Hiring talent across borders used to be reserved for the biggest companies. Today, it's an option for everyone. Whether you're setting up your first hire in Spain, building a remote dev team across Europe, or testing a new sales market — there's more access than ever.

But there's also more confusion.

Terms like EOR, PEO, AOR, and payroll outsourcing often get thrown around like they're interchangeable. They're not. And making the wrong call can cost you in compliance, contracts, or team morale.

After working with companies expanding into 15+ countries, we've seen which models work — and where they fall short. This article breaks down the 7 most common ways to hire internationally, what each model actually does, and when it makes sense to use them.

Let's start with the model that's gained the most popularity in the past 5 years: EOR.

If you want to hire talent in a country where you don't have a legal entity, but still want to play by the rules — an EOR can make that possible in weeks, not months.

An Employer of Record becomes the legal employer on paper. They handle all the backend: employment contracts, tax filings, social security, onboarding, benefits, and terminations. You still manage the employee day-to-day, but the EOR takes on the legal risk.

When EOR makes sense:

• You need to hire in a new country fast — and don't want to set up a local entity
• You want to reduce legal exposure and ensure compliance with local labor laws
• You're testing a market with 1–5 employees before committing to a full setup
• You need support for terminations or complex compliance scenarios

What it won't do:

• Help you find candidates (you do the recruiting)
• Offer direct control over employment policies or internal HR systems
• Give you entity-level advantages like tax incentives

Real-world example:

A Chinese SaaS startup wants to hire a sales manager in Germany to explore the DACH market. Instead of registering a GmbH and waiting months, they use Employer of Record services to legally employ the rep within 3 weeks — fully compliant, no red tape.

Already have a local entity but don't want to deal with payroll calculations, payslips, or monthly tax filings? That's where payroll outsourcing steps in.

With this model, you stay the legal employer — but a third-party provider handles payroll processing, tax deductions, social contributions, and reporting. You retain full control of contracts, HR decisions, and compliance, but avoid the admin burden.

When payroll outsourcing makes sense:

• You've already set up a local legal entity
• You have HR/legal teams managing employee contracts and compliance
• You want a reliable payroll partner without outsourcing everything else
• You're hiring a small team in-country and prefer to manage them directly

What it won't do:

• Draft contracts or handle employment law
• Manage employee onboarding, benefits, or terminations
• Take on legal liability — you still own the employment risk

Real-world example:

A Dutch software company opens a legal entity in Spain and hires a local engineering team. Instead of hiring internal payroll staff, they outsource monthly payroll to a Spanish provider — keeping control of HR while ensuring correct deductions and filings.

Need to hire people quickly for a project or peak season, without setting up an entity? An Agency of Record is often the go-to. The agency recruits, hires, and legally employs the workers on your behalf, then assigns them to work with you.

Think of it like plug-and-play talent — fast, compliant, and ready to go.

When AOR makes sense:

• You need temporary or project-based staff without long-term obligations
• You don't want to manage contracts, HR, or compliance directly
• You're hiring for seasonal, short-term, or event-driven needs
• You want to scale teams up or down without administrative hassle

What it won't do:

• Support long-term workforce integration or custom benefits
• Provide deep HR strategy or internal culture-building
• Guarantee employee retention — workers are usually on fixed terms

Real-world example:

A German logistics firm needs 20 warehouse workers during the holiday rush. They work with a staffing agency that hires and assigns the team for 3 months. The company pays one invoice, no paperwork, no compliance worries.

Recruitment agencies are great when you're looking for the right person but don't have the time or internal capacity to search and screen candidates yourself. They help with sourcing, initial interviews, and shortlisting — but once you hire, the employment contract is yours to manage.

This works well when you already have an entity (or are combining it with an EOR) and want to stay in control of the employment relationship.

When recruitment agencies make sense:

• You're hiring for niche or senior roles that require headhunting
• You want to own the employment contract and integrate employees long-term
• You have in-house HR/legal capacity to manage contracts and compliance
• You need extra support finding candidates in new or competitive markets

What they won't do:

• Manage payroll, taxes, or benefits
• Draft contracts or ensure local compliance
• Employ or onboard the candidate — that's your job (or your EOR's)

Real-world example:

A Dutch fintech startup is looking for a senior product manager in Germany. They work with a Berlin-based recruitment agency to identify and vet candidates, then hire the best one directly through their local subsidiary.

