6 Ways to Reduce Global Expansion Costs

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Gino Peters

Written By:

Gino Peters

Reviewed By: Belinda E.

May 17, 2026 2:53 am

Category Tag: News

The rise of remote work made international expansion much easier in recent years, but hiring abroad still comes with legal and administrative complexity, as every country has its own labour laws and payroll rules that must be followed. In addition, not many companies can open a new entity in every new market that they are expanding into. That is when the Employer of Record (EOR) solution comes in handy.

The EOR serves as the legal employer on paper, while the client company manages important activities related to the employees responsibilities and performance.

In this guide we will cover what an employer of record is, how it works in detail, how much it can cost and which business should consider an EOR solution.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third party service provider that legally employs a person on behalf of another company in the country where the employee officially resides. As an official employer the responsibilities of EOR include issuance of an employment contract, processing payroll and withholding taxes and necessary social security contributions, as well as preparation of offboarding documents or any documentation that need to be signed by the employer. In addition, EOR ensures the compliance with local labour laws and serves as a first point of contact for any legal disputes.

The client company that hired the employee through an EOR also has a list of responsibilities. As an Employer of Record does not have the visibility on operational activities behind the scenes a client company needs to provide direction and ensure proper team integration.

In simple terms, the EOR provider acts as a legal employer in the country of the employee’s residence, while the client company takes on day-to-day manager work.

Responsibility	Employer of Record (EOR)	Client Company
Employment contracts & any other official documentation
Payroll processing
Income tax & social security contributions
Compliance with local labour laws
Statutory benefits administration
Managing daily work and projects
Setting goals and performance expectations
Providing equipment and tools
Leading the employee’s team and workflow

Employer of Record solutions gain more and more popularity in the field of global expansion as they allow businesses to hire best candidates fast and easy while staying compliant with local employment regulations. More information about EOR service are available if you would like to understand more.

EOR Meaning

The term “EOR” is the abbreviation for Employer of Record.

Employer in this instance stands for the company that hires the employee and takes on duties related to it, such as onboarding and offboarding process, payment of wages and compliance with other legal requirements.

“Record” from the EOR perspective refers to official registration with government authorities. The name of the EOR provider is stated in all payslips and tax filings, and should also be listed by the employee in any documents where employer must be stated, such as mortgage or loan applications.

One might ask a question of why this legal structure exists. As it is not possible to provide an employment contract directly to a person that legally resides in another country, the business expanding abroad typically needs to establish a local entity. That involves legal registration, arrangement of local bank accounts and organisation of payroll structure, as well as compliance with local law.

EOR allows to simplify the global hiring and reduce administrative burden through their existing legal entity.

There are some other hiring models that can be confused with EOR.

EOR and PEO

Many sources online refer to EOR as “international PEO”, which may create confusion as these models have 1 important difference.

A Professional Employer Organisation (PEO) serves as a co-employer of a client company. In other words, a business must already have an established entity in the country. The hiring tasks are, therefore, shared between 2 companies, while legal liability stays only with the client company. In the EOR model all legal risks are being taken by the official employer. Read more about the difference between PEO and EOR here.

EOR and staffing agency

Staffing companies mainly provide assistance for short-term projects by providing temporary workers. If the client wishes to employ a person for a longer time, EOR approach must be chosen.

EOR and contractor model

Contractor agreements assume the involvement of independent workers rather than employees. This model is also often used for temporary, project-based assignments. It is important to remember that there is a big misclassification risk between a contractor and an employee in the company which can lead to potential legal issues. An EOR ensures that employment is legally compliant with local labour law.

How does an Employer of Record work?

While it may sound complicated at first, a process behind the employer of record model is relatively straightforward.

The operating company selects a candidate

The client company recruits the employee they want to hire in another country

The EOR becomes the legal employer & local employment contract is issued

The Employer of Record uses its local legal entity to prepare and issue an employment contract that complies with labour law of the country where the employee is based. Depending on case-by- case situation, the work visa might need to be secured beforehand. Our company provides immigration services, more details can be found here.

Payroll and taxes are managed

The EOR takes on recurring responsibilities related to a payroll and ensures correct processing of income tax, social security contributions etc

Benefits are administered

Paid leave, sick leave, pension contributions and any other statutory benefits are being managed by the EOR.

Ongoing compliance and HR support

It is the responsibility of the EOR to monitor changes in local labour law and ensure ongoing compliance.

Example:

Imagine a UK-based tech company found a perfect candidate in Germany for a position of a software developer.

Instead of going through the administrative burden of opening a legal entity in Germany, the company chooses to work with an Employer of Record. The EOR hires the developer under a German employment contract and manages payroll and taxes. At the same time the UK company welcomes the new employee in the team and manages the daily work of a developer.

What services does an Employer of Record provide?

