In the first half of 2025, U.S. startup funding grew 75.6% to $162.8 billion, marking the strongest performance since 2021.
Flush with new funding, many startups look to fill strategic roles to strengthen their competitive position and rapidly grow their business. But, without the safety net of reliable, recurring revenue, every new hire needs to count — filling critical gaps and driving growth strategies.
Building out a comprehensive human resources or legal team is rarely a top priority at early stages. Instead, a startup can get a lot of value out of working with a Professional Employer Organization (PEO). PEOs handle typical HR administrative tasks, including payroll management and legal compliance.
However, once a company starts looking to hire outside its home country, a PEO can become limiting, since it requires the business to set up a legal entity in every new market. That’s where an Employer of Record (EOR) comes in.
EORs make it possible to hire people around the world quickly and compliantly, without the time and expense of creating new entities.
Key takeaways:
- EOR services let startups quickly test new markets, scale headcount up or down, and streamline global payroll processing and employee benefits administration, without long-term commitments.
- EOR providers ensure compliance with local labor laws and don’t require a lengthy entity setup.
- EORs provide the cost predictability that lean startups need, avoiding the overhead of building in-house HR and legal infrastructure.
Why Startups Need Global Talent Now
For startups, every new hire is a tradeoff for other financial investments. Building a lean, high-performing team is a top priority, even if it means looking halfway around the world to find the right candidates.
Otherwise, you risk limiting hiring options, missing out on hard-to-find skills, and restricting the speed, innovation, and adaptability needed to grow.
Hiring globally allows startups to:
- Access highly specialized skills
- Tap into more affordable talent pools
- Offer 24/7 service and productivity through distributed teams
- Enter international markets with local insights
- Approach problems from diverse cultural and market perspectives
- Reduce hiring timelines by widening the candidate pool
EORs Aren’t Just for Big Companies
It’s a common misconception that EORs are only suitable for large enterprises. The reality couldn’t be farther from the truth. Startups gain tremendous value from partnering with an EOR — a more budget-friendly option than bringing on more in-house HR staff — when hiring internationally.
For larger companies planning to hire a significant number of employees in a given country, setting up a local entity — an expensive, time-consuming, and complex process — can be worthwhile. However, for startups that hire only a handful of employees in a particular country, the time and cost usually outweigh the benefits, making it a less practical option.
EORs offer flexible and scalable hiring resources. They act as the legal employer for international employees, tackling HR, finance, and legal functions, and enable startups to focus on growth without adding unnecessary overhead costs.
The Headaches of Global Hiring Without an EOR
To legally hire employees in another country, businesses have two options: work with an EOR or establish a local entity.
Setting up a local entity can take months or even longer. For many startups, slowing down the hiring and growth process is a risk they can’t afford.
Plus, employment laws and regulatory requirements are different in every country. If a company gets it wrong, it risks legal issues, costly fines, and reputational damage.
Other common global hiring risks include:
- Misclassifying employees as contractors and exposing the company to fines and legal liabilities
- Violating local labor laws (e.g., mandated leave, notice periods, severance) by not staying on top of each country’s evolving employment regulations
- Incorrectly managing cross-border payroll and taxes, which requires nuanced local expertise
Without the support of an EOR, startups rarely have the internal bandwidth and resources to manage the many complicated risks associated with international growth.
Ultimately, EORs level the global playing field, allowing startups to access highly sought-after international talent and enter new markets quickly, without the red tape.
6 Ways an EOR Simplifies the Global Expansion Process for Startups
1. Expand the Talent Pool
An EOR allows startups to employ candidates anywhere, rather than being limited to potential hires within, say, a 50-mile radius of headquarters.
Instead, businesses can employ top talent with the skills their company needs the most, whether that’s a machine learning engineer in Poland or a marketing strategist in Brazil.
2. Faster Market Entry
When speed matters, waiting months for entity setup is a competitive disadvantage.
EORs already have legal infrastructure in many countries and the local expertise to navigate local employment laws.
Once a startup identifies an international candidate or a new market to test out, an EOR helps them move fast — onboarding employees in a matter of days, not months.
3. Compliance Peace of Mind
Compliance risks are challenging for even the largest enterprises. In fact, 82% of compliance leaders faced consequences due to third‑party risk in the past year.
An EOR ensures employment contracts comply with local labor laws, such as statutory benefits.
For example, in the United States, employers don’t need to offer maternity leave, outside of access to unpaid leave via the Family and Medical Leave Act (FMLA). However, in the Netherlands, employees are legally entitled to 16 weeks of paid maternity leave.
An EOR knows the ins and outs of each country’s local regulations, including parental leave policies, so you can be confident that your business is compliant.
4. Cost Efficiency
For startups, every dollar counts. An EOR helps businesses avoid the overhead costs of building out legal and HR teams or opening local entities.
With an EOR, you typically pay a monthly fee per employee, which covers various HR services, from onboarding employees to managing payroll, health insurance, contracts, and taxes.
The predictable pricing structure simplifies forecasting budgets and makes it easier to allocate resources to growth activities.
Plus, the ability to hire in markets with lower living costs can help stretch your budget farther.
5. Flexibility
Markets shift, products pivot, and funding timelines change. Startups need to stay flexible to remain competitive.
With an EOR, you can scale headcount up or down, without the sunk cost of maintaining physical offices, local bank accounts, or long-term contracts.
You can test out a new market, and if you decide it’s not the right fit for your business, scale your go-to-market strategy to a new region or key hire.
6. Compliant Payroll and Benefits
A competitive compensation package is key to attracting great talent, but it’s just as important to have payroll systems in place that ensure employees are paid accurately and on time.
Managing payroll across multiple countries adds complexity, with different currencies, tax withholdings, and statutory contributions to consider. Errors in this process can be expensive, damage your company’s reputation, and make it harder to attract top candidates in the future.
An EOR partner manages the entire process, ensuring salaries are paid accurately, on time, and in each candidate’s local currency. An EOR can also help startups develop compliant and competitive benefits packages that meet local expectations.
When Is the Right Time to Use an EOR?
Startups are in a unique position: they need to hire strategic candidates, build competitive products, and test go-to-market strategies quickly — and be able to pivot fast if the fit isn’t right.
An EOR supports startups through this fast-paced, high-stakes process, filling crucial internal operational gaps, without adding significant overhead costs.
Partner with an EOR, if you want to:
- Hire an international team without opening local entities
- Test a new market, without long-term legal commitment
- Scale quickly, while minimizing legal risk
- Hire just one or two people in a new region
- Build distributed teams in multiple countries, but centralize payroll, benefits, and compliance in one system
- Avoid compliance and legal missteps with expert guidance
Fuel Your Startup’s Global Expansion With RemoFirst
RemoFirst helps companies of all sizes hire, manage, and pay a global workforce in 185+ countries without setting up local entities.
We also support hiring and paying contractors in 150+ countries, with compliant contracts that protect your IP and reduce misclassification risk.
Let our expert team at RemoFirst handle everything from payroll to equity, onboarding, local benefits, taxes, and labor law compliance, so that you can scale your startup quickly and confidently.
Schedule a demo today, and see how RemoFirst makes international hiring fast, compliant, and cost-effective.
