Why a Global Employer of Record Is the Best Solution for Expanding Without a Local Entity
The Complexities of Setting Up a Local Entity
When expanding into new markets, setting up a local entity comes with significant challenges that can slow down or even derail international growth. The process involves navigating complex regulations that vary widely by country, making it difficult to establish a foothold without extensive local knowledge.
One of the primary hurdles is cost. Setting up a legal entity involves not only high upfront registration fees but also ongoing costs for legal compliance, tax filings, and administration. These expenses can become prohibitive for companies aiming to expand into multiple countries.
Additionally, maintaining compliance with local labour laws and employment regulations is no small task. Each country has its own intricate rules around payroll, taxes, employee benefits, and termination procedures. This complexity is often underestimated, and failure to meet local compliance standards can result in steep fines or legal consequences. For more insight into what this entails, explore the Employer of Record (EoR) concept and how it can simplify compliance management here.
Another critical factor is time. Establishing a legal entity often takes months, involving layers of approvals, paperwork, and government oversight. This lengthy process delays market entry, during which competitors may already gain traction. For businesses looking to expand swiftly and cost-effectively, the traditional route of setting up a local entity may simply not be the best option.
To summarise, establishing a local entity involves:
- High upfront and administrative costs
- Complex regulatory hurdles
- Lengthy approval processes delaying market entry
- Greater risk of non-compliance with labour laws
How a Global Employer of Record Simplifies Expansion
A Global Employer of Record (EoR) offers businesses a seamless way to expand into new markets without the need to establish a local entity. Think of a Global EoR as your local HR partner in every country you want to expand into. They take care of all the heavy lifting—payroll, taxes, benefits, and compliance—so you can stay focused on what you do best: growing your business.
One of the biggest advantages of using an International Employer of Record (EoR) is its ability to ensure full compliance with local regulations. Labour laws differ greatly from country to country, with rules around employment contracts, termination processes, and employee benefits often requiring specialised knowledge. An EoR has in-depth expertise in local employment laws and can mitigate the risk of non-compliance, helping companies avoid fines or legal disputes.
Furthermore, a Global EoR accelerates market entry. Instead of waiting months for a local entity to be approved, businesses can use an EoR to hire employees in a new country almost immediately. This quick setup allows companies to capitalise on new opportunities without unnecessary delays.
Another significant benefit is the cost savings that an International EoR provides. Studies show that businesses save up to 60% on administrative costs when using an EoR compared to setting up a local entity. These savings, combined with faster market entry, make EoR a game-changer for international expansion.
By handling the administrative and legal burdens associated with hiring internationally, a Global EoR enables businesses to focus on their core operations and strategy, making global expansion far more efficient and less risky.
Using a Global EoR enables companies to:
- Skip local entity setup
- Ensure full compliance with labour laws
- Hire quickly in new markets
- Focus on growth, not admin
Compliance and Risk Management with a Global EoR
One of the most significant advantages of partnering with a Global EoR is its ability to handle the complex legal and regulatory landscape in foreign markets. When expanding into a new country, businesses are faced with a multitude of compliance requirements, each of which can be a potential source of risk if not managed correctly. This is where the expertise of a Global EoR becomes invaluable.
Labour laws, tax regulations, and employment standards differ in every country, often in subtle yet critical ways. A Global EoR has comprehensive knowledge of these laws, ensuring that your business adheres to local employment regulations from day one. From correctly registering employees for tax purposes to managing statutory benefits and ensuring fair working conditions, the EoR takes full responsibility for cross-border compliance. It’s also essential for businesses to follow best practices when maintaining employee records, as this ensures compliance with local and international data regulations. For more on this, check out our in-depth guide on maintaining employee records with EoR services.
Consider a UK-based tech company expanding to Brazil. Instead of navigating Brazil’s complex labour laws and tax system, they partnered with an International EoR, which took care of payroll, taxes, and benefits in full compliance with local regulations. This allowed the company to focus on product development without worrying about legal pitfalls.
Risk reduction is at the core of an EoR's value. An EoR helps businesses avoid legal complications, ensuring they won’t face compliance issues or unexpected fines that could harm their reputation and operations. For example, misclassifying workers or mishandling employment contracts can lead to legal disputes, draining resources and distracting from core business activities. A Global EoR mitigates these risks by ensuring employment contracts, payroll, and tax filings comply with local regulations.
Moreover, regulatory changes are a constant challenge in international markets. Employment laws and tax codes are subject to updates, sometimes without much notice. A Global EoR stays on top of these changes, adjusting policies and processes as needed, so businesses remain compliant without having to dedicate internal resources to monitoring legal shifts. This proactive compliance management helps prevent future issues before they arise, reducing the likelihood of costly mistakes.
Another key area where a Global EoR adds value is data protection and privacy. In many countries, stringent regulations, such as GDPR in Europe, govern the handling of employee data. A Global EoR ensures that all personal data is managed securely and in compliance with local laws, safeguarding your business from potential breaches or violations.
By outsourcing these complex compliance tasks to an EoR, businesses not only avoid the legal and financial risks of non-compliance but also gain peace of mind, knowing that their international operations are being managed professionally and efficiently.