The Employer of Record does more than just providing an employment contract to the employee. Typically a wide range of HR and compliance services is included in the EOR offer. For example, read about the services included in our EOR package here.

Employment and HR administration

Locally compliant employment contracts and support with other documents requested by authorities
Employee onboarding
Employee record management. For example, control over PTO

Payroll and tax management

Regular payroll processing
Tax withholding and reporting of social security contributions with authorities
Payslip generation and creation of annual wage tax certificates

Benefits administration

Management of statutory benefits
Pension contributions (where required)
Support with benefits such as maternity leave allowance, sick leave allowance etc

Compliance and risk management

Insuring compliance with local labour law
Management of onboarding and offboarding processes
Representation in difficult legal and court cases

Additional services:

Some EOR providers ( such as ThisWorks EOR Services) provide additional services such as:

Work permit and dependent visa support
Background checks
Relocation support
Value added services: support with housing, company car, banking, etc ( depending on the country).

This vast list of services allows businesses to manage international teams, while staying compliant and avoiding complex local employment administration.

Benefits of using an EOR service

There are multiple advantages the businesses can get from working with an Employer of Record provider.

Faster global hiring

Setting up a new entity can take up to several months. With an EOR the hiring process can take several days.

Reduced compliance risk

A trustworthy EOR provider ensures the compliance with all local regulations. As the labour law varies greatly between countries, having a knowledgeable party to rely on can make a big difference.

Lower expansion costs

Establishment of a new entity is not only a time-consuming process, but also costly. With EOR services these costs can be avoided.

Access to global talent

The location of a remote candidate is not a problem if the company uses Employer of Record services. In other words, the best candidate for specific business purposes can be chosen.

Scalable hiring model

EOR services are ideal for organisations that want to scale international hiring quickly. They are particularly useful in the following situations:

Remote-first teams and organisations
Companies testing new markets abroad
Startups expanding internationally

How to choose the right Employer of Record

Choosing between several EOR providers is important, as it influences not only compliance, but also employee experience for new hires and how your company is perceived on the job market.

Here are some important things to keep in mind when deciding on your EOR partner:

Geographic coverage

Make sure that EOR provider can cover the country where you want to expand globally. Read about our EOR coverage here.

Pricing transparency

Check that EOR provider does not have any hidden costs and the pricing is clearly outlined in your MSA.

Compliance expertise

A strong EOR provider should have a team of experienced local HR specialists who understands all in and outs of a national labour law.

In-house vs partner model

Some EOR providers rely on their third-party partners, while others manage employment directly through their own local entities.

Customer support

It is important to find a EOR partner that helps with any questions or concerns in a quick and professional manner. That can be crucial when dealing with employee offboarding or any legal disputes.

Warning signs

Understanding the importance of choosing a right party, your company should be cautious of providers that lack local expertise and cannot give clear answers to your labour law questions. In addition, companies with slow response times can prove to be unreliable in critical situations. Furthermore, providers with complex pricing models with many hidden fees can create a lack of cost transparency and result in unforeseen expenses.

By selecting a provider with strong expertise in local labour law and reliable support from dedicated teams, your company can ensure a smooth international growth. Learn why companies choose ThisWorks as their EOR partner.

How much does an employer of record cost

The vast coverage of services the employer of record provides makes many businesses ask how much an EOR costs.

Pricing models vary greatly on the provider and the country of coverage, but most EORs use one or more of the following structures.

Flat monthly fee per employee.

The EOR provider charges a fixed monthly fee for each employee they have on the payroll from the client.

Percentage of salary

While not being a popular approach, some EOR providers charge a percentage of the employee’s salary, typically ranging between 5%-15%.

Setup fees

Some providers charge onboarding or offboarding fee for each employee.

The fee that the business needs to pay to an EOR provider also depend on the location of a service. Local labour law complexity of some countries can influence the fee. In addition, some countries have specific statutory benefits and payroll administration requirements. Furthermore, employee headcount in the specific location can influence the fee.

EOR vs setting up a legal entity

To establish a new entity the organisations needs to go through legal and tax registration. In addition, accounting support and ongoing compliance costs such as the fees for local labour lawyers can make setting up a legal entity significantly more expensive.

An EOR allows companies to expand globally without these upfront investments.

EOR vs hiring contractors

Some businesses decide to hire international workers as contractors. However, this approach can often lead to a misclassification risk, which can cause legal and tax liabilities.

A professional EOR provider ensures that the new starters are compliantly onboarded under local employment regulations.

EOR FAQs

Is an EOR the same as a PEO?

No. PEO model assumes co-employment and requires the business to already have established local entity, while EOR employs new talents through its own entity only.

Can an EOR hire contractors?

While some EOR providers can support hiring contractors, it is important to remember that main function of EOR is the employment of full-time workers legally in a country. A risk of misclassification between EOR and contractor should be also considered carefully.

