presence in a country such as opening offices, hiring large teams, or selling directly to customers, establishing a local entity gives you more control and credibility.

Industry-specific regulations

Some industries, such as financial services, healthcare, and education, have licensing or data-handling requirements that an EOR may not be able to fulfill. In those cases, a local entity is mandatory.

Direct employee relationships

Some companies prefer to manage employment relationships directly for strategic or cultural reasons. Having your own entity allows for greater control over contracts, benefits, and employee experience.

Compliance challenges in international hiring

One of the most significant hurdles companies face when hiring abroad is compliance with local laws. According to the Atlas 2023 study, 60% of companies find it particularly challenging to ensure compliance with local regulations across multiple jurisdictions.Common challenges include:

Tax obligations: Understanding local tax registration, filing, and withholding requirements.

Labor law differences: Each country has its own rules on notice periods, termination, and benefits.

Work authorization: Navigating visas and work permits for foreign nationals can be complex and time-consuming.

How to overcome these challenges

Engage local experts: Partnering with regional legal or HR professionals helps ensure compliance from day one.

Leverage technology: Tools like Plane automate compliance workflows, from contract generation to payroll and filings.

Use an EOR partner: For most early-stage or remote-first teams, an EOR eliminates the biggest legal and operational headaches, and you get to work with in-house compliance experts.

Choosing the right path for your business

The decision to establish a local entity or partner with an EOR comes down to your company’s goals and stage of growth.If you’re hiring a handful of people in new markets or want to test expansion without a full legal setup, an EOR partner like Plane is almost always the smarter route. But if you’re building a permanent footprint with a large, locally managed team, forming a local entity can be a worthwhile investment.Either way, the key is to ensure compliance, consistency, and scalability in how you manage global hiring.

Ready to expand your global team?

With Plane, hiring abroad is seamless and fully compliant. The platform helps you manage international hiring, onboarding, and payroll without needing to open entities in multiple countries.You gain:

Local compliance coverage across 100+ countries for employees and 240+ countries for contractors.

Centralized dashboards for contracts, payments, and documentation.

Expert support from global employment specialists.

Hiring internationally shouldn’t slow you down, it should help you grow faster. Get started with Plane and start hiring top talent anywhere in the world, without borders or bureaucracy.