Global Hiring Options: EOR, PEO, or Subsidiary?

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Notes from when I was building my first international team:

Employer of Record (EOR)

An EOR is a third-party company that becomes the legal employer of your workers in-country. You manage the work; they handle payroll, benefits, taxes, and compliance. Velocity is an EOR

Best for: Testing a new market or going global without setting up entities.

Tradeoff: Higher per-employee cost and less control over benefits, equity structures, and employment terms. The EOR is the legal employer, which can complicate IP assignment and create dependencies.

Professional Employer Organization (PEO)

A PEO is co-employment: you already have a legal entity in-country, and the PEO handles payroll, benefits administration, and HR compliance. You remain the employer of record. Trinet is a PEO.

Best for: When you’ve established an entity but want to outsource HR operations and get better benefits rates through the PEO’s scale.

Tradeoff: You still need the entity first. This isn’t a great shortcut to market entry. Setup and compliance costs remain yours. PEOs work best at a moderate scale (10+ employees) where their admin value outweighs the service fee.

Subsidiary

You establish a legal entity (Ltd, GmbH, KK, etc.) in the target country. Full control, full responsibility.

Best for: Serious long-term presence, large teams (15+ people), or situations where regulatory, IP, or contractual requirements demand a local entity. Also necessary if you’re raising capital locally or need to hold in-country assets.

Tradeoff: Highest setup cost, longest timeline (2-6 months typically), and ongoing compliance burden (tax filings, audits, directors, registered office). You own the risk and the administrative overhead.

Other

There are other options. Upwork has built out features that make it more similar to a PEO. In Japan, there are a host of other options (e.g., 商社) that I’ll add later.

TL;DR

Subsidiary: Maximum control and compliance exposure. Use when scale, risk profile, or regulatory requirements justify the investment.

EOR: Fastest path. Use for tests, small teams, speed-to-market. Expect higher per-seat cost and reduced control.

PEO: Admin layer after you’ve already established presence. Good for operational efficiency, not for initial market entry.

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