Partnering with an International EoR allows businesses to:
- Stay compliant with evolving labour laws
- Avoid legal risks like worker misclassification
- Prevent fines for non-compliance
- Safeguard employee data under local privacy laws (e.g., GDPR)
Faster and More Cost-Effective Market Entry
Expanding into new markets often presents businesses with two critical challenges: time and cost. Establishing a local entity in a foreign country is a slow and resource-intensive process, often taking months to complete due to the complex registration, legal, and compliance procedures involved. However, partnering with a Global Employer of Record (EoR) offers a faster and more cost-effective route to international expansion.
One of the most immediate benefits of using an EoR is speed of market entry. When setting up a legal entity, businesses must navigate layers of bureaucracy, from securing local licences to complying with government regulations. These processes can delay hiring and operations for several months. In contrast, an EoR already has a legal infrastructure in place in the target market, allowing businesses to begin operations almost immediately. This rapid setup means that companies can start onboarding talent and executing projects in new regions without the lengthy waiting periods typically associated with creating a legal entity.
For businesses in industries that move quickly or rely on seizing opportunities as they arise, this accelerated market entry can be a game-changer. An EoR makes it possible to capitalise on market conditions or respond to new demand faster than competitors who are bogged down by the formalities of establishing a local presence.
On the cost front, the savings are equally compelling. Setting up a legal entity involves significant upfront investment, including registration fees, legal representation, accounting services, and ongoing administrative costs. Additionally, maintaining a local entity means managing local offices, hiring in-house HR teams to navigate foreign regulations, and ensuring continuous compliance with local laws—all of which add up over time.
By contrast, partnering with a Global EoR eliminates these expenses. An EoR acts as the legal employer in the target country, handling payroll, benefits, taxes, and compliance for the business. This removes the need to hire legal teams, tax specialists, or compliance officers in each market. In turn, businesses can significantly reduce the cost of expansion, focusing their budget on growth initiatives and market penetration instead of administrative overhead.
Moreover, for companies testing the waters in a new market, the flexibility that an EoR provides is invaluable. Instead of making the long-term financial commitment of setting up a legal entity, businesses can use an EoR as a temporary solution to gauge market potential. If the expansion proves successful, the EoR can continue to support operations, or the business can eventually transition to establishing a local entity if needed.
A Global EoR lets businesses:
- Skip lengthy legal entity setups
- Cut administrative costs
- Hire talent immediately in new markets
- Stay compliant with labour laws from day one
Real-Life Example: Global EoR in Action
dLocal, a global fintech leader, specialises in facilitating cross-border payments, primarily in emerging markets. The company provides businesses with a platform to process payments in over 40 countries, including regions like Latin America, Asia, and Africa, where navigating local financial regulations can be particularly complex. dLocal counts major global companies like Amazon, Uber, and Microsoft among its clients, making it a critical player in enabling seamless transactions across diverse markets.
When dLocal set its sights on 27 new countries, they knew they had a challenge ahead—finding the right talent fast, without the endless paperwork. That’s when they turned to Deel for help.
Results
By partnering with Deel, dLocal was able to:
- Onboard employees rapidly across 27 countries without setting up local entities.
- Comply with local tax, payroll, and employment regulations in each market.
- Save both time and resources that would have been spent managing administrative complexities.
Choosing the Right Global EoR Partner
Selecting the best International Employer of Record (EoR) partner is essential for a smooth international expansion. Here are the key factors to consider when making your choice:
- Local Expertise: Ensure the EoR has in-depth knowledge of labour laws and compliance in your target countries. Local HR and legal teams are crucial for staying compliant.
- Global Reach: Opt for an EoR with a large global presence to support your operations across multiple markets, ensuring scalability as your business grows.
- Technology: Choose a provider with a user-friendly platform that integrates seamlessly with your HR and payroll systems, enhancing efficiency in onboarding and managing international employees.
- Cost Transparency: Clear, transparent pricing without hidden fees is critical. Make sure the EoR offers a flexible model that aligns with your expansion goals.
- Reputation: Look for strong customer reviews, case studies, and a proven track record of client satisfaction.
The Strategic Advantage of Using a Global Employer of Record
Expanding into new markets comes with significant challenges—setting up a local entity, navigating complex regulations, managing payroll, and ensuring compliance with local laws. A Global Employer of Record (EoR) eliminates these barriers, allowing businesses to expand swiftly and cost-effectively. By partnering with a Global EoR, companies can bypass the time-consuming and costly process of setting up legal entities in multiple countries. Instead, they gain immediate access to top talent, ensure compliance with local employment laws, and focus on what matters most—growing their business.
As we’ve seen with examples like dLocal, the strategic use of an EoR accelerates market entry while reducing the risk of legal complications. It simplifies payroll, tax compliance, and employee benefits across various regions, giving businesses the confidence to expand globally without administrative headaches.
In essence, a Global EoR is the best solution for companies looking to expand internationally without the overhead of establishing local entities. It’s a faster, more flexible, and compliant way to scale your operations.
Ready to take your business global? At the ConnectaVerse, we provide comprehensive EoR services tailored to your expansion needs. Whether you’re entering one market or twenty, we’ll handle the complexities so you can focus on growth. Don’t let administrative hurdles slow your growth—start your global expansion today with ConnectaVerse.
I want more information
Isidro Helder
ConnectaVerse B.V.
Nieuwezijds Voorburgwal 271
1021 RL Amsterdam
The Netherlands
info@theconnectaverse.com
Contact us
Isidro Helder
ConnectaVerse B.V.
Nieuwezijds Voorburgwal 271
1021 RL Amsterdam
The Netherlands
info@theconnectaverse.com