As companies look to expand their global footprint and hire talent across borders, they often face a critical decision: Should we use an Employer of Record (EOR) or become a Foreign Employer? Understanding the distinction between Employer of record vs foreign employer is essential to selecting the right international employment solution.
In this blog, we clarify the key differences and introduce the Foreign Employer model as a compelling alternative for businesses seeking both compliance and control.
What is an Employer of Record (EOR)?
An Employer of Record is a third-party organization that legally employs your workers in a foreign country on your behalf. The EOR handles all administrative tasks—such as payroll, tax filings, employment contracts, and compliance with local labor laws—while the client company directs the day-to-day work.
EOR Pros:
- Quick market entry
- No need to establish a legal entity
- Simplified compliance
EOR Cons:
- Less control over the employment relationship
- Typically higher long-term costs
- Can be limited in scope or restricted by local labor laws
What is a Foreign Employer?
A Foreign Employer is a company that hires employees abroad directly, without establishing a local entity or using an EOR. This model is viable in countries that allow direct cross-border employment, and it requires the employer to register with local tax and social security authorities.
Internago specializes in this model, providing full administrative support—payroll, tax filings, social security reporting, and local compliance—so clients maintain the employment relationship while avoiding the overhead of a local subsidiary.
Foreign Employer Pros:
- Full control over the employment relationship
- Lower cost structure in the long term
- More transparent setup with local compliance
- Greater flexibility in managing international teams
Foreign Employer Cons:
- Not available in every country
- Slightly longer setup than EOR in some cases
- Requires careful handling of compliance
Key Differences at a Glance
| Feature | Employer of Record (EOR) | Foreign Employer |
| Legal employer | EOR provider | Your company |
| Local entity required | No | No |
| Control over employment terms | Limited | Full |
| Employment relationship | Indirect | Direct |
| Cost-efficiency (long term) | Lower for short-term hires | Better for ongoing international hires |
| Country availability | Widely supported | Country-dependent |
Why Choose the Foreign Employer Model?
Internago offers a compliant, cost-effective, and flexible alternative to traditional EOR solutions for companies that want to hire abroad—without giving up control.
We support direct cross-border employment in multiple countries where this model is permitted, managing everything from payroll processing and local tax filings to employee benefits and social contributions.
Our clients value:
- Full transparency in local processes
- Dedicated payroll and compliance experts
- Seamless integration with your HR processes
- No “employer lock-in” with third parties
Conclusion
The right global employment model depends on your company’s needs, structure, and growth strategy. If you want to hire internationally without establishing a legal entity but still maintain full control and lower costs, the Foreign Employer model may be a good alternative.
If you are unsure which model works best for your situation, reach out—we are happy to help evaluate your options.
At Internago, we specialize in assisting businesses with their international expansion, helping you manage tax and payroll compliance efficiently. Let us handle the complexities so you can focus on growth and success.
Be sure to also check out our other blogs about foreign employer such as “What is an auslandischer-arbeitgeber“, “Foreign employer in Denmark”, “EOR vs. Foreign employer” or “Foreign employer in Norway” and more.
Interested in learning more? Please visit us on linkedin, our website or our Payroll Portal. For further inquiries, contact us at info@internago.com
Disclaimer
This blog post provides a general overview and introductory examples related to payroll. In practice, there are many additional factors to consider, and this article should not be regarded as comprehensive guidance. For a more in-depth discussion tailored to your specific needs, please feel free to contact us.