Is the global employment model the same as remote work?

No. Remote work describes where someone does their job. The global employment model describes how they are legally employed across borders. You can employ a remote worker compliantly through an employer of record, an owned entity or, where they are genuinely independent, a contractor arrangement.

Do I need a legal entity in every country I hire in?

Not if you use an employer of record, which already holds an entity in each market it covers and employs your worker through it. You only need your own entity where you choose the owned-entity route, typically once local headcount makes the setup and running costs worthwhile.

Can I just pay overseas workers as contractors instead?

Sometimes, but only where the relationship is genuinely independent under local law. If you direct the work like an employer, most countries will treat the person as an employee regardless of the contract label. Getting this wrong is misclassification, which carries back taxes and penalties.

How does a company move between routes as it grows?

A common path is to start in a new market through an employer of record to test demand quickly, then set up an owned entity once headcount is high enough that running your own subsidiary costs less than per-worker fees. The two routes are stages, not rivals.

Glossary

Global Employment Model

The global employment model is the practice of hiring and retaining workers in countries outside a company's home base, meeting each market's labour law, payroll tax, statutory benefits and termination rules, usually through an employer of record, a PEO or an owned foreign entity.

Reviewed by Teamed's in-house employment-law team·Last updated 28 July 2026

Also known as: global employment, international employment model

What is Global Employment Model?

The global employment model is the set of arrangements a company uses to employ people in countries where it does not have, or does not want, its own legal entity. Each country ties employment obligations to the entity on the contract, so the model chosen decides who is legally responsible for payroll, tax withholding, statutory benefits and lawful termination in that market.

Three routes dominate. An employer of record already holds a local entity and employs your worker on your behalf, so you can start in weeks. A professional employer organisation shares employer duties where you already have an entity. Owning a foreign entity gives you full control but takes months to register and carries ongoing filing costs.

Most companies mix these routes as they grow, using an employer of record to test a market, then moving to an owned entity once local headcount justifies the overhead.

What are the main ways to run a global employment model?

Three routes cover most cases. An employer of record employs the worker through its own local entity, so you carry no incorporation burden. A professional employer organisation co-employs staff where you already hold an entity. Setting up your own subsidiary gives direct control but adds months of registration and permanent local filing duties.

Which route fits depends on how permanent the hire is, how many people you plan to employ in the market, and how much local control you need over the employment relationship.

When does an owned entity beat an employer of record?

An owned entity usually wins once your headcount in a market is large enough that the fixed cost of incorporation and ongoing filings falls below the per-worker fees of an employer of record. Until then, an employer of record is faster to launch and cheaper to unwind if the market does not perform.

What are the compliance risks of global employment?

The main risk is treating a foreign worker as a contractor when local law would call them an employee, which is misclassification. A close second is triggering a permanent establishment, where your activity in a country creates a taxable presence. Both carry back taxes, penalties and reputational cost.

Key facts

Permanent establishment (OECD Article 5): Article 5 of the OECD Model Tax Convention defines a permanent establishment as a fixed place of business through which an enterprise's business is wholly or partly carried on.Employing people abroad can create a taxable presence, so the route chosen under the global employment model affects permanent establishment exposure.Source: OECD· verified 2026-07-28

Global employment routes compared

	Employer of record	Owned entity
Own local entity needed?	No	Yes
Time to first hire	Weeks	Months
Legal employer	The provider	Your subsidiary
Best when	Testing or few hires	Large local headcount

Frequently asked questions

Is the global employment model the same as remote work?
No. Remote work describes where someone does their job. The global employment model describes how they are legally employed across borders. You can employ a remote worker compliantly through an employer of record, an owned entity or, where they are genuinely independent, a contractor arrangement.
Do I need a legal entity in every country I hire in?
Not if you use an employer of record, which already holds an entity in each market it covers and employs your worker through it. You only need your own entity where you choose the owned-entity route, typically once local headcount makes the setup and running costs worthwhile.
Can I just pay overseas workers as contractors instead?
Sometimes, but only where the relationship is genuinely independent under local law. If you direct the work like an employer, most countries will treat the person as an employee regardless of the contract label. Getting this wrong is misclassification, which carries back taxes and penalties.
How does a company move between routes as it grows?
A common path is to start in a new market through an employer of record to test demand quickly, then set up an owned entity once headcount is high enough that running your own subsidiary costs less than per-worker fees. The two routes are stages, not rivals.

Related terms

Note

This is general information, not legal advice. Statutory rules vary by country and change over time.

Glossary

Have a global hiring question?

Ask a real person, or run the numbers yourself with the free calculators.

See when an entity beats an EOR

Last verified 2026-07-28