Staffing agencies are similar to AORs but often more focused on temp roles. They recruit, employ, and assign workers to your business. You pay the agency, and they handle everything from contracts to terminations. It's a practical way to fill roles quickly without employment obligations.

These are commonly used for warehouse workers, retail staff, or customer service teams during busy periods.

When staffing agencies make sense:

• You need workers quickly for short-term roles
• You want to avoid employment liability or HR management
• You don't have a legal entity in-country (and don't plan to open one)
• You're covering a seasonal peak or one-off event

What they won't do:

• Integrate workers into your long-term workforce
• Offer strategic HR support or employer branding
• Give you full control over employment terms

Real-world example:

A UK e-commerce company expands into France for the holiday season. They hire a staffing agency in Paris to place a customer support team for 6 weeks. The agency handles everything — the company just reviews performance and pays one fee.

A PEO offers co-employment: they take on some employer responsibilities (like payroll and benefits admin), while you stay legally in charge. This works best for companies that already have a legal entity in the country but want to outsource time-consuming HR admin without giving up control.

Unlike an EOR, a PEO doesn't provide a legal entity or employ workers for you — they simply act as a partner for ongoing HR tasks.

When PEOs make sense:

• You already have an entity but want HR admin off your plate
• You want to offer benefits and payroll without building internal teams
• You're scaling but want to retain control over hiring and management
• You're focused on compliance and want support, not full delegation

What they won't do:

• Help you hire in countries where you don't have an entity
• Draft employment contracts from scratch without your input
• Act as the legal employer or take full legal responsibility

Real-world example:

A U.S.-based software company opens a subsidiary in the Netherlands. Rather than building a Dutch HR/payroll team, they use a PEO to manage monthly payroll and ensure compliance — while the company stays the official employer.

Contractors can be a fast, flexible way to fill skills gaps. You sign a services agreement (not an employment contract), and they're responsible for their own taxes, benefits, and work structure. It's ideal for short-term needs or testing the waters in a new country without setting up a company or hiring through an EOR.

But flexibility comes with risk: misclassifying a contractor as an employee can result in legal penalties and backdated employment taxes.

When hiring contractors makes sense:

• You need specific skills for a project or short-term engagement
• You want to test working with someone before offering full employment
• You're hiring for clearly defined deliverables with set timelines
• You need expertise without the overhead of employment benefits

What to watch out for:

• Misclassification risk if the work looks too much like employment
• Less control over how and when work gets done
• No guarantee of availability or exclusivity
• Tax and legal complexities vary by country

Real-world example:

A Canadian startup needs a marketing website built quickly. They hire a freelance developer in Poland for a 3-month project. The contractor delivers the site, invoices the company, and handles their own taxes — simple, fast, and compliant.

Here's a side-by-side comparison of all seven international hiring models to help you choose the right approach:

Choosing the right international hiring model depends on your specific needs, timeline, and budget. Here are the key factors to consider:

1. Timeline and urgency

If you need to hire quickly and don't have months to set up a legal entity, go with EOR or AOR services. If you're planning a longer-term expansion and have time to set up properly, consider establishing a local entity with payroll outsourcing.

2. Level of control needed

Want full control over contracts, benefits, and HR policies? Set up an entity and use payroll outsourcing. Happy to outsource most HR responsibilities? EOR or PEO services might be better.

3. Budget considerations

Consider both setup costs and ongoing fees. EOR services might seem expensive upfront but can save money compared to entity setup, especially for small teams. Contractors appear cheapest but come with misclassification risks.

4. Compliance and risk tolerance

If you want minimal legal exposure, use EOR services. If you're comfortable managing compliance but want payroll support, go with payroll outsourcing. Contractors require the most careful legal consideration.

5. Long-term plans

Testing a market with 1-2 people? Start with EOR. Planning to hire 10+ people? Consider setting up an entity. Need temporary help? Use staffing agencies or contractors.

International hiring isn't about finding the "perfect" model — it's about finding the right model for your specific situation. Your needs will likely evolve as you grow, and that's okay.

Many successful companies use a combination of models: EOR for permanent hires, contractors for project work, and recruitment agencies for specialized roles. The key is understanding what each model does (and doesn't do) so you can make informed decisions.

Start with your immediate needs: Do you need someone hired next month? Are you testing a market or committing long-term? Do you want full control or prefer to outsource? Answer these questions, and the right model will become clear.

Remember: You can always start with one model and transition to another as your needs change. The goal is to hire great people compliantly — how you get there matters less than getting there safely.