Is an employer of record legal?

Yes, when established and structured properly, Employer of Record entities are legal and widely used for international expansion by many companies.

When should you use an EOR?

The most common reason for using EOR include:

Hiring employees located in another countries remotely
Testing new markets before establishing an entity
Expanding internationally

Can you switch from EOR to your own entity?

Yes. Many companies initially hire through an EOR for the ease and speed of expansion and later transition employees to own legal entities upon their establishment. It is important to remember that some countries require specific procedure to be followed in such a scenario.

Get in touch with ThisWorks

Expanding your team globally does not need to be long and administratively complex.

With the use of Employer of Record the businesses can have access to the best talent from around the world while ensuring full compliance with local labour laws.

ThisWorks can support your global expansion with our compliant Employer of Record services.

Contact our team to find our how we can help your international team glow fast and compliantly!

In this article, we will explain six practical strategies to cut global expansion expenses and preserve operational efficiency and future growth possibilities.

Exploit Market Research and Data Analysis

The biggest mistake, which is quite costly to companies undertaking global expansion, is failing to understand the local demand, competition and regulations in the market before getting in.

Engage in proper market research: This can either be through primary market research (surveys, focus groups, interviews) or secondary market research (industry reports, government statistics).

Consumer behaviour analysis: The Google marketing finder, Statista, and other research firms in the area of marketing and data finder-related matters can help you analyse consumers.

Demonstrate emerging risks before it is too late: Market data will assist in uncovering emerging risks that have the potential to block the operations later.

Efficiency benefit: Conducting research in the early stage can save the company millions of dollars in the future, owing to the possibility of incurring expensive mistakes in terms of product-market non-fit or being unable to meet the regulatory requirements.

Strategic Hiring/Outsourcing

Employing local labour has the disadvantage of being costly in terms of payroll, training, and the employment regulations. In order to minimise expenditures, HR leaders and executives need to implement a hybrid relationship.

Outsource non-core activities: Other activities such as IT support, payment functions or online marketing can be outsourced to specialist companies at reduced rates.

Outsource to Employer of Record (EOR) providers: They will take care of compliance, payroll, and HR, so there is no need to establish a legal entity in every country where you have employees.

Employ remote-first teams: In jobs that do not need an employee to appear in a physical setting, hiring in various regions will enlarge your talent pool and help save office and relocation costs.

Cost-saving advantage: The high cost of forming entities is eliminated, and flexibility is inherent as teams may be scaled up and down depending on performance in the market.

Optimise the Supply Chain and Logistics

International growth usually includes the export of goods and services, the purchase of raw materials and global distribution channels. The supply chains which are not efficient can easily consume profits.

Collaborate with regional logistics: Transport the goods instead of them being shipped out of headquarters.
Negotiate with at least two suppliers: This reduces dependency risk and will create leverage in obtaining better prices.
Adopt just-in-time (JIT) inventory systems: This will reduce the warehousing expenses through matching production to the exact need.
Cost-saving benefit: A trim supply chain not only cuts transaction and storage costs but also saves waste generated through overproduction or stockouts.

Leasing Benefits in terms of Government Incentives and Tax Advantages

Most nations are very open towards foreign investment and provide financial packages to companies to establish industries. Such incentives will effectively help defray expansion costs.

Tax holidays and lower corporate taxes: Other areas have been known to give lower taxes over a specific period to attract investors.
Grants and subsidies: The government can also offer grants and subsidies to train local workers or invest in specific industries.
Special Economic Zones (SEZs): In SEZs, there are often fewer customs duties and simpler regulatory approaches.

The cost-saving benefit: A well-chosen selection of the market with nice benefits provides a business with a significant cost saving that can be higher due to the prevalence of excellent market selection combined with the application of wide-ranging profitability.

Localize Smartly Without Overspending

Smartly Localize has the best of both worlds without having to overspend.

Managing cultural and language differences is a necessity, but companies make needless modifications at immense costs. Strategic localization is a trade-off between cost-effectiveness and customer engagement.

Choose hard-boiled changes: Do not spend time and money on secondary materials before you can translate websites, labels of goods and legal documents.
Utilise local agencies and freelancers: Rather than employing local in-house translation teams, consider local experts in terms of accessing the local culture and consumer psychology.
Pilot before scaling: Test on pilot campaigns or pilots on products in smaller areas before introducing them to the nation.
Cost-effective benefit: Localization in specific areas means the allocation of resources is only where they are going to make a difference in avoiding wastage.

Adopt Digital tools and technology.

Technology has enabled the expansion of the global front to be more cost-efficient than before. Digitising processes helps businesses cut down on overhead and the provision of uniformity across borders.

Online collaboration software: Software tools such as Slack, Microsoft Teams, and Zoom are lowering the demand for office structures and international transportation.

