Borderless Hiring: Why Companies Are Choosing EOR in 2025

Expanding internationally inevitably means having to navigate differences in payroll, taxation, and employment regulations in each country. It requires juggling administrative, legal, and compliance-related tasks—all while risking fines and penalties for even minor oversights.

You might be considering hiring independent contractors, using a global PEO, forming joint ventures, partnering with a local distributor, or establishing a legal entity. While each approach has its advantages in certain situations, many businesses in 2025 are opting for an Employer of Record (EOR) as the most practical and secure way to expand globally. Read on to learn why.  

The Growing Demand for EOR Services

An Employer of Record (EOR) takes on the legal and administrative responsibilities of employment, including payroll taxes, benefits, and compliance with labor laws. It enables companies to legally employ individuals in a specific jurisdiction or country without the need to establish a local entity. While the modern workforce offers flexibility, companies would still need strong resilience to withstand payroll discrepancies, evolving employment laws, legal and administrative complexities —challenges that an EOR is designed to handle.

Today, EOR continues to establish itself as the fastest, safest, and most cost-effective solution for achieving full legal compliance. Industries that want to support employees in locations where they do not have an established presence (such as healthcare, support services, administration, and technology) can rely on an EOR to ensure compliance with paying and retaining employees.  

Why Companies Are Making the Smart Switch to EOR

1. The Fastest Way to Hire in Another Country

Expanding your business overseas involves complex legal and administrative procedures. While some nations allow the process to be completed via power of attorney, others require company representatives to travel in person for incorporation. Additionally, countries like China require in-person presence for opening a corporate bank account, a process that can take anywhere from 1 to 3 months.  

Hiring foreign workers can also be a lengthy process. In France, for example, hiring non-EU employees involves multiple steps, including proving that no suitable local candidates are available, applying for work permits, and meeting required salary thresholds. This process can take anywhere from 3 to 6 months. Similarly, setting up an LLC in countries like Brazil requires multiple registrations and accounting procedures, often extending beyond a year.

Because of these legal and administrative barriers, market entry can be time-consuming. However, an Employer of Record (EOR) offers a faster alternative. By handling work permits, compliance, payroll, and tax filings, an EOR eliminates many of these obstacles—allowing businesses to start hiring in as little as one day to two weeks.

2. Ideal for Testing New Markets

Setting up a local entity requires substantial time and investment, which might not be justifiable if you're still evaluating whether a market is worth long-term investment. Testing the waters often involves hiring a small local team, launching pilot projects, engaging with potential customers, and assessing demand before committing to full-scale operations.

An EOR allows businesses to enter new markets quickly without the legal and financial burden of entity registration. Your company can hire local employees, establish partnerships, and gather market insights while maintaining the flexibility to scale up or exit as needed. If the market proves viable, you can confidently expand operations. If not, you can withdraw without the costly process of dissolving a legal entity.

3. No Employee Misclassification Issues

One of the most common pitfalls of overseas employment for both employer and employee is the risk of worker misclassification. This happens when a business gives the wrong designation to their workers, incorrectly labeling an employee as an independent contractor and vice versa. Whether deliberate or accidental, this non-compliance can result in staggering penalties, fines, unpaid taxes, and legal disputes.

Even if you believe you’ve classified your team members correctly, the nature of your relationship with them can change over time. For instance, it’s common to overlook that a contractor has gradually taken on an employee role or to struggle to prevent this shift. Different jurisdictions have varying definitions of employees and contractors, not to mention that local laws also change over time, which is why staying updated on compliance information is crucial. In France, for example, you need to review the terms and conditions of the collective agreement before even giving an employee an offer, as misclassification can lead to huge penalties.

Partnering with an EOR allows you to offer full-time employee status in the country where you plan to hire talent. It takes on the responsibility of providing contracts, legally mandated benefits, and labor protections, ensuring proper classification and compliance with labor laws in a specific jurisdiction.  

4. Seamless Onboarding and Offboarding

Before using EORs, companies themselves must handle all the legal, financial, and administrative complexities of hiring and firing employees overseas. This entails taking care of everything from drafting localized employment contracts to setting up benefit plans, tracking labor law changes, handling legal documentation, managing severance payments, and more.

Mistakes in these processes can lead to payroll delays, compliance violations, or legal disputes. An EOR removes these risks by ensuring onboarding and offboarding follow local laws, providing a smooth experience for both employers and employees. At the same time, your company will still oversee assigning work, setting expectations, and integrating employees into your team.

5. Access to a Larger Talent Pool

EOR removes recruitment barriers by handling all the legal and administrative aspects of international hiring, hence companies have a wider pool of talent to choose from, but what’s also equally important is how this affects employees.

Unlike alternative hiring methods that may classify workers as contractors with limited protections, an EOR provides them with legally compliant contracts, access to mandatory benefits, and job security. EORs also have group benefits plans in place or solutions they can provide to potential candidates, such as HMO in the Philippines or Group Benefits and 401(k) in the USA. This level of stability keeps employees engaged and significantly improves the retention rate.  

6. No Co-Employment Arrangement

PEO arrangements can be highly restrictive in countries like France, where strict limitations on job roles and temporary employment conditions can make long-term hiring difficult. In Italy, using a PEO that isn’t a registered staff leasing agency can lead to severe financial penalties and even employee claims for direct employment. Similarly, in Germany, PEOs must comply with strict temporary agency work laws, often limiting employment terms to just 18 months. Even in the UK, businesses using PEOs may struggle to enforce confidentiality agreements, intellectual property rights, and post-termination restrictions, potentially exposing them to risk.  

Unlike Professional Employer Organizations (PEOs), which operate under a co-employment model where both the PEO and the company share employment responsibilities, an Employer of Record (EOR) acts as the sole legal employer while you retain full control over the employee’s daily responsibilities. With an EOR, your business avoids legal uncertainties while benefiting from complete oversight of your team. You maintain full authority over employee management, company culture, and performance expectations —while the EOR handles the nitty-gritty of payroll, benefits, and local labor compliance.

The complexities of international hiring shouldn’t stand in the way of your company’s milestone of expanding overseas. Choose a solution designed to eliminate legal, financial, and administrative burdens. Let an EOR help your company focus on building a strong global team in the most efficient and secure way.

Whether you're looking to enter a new market, avoid misclassification risks, or streamline payroll and benefits, our team at Knit can give you tailored solutions to fit your goals. Ready to expand? Let’s talk.