Setting up International Payroll Without an Entity

As the global workforce becomes more interconnected, businesses of all sizes are embracing international hiring. But here’s the catch: setting up international payroll without an entity in each country can seem like navigating a regulatory minefield. The good news? It’s absolutely possible—if you understand the right strategies, tools, and compliance frameworks.

This guide will walk you through how to handle international payroll without setting up a legal entity, allowing your company to scale globally, stay compliant, and retain top talent without unnecessary overhead.

Why Companies Avoid Setting Up Legal Entities

Establishing a legal entity in another country is a complex, expensive, and time-consuming endeavor. It often requires:

• Local registration and incorporation
• A local bank account
• A physical office or address
• Ongoing legal and tax compliance
• Hiring local legal or HR professionals

These hurdles make it impractical for many startups, SMEs, and even large corporations looking for agility and speed.

Instead, many companies now choose to run international payroll without forming an entity by using alternative solutions.

How to Run International Payroll Without a Legal Entity

There are three primary methods for managing international payroll without the need for a local business registration:

1. Use an Employer of Record (EOR)

An Employer of Record is a third-party organization that legally hires employees on your behalf in a foreign country. While you manage the employee's day-to-day work, the EOR handles compliance, payroll, taxes, and HR responsibilities.

Benefits:

• Fast onboarding in new countries
• Full compliance with local labor laws
• No need to create a subsidiary
• Cost-effective for small teams

Top EOR platforms include:

• Deel
• Remote
• Papaya Global

✅ For example, if you're a U.S. tech company hiring a developer in Brazil, an EOR can handle the legal employment and local payroll without requiring you to register in Brazil.

2. Hire International Contractors

Freelancers and independent contractors are another popular route. If your team members can work autonomously and don’t require local benefits, this model works well—especially for short-term or project-based engagements.

Key considerations:

• Ensure contracts are legally compliant in both countries
• Be cautious of misclassification risks
• Use platforms like Upwork, Fiverr, or direct contractor agreements

To avoid penalties, reference guidelines from authorities like the U.S. Department of Labor to distinguish between employees and contractors.

3. Partner with a Global Payroll Provider

Global payroll providers offer technology solutions to process payroll in multiple countries from a single platform. These providers don’t act as the legal employer, but they manage salary payments, tax filings, and benefits in compliance with local laws.

Ideal for:

• Companies with existing local partners or branches
• Teams already employed through other entities
• Larger corporations seeking centralized payroll data

Legal and Compliance Risks to Avoid

Even without a local entity, your company remains responsible for ensuring legal compliance. Mistakes can be costly and may result in penalties, back taxes, or even bans from certain markets.

Watch out for:

• Misclassification of contractors as employees
• Non-compliance with local labor rights and benefits
• Incorrect tax withholding
• Currency conversion and exchange rate issues

Pro Tip: Always consult with local legal and tax advisors when hiring in a new country, or rely on a reputable EOR or payroll provider that includes legal counsel as part of their offering.

Financial and Operational Benefits of Skipping an Entity

Running international payroll without a local presence isn’t just about cutting red tape—it also unlocks several operational advantages:

• Faster market entry: Start hiring within days, not months
• Reduced legal complexity: No need to navigate unfamiliar corporate structures
• Lower costs: No setup fees, maintenance, or admin staff required
• Agility: Easily test new markets or scale up/down teams

Real-World Example: Scaling Without Borders

A SaaS company based in London wanted to test the U.S. market. Instead of opening an entity in California, they partnered with an EOR who employed a local sales rep on their behalf. Within a week, payroll was set up, compliant contracts were signed, and the employee was fully operational—without any legal setup.

Tips for Smooth Global Payroll Management Without an Entity

• Vet your EOR or payroll provider thoroughly: Look for global reach, positive reviews, legal compliance, and responsive support.
• Centralize documentation: Keep digital records of contracts, payments, and compliance reports.
• Communicate clearly: Set expectations about benefits, pay cycles, taxes, and compliance from the start.
• Stay updated: International employment laws change frequently—choose a provider that tracks these changes in real-time.

Conclusion: Go Global Without Going Broke

Hiring talent across borders used to require time, money, and extensive paperwork. Not anymore. Today, you can run international payroll without a local entity—legally, efficiently, and affordably. Whether you’re hiring your first international employee or building a global team, EORs, contractors, and payroll platforms give you the flexibility to grow without borders.

Ready to expand globally without the headaches of setting up entities? Start by evaluating trusted EOR platforms or payroll partners that fit your business model.

FAQ: International Payroll Without an Entity

1. Can I legally pay employees in another country without a legal entity?
Yes. Using an Employer of Record (EOR) or a global payroll provider allows you to do this legally and compliantly.

2. Is it safe to hire international contractors instead of full-time employees?
Yes, but be cautious. Misclassification of workers can lead to penalties. Always draft proper contracts and follow local labor rules.

3. What’s the fastest way to set up international payroll without an entity?
Partnering with an EOR is the quickest and most compliant route to start paying international employees.

4. How do taxes work when I use a global payroll provider?
The provider handles local payroll taxes, filings, and compliance on your behalf, simplifying your responsibilities.

5. What’s the best platform for managing international payroll without setting up an entity?
Popular options include Deel, Remote, and Papaya Global, all offering full EOR and global payroll services.