Digital financial management: This enables processing of multi-currency transactions and compliance using platforms like Wise, Payoneer, and even global ERP systems at low costs.

AI-enabled customer service: Customer service can employ chatbots and multilingual virtual assistants that do not require an extensive workforce in each market.

Cost-effective benefit: Digital solutions abolish traditional and costly infrastructure as scalable and cloud-based systems that expand as the enterprise does.

Practical Example

Airbnb has been able to localise its app smartly, first by translating it and converting the local currency in key markets and then later on extending to a more substantial advertising campaign.

Spotify didn’t need vast physical infrastructure and investments in physical resources to spread across the world because of the remote-first teams and digital distribution.

Tesla established regional gigafactories to reduce transportation and tariffs expenses and take advantage of regional government incentives.

These corporations show that global expansion that is cost-effective is not about budget dressing but better investments.

Why select ThisWorks

Expanding on a global scale can get intimidating- especially when companies are under pressure to meet regulatory demands, recruitment and cost-saving demands. This is where the difference really counts.

Simplified Global Hiring: Rather than establish expensive legal entities in each country, with ThisWorks, employers can hire anywhere, with all required legal, tax, and payroll compliance built in.

Employer of Record Services (EOR): By taking care of payroll, HR, contracts, and compliance, ThisWorks helps companies remain compliant within local labour regulations without incurring the expenses of assembling an in-house workforce in foreign markets.

Quicker Market Accessibility: Slow market accessibility can be caused by delays in entity registration or other relevant compliance procedures, which are costly to businesses. Using ThisWorks, companies are able to tap new markets quickly, which provides them with a competitive advantage.

Scalability Solutions: Be it a startup with a new market or a growing enterprise with a large workforce, ThisWorks provides scalable solutions that can fit in with the long-term expansion plans.

Reduction in Risk: Non-compliance, misclassification or labour disputes can cost money. Through the expertise of ThisWorks, businesses minimise those risks and have a lean expansion model.

Differently put, selecting ThisWorks not only saves a lot of money spent on international expansion but also eliminates a variety of business issues that doom the foreign operations of companies.

Conclusion

Expansion into the international market may be viewed as a financially challenging experience; however, with proper planning, the expenses can be minimised. With the help of concentrating on research, making smart hires, optimising supply chain, taking government incentives, engaging in strategic localisation, and using digital resources, businesses can internationalize without stretching their finances too much.

The trick here is not to see global expansion as a cost center, but as a strategic investment in which you put each dollar with ROI in mind. It is a business that manages to keep a sense of ambition without sacrificing cost efficiency, which is likely to succeed in a new market.

FAQs

1. Why does it tend to be costly for businesses to expand globally?

Expanding business globally means that you have to establish legal entities, recruit local employees, make sure they comply with the labour regulations of a country, and deal with international payroll expenses. This process is also expensive and time-consuming, particularly for small and medium-sized companies.

2. What are the ways companies can lower the expense of globalisation?

By utilising an Employer Record (EOR) service provider like ThisWorks, businesses can avoid the expenses of establishing local entities and can outsource compliance requirements, as well as making it even more straightforward to regulate payroll. This helps decrease overhead at the same time, allowing an expedited entry into new markets.

3. What is an Employer Record (EOR), and why should this be considered in global hiring?

An EOR is an intermediary (third-party) company that assumes the role of official employer of the international employees working in the company. The tool that enables companies to hire talent around the world tax compliantly, without having to manage and deal with HR and legal risks and complexities.

4. Can a start-up use ThisWorks to facilitate expansion?

Yes. New markets typically come with budget constraints, and startups are not an exception. The scalability of the solutions that they offer enables them to test out the market without investing heavily upfront and establish global teams without huge initial investments.

5. How does ThisWorks guarantee local labour law conformance?

ThisWorks covers employment contracts, payroll and benefits as well as tax compliance under individual country regulations. This lowers legal risks and does not require a company to hire local legal or HR teams, which is expensive.

6. Which industries are best suited to the collaboration with ThisWorks?

Any company that needs global talent in the industries of tech, SaaS, e-commerce, consulting, and remote-first companies is advantageous. This is because hiring developers, marketers, and other personnel across borders using this rental platform is relatively more straightforward without cumbersome expansion fees.

7. And what is the assistance that ThisWorks offers in a scenario of global expansion?

Failure to comply, employee misclassification and payroll errors are expensive pitfalls. By using the services of ThisWorks, businesses can reduce the extent of these risks, and they will experience a more streamlined and less costly expansion process.

8. Is ThisWorks only done as a market test, or is it a long-term solution?

Both. Companies can conduct demonstrations in the new markets with several employees through ThisWorks or create a long-term, compliant workforce across different countries. The scalability enables it to be an economical solution at any growth stage.