You want to expand internationally, but the setup you choose will shape your cost, speed, and risk. An Employer of Record lets you hire fast in a new country without creating a local company. A subsidiary gives you full control but demands more time, money, and legal work.
You should choose an EOR for fast entry and lower risk, while a subsidiary fits long-term global expansion that needs full control and a local presence. However, the right choice depends on your goals, budget, and how long you plan to stay in the market. Each model solves a different problem, so clarity matters before you commit.
This guide helps you see the real tradeoffs between these two paths. As a result, you can move forward with a structure that supports growth without avoidable setbacks.
Key takeaways
- EOR supports fast and low-risk global expansion
- A subsidiary offers control but requires time and investment
- Your goals should guide how you expand internationally
Fundamental differences between EOR and subsidiary setup
You can expand into new countries through an employer of record or by setting up a subsidiary. Each model defines who hires staff, who carries legal duty, and how much control you keep. Your choice affects cost, speed, risk, and daily operations across borders.
What is an Employer of Record (EOR)?
An employer of record hires workers for you in another country through a local legal entity. The EOR signs the employment contracts and manages payroll, taxes, and benefits. You direct the employee’s daily work and goals.
This model fits fast entry. You avoid entity setup and local filings. As a result, you can hire within weeks and limit exposure to labour law mistakes.
An EOR also reduces admin load. You rely on one partner for compliance across regions. Platforms such as Borderless AI support this approach with tools that simplify cross‑border hiring and payroll.
What is a subsidiary setup?
A subsidiary is a company you own in a foreign country. Your parent company or holding company controls it. You register the entity, open bank accounts, and hire staff directly.
This path gives full authority. You set policies, culture, and compensation without third‑party limits. You also gain a local brand presence, which can help sales and partnerships.
However, setup takes time and capital. You must handle licenses, tax filings, audits, and local employment law. Therefore, a foreign subsidiary suits long‑term plans and stable headcount rather than short tests.
EOR vs. subsidiary: Key legal and operational distinctions
The eor vs. subsidiary choice centres on legal duty and control. With an EOR, the provider holds employer status. With a subsidiary, your entity holds that role.
Key differences include:
- Liability: EORs carry employment compliance. Subsidiaries place duty on your entity.
- Speed: EORs enable fast hires. Entity setup often takes months.
- Control: Subsidiaries grant full HR and policy control. EORs limit legal authority.
- Cost pattern: EORs charge ongoing fees. Subsidiaries require higher upfront spend.
Therefore, choose based on timeline, risk tolerance, and whether entity setup supports your growth plan.
How to choose the best model for international expansion
Your choice depends on how fast you need to hire, how much control you want, and how long you plan to stay in each country. Speed, cost, compliance duties, and local presence all shape the right decision for your business.
Speed, cost, and complexity of market entry
If speed matters, eor services allow quick market entry. You can hire staff in weeks because you avoid entity setup and registration steps. As a result, this model fits teams that need fast access to talent or short timelines.
A subsidiary takes more time and higher upfront spend. You must register the entity, open bank accounts, and work with local authorities. However, this structure lowers per-employee costs over time if you plan steady growth.
Consider your budget and timeline together. For example, you may test new markets with an EOR, then shift later if demand grows. This approach limits early risk while you expand internationally.
Scalability and local presence
An EOR supports flexible hiring across many countries. You can add or reduce headcount with less friction. Therefore, this model works well for distributed teams or early-stage expansion.
A subsidiary creates a stronger local presence. Customers, partners, and banks often view a registered entity as more stable. This overseas credibility can help sales, contracts, and long-term partnerships.
Think about scale and visibility. If you need a light footprint across several regions, an EOR fits better. If you need deep roots in one country, a subsidiary offers clearer local identity and control.
Compliance, risk, and HR considerations
Local employment laws vary by country and change often. An EOR handles hr compliance, payroll, taxes, and local benefits. As a result, you reduce legal exposure and admin work.
With a subsidiary, you take full responsibility for local labour laws. You must draft employment contracts, manage benefits, and meet reporting rules. This path demands local expertise or outside advisors.
Risk tolerance matters. If your team lacks in-country HR knowledge, an EOR lowers mistakes. If you already have legal and HR support, a subsidiary gives more direct oversight.
Long-term vs short-term global strategy
Short-term plans favour flexibility. An EOR supports pilot hires, project teams, and uncertain demand. You can exit a market with fewer steps if plans change.
Long-term plans favour ownership. A subsidiary supports permanent teams, brand presence, and local leadership. Over time, this model can align better with tax planning and governance.
Define your horizon clearly. If your goal focuses on learning and speed, start with an EOR. If your goal centres on permanence and authority, build a subsidiary from the start.
Conclusion
You choose between EOR and a subsidiary based on your goals, budget, and risk level; however, the right fit also depends on your timeline. An EOR fits short timelines and quick market entry, therefore you gain speed and lower upfront cost while a partner handles local employment rules.
A subsidiary suits long-term plans; as a result, you gain full control and a local presence, but you accept higher cost and compliance work. Therefore, match the model to your timeline and commitment, and review a switch as your plans mature.
