Global payroll and Employer of Record: how they work together

• Companies can hire and pay overseas employees without setting up a local entity by using compliant third-party models.
• Employer of Record (EOR) services and global payroll outsourcing work together to reduce legal risk and support international hiring.
• The right combination depends on workforce size, risk appetite, and long-term market plans.

When you decide to hire overseas, paying your workers compliantly, correctly and punctually is among your primary concerns. In today’s world, expanding abroad is easier than ever. Lots of businesses are testing out new markets via solutions like Employer of Record, before committing to establish permanent entities. In these situations, a key question arises: how do global payroll and Employer of Record services work together when you do not have a legal presence in a country?

Payroll, tax, employment law and data protection rules still apply regardless of whether you have incorporated locally. Errors can result in fines, back payments, and reputational damage. Understanding how Employer of Record models integrate with global payroll is, therefore, essential for compliant international growth.

For more information, check out our Ultimate guide to global payroll and Ultimate guide to Employer of Record.

Why companies hire internationally without incorporating

You may think: why run the risk of hiring abroad without incorporating a company in that country? The answer is manifold, but the ultimate truth is that with the right global payroll partner, that risk is mitigated to the point of being virtually eradicated.

First of all, establishing a subsidiary can take months and requires legal counsel and accountancy support. In contrast, alternative hiring models like Employer of Record allow companies to onboard talent in weeks or even days. They consolidate services - providing inhouse legal and tax support - eliminating the need to engage multiple vendors.

Cost is another factor that deters start-ups and SMEs from incorporation. Legally establishing your own entity brings ongoing expenses such as workspace rental and fees, audits, and corporate tax compliance. For small teams or short-term projects, these costs can outweigh the benefits of having a permanent presence.

Finally, flexibility is key when moving into new markets. Many businesses want to test a market or support remote working without committing to a long-term investment. Hiring without incorporation allows these businesses to remain agile and scale up or down as needed.

The compliance challenge without a local entity

Even without a registered entity, employers remain responsible for complying with local labour laws where the worker is based. These differ between countries and even regions – such as the United States, where employment and tax laws vary by state. This includes minimum wage rules, working time limits, statutory benefits, tax withholding, and social security contributions.

Misclassification is a common risk. Treating overseas workers as independent contractors when they legally qualify as employees can cause serious problems for employers found guilty. Fines, legal proceedings and reputational damage may await. Payroll compliance is also complex, as each country has its own rules on payslips, reporting, currency, and payment timing.

Without local expertise, it is easy to overlook obligations or misunderstand requirements. This is why most companies rely on structured solutions rather than trying to manage overseas payroll alone.

Employer of Record services explained

One of the most widely used solutions is the Employer of Record (EOR) model. Under this arrangement, a third-party provider employs the worker on behalf of the client company. The provider already has a legal entity in the country and takes on responsibility for employment contracts, payroll, tax, and statutory benefits.

The client company directs the day-to-day work while the EOR handles compliance. This allows the business to operate as if it had a local presence, without the administrative burden of incorporation.

EOR services are particularly popular for hiring full time employees in countries where the company has no entity and no immediate plans to set one up. They are also useful when entering highly regulated markets, where local employment expertise is essential.

Mauve Group is arguably the original Employer of Record, compliantly engaging workers in 150+ countries worldwide.

How global payroll supports the Employer of Record model

Global payroll complements the Employer of Record model. While the Employer of Record provides the legal employment framework, global payroll ensures employees are paid compliantly across multiple countries.

Through integrated global payroll systems, employers retain visibility over costs, compliance, reporting, and payment schedules, even though payroll is processed locally by the Employer of Record. This centralised oversight allows finance and HR teams to manage international payroll efficiently while maintaining local compliance.

Global payroll also supports scalability. As companies hire in additional countries through an Employer of Record, payroll data can be consolidated into a single reporting structure, simplifying budgeting and forecasting.

Mauve Group’s centralised platform, Mauve Insight, provides access to all payroll data 24/7.

Global payroll outsourcing beyond Employer of Record

Global payroll outsourcing is often used alongside different employment structures. Where a company has its own entities, or transitions away from an Employer of Record, a global payroll provider can centralise payroll processing across countries.

This model does not remove the need for a legal employer. However, it does streamline payroll operations by standardising processes and improving data accuracy which, in turn, reduces internal workload. For organisations operating across multiple jurisdictions, global payroll outsourcing provides consistency and control.

Choosing the right model for your workforce

Selecting the best approach depends on the number of employees in each country. Hiring one or two people usually favours an Employer of Record, while larger teams may justify a legal entity over time. Duration of hire can also determine approach. Short-term or project-based hiring aligns well with EOR services, whereas permanent market entry may call for a phased approach that starts with an EOR and later transitions to an entity.

Risk tolerance and internal capability should be assessed honestly. If your organisation lacks international HR and payroll expertise, outsourcing is often the safest choice. This is the case for smaller teams, such as SMEs and NGOs.

Managing the employee experience

It is well documented that happy workers are more productive, and stay with their companies longer. Ensuring employee wellbeing and satisfaction in a no-brainer when it comes to strategising toward boosted innovation and retention.

Like those at home, your overseas employees expect timely, accurate pay. They want clear, location-appropriate contracts, and access to statutory benefits, at the very least. For example, a recent study from Florida shows that in the States, paid time off greatly reduces employees’ odds of quitting their jobs.

A reputable EOR or payroll provider can support this by offering locally compliant benefits, handling employee queries in local languages, and ensuring payslips and documentation meet expectations.

Data protection and security considerations

Handling payroll data across borders raises data protection issues, particularly under UK GDPR and equivalent regimes. Employers must ensure that personal data is processed lawfully, stored securely and transferred in compliance with applicable rules.

Established global providers typically have robust security frameworks and clear data processing agreements. This is another reason many companies avoid ad hoc solutions when managing overseas payroll.

Mauve Group was recently announced as the winner of the 'HR Tech Provider of the Year' award at the prestigious Personnel Today Awards 2025. In 2025, Mauve achieved ISO 9001 certification, the internationally recognised standard for quality management systems (QMS).

Recognition from the British Assessment Bureau underscores Mauve’s dedication to operational excellence and delivering the very best customer service to every client and worker, for three decades.

Supporting global growth with Mauve Group

Mauve Group has spent decades supporting organisations to employ and pay overseas workers compliantly, with or without a local entity. Through integrated Employer of Record solutions and comprehensive global payroll outsourcing, Mauve enables businesses to expand internationally with confidence.

By combining local expertise with centralised payroll oversight, Mauve Group helps clients balance speed, compliance, and employee experience at every stage of global growth.

Contact our team to learn how we can help you manage, onboard, and pay employees worldwide.

FAQs

Can global payroll and an Employer of Record be used together?

Yes. An Employer of Record provides the legal employment structure, while global payroll systems support accurate payment, reporting, and oversight across countries.

What is the difference between an Employer of Record and global payroll outsourcing?

An Employer of Record acts as the legal employer in countries where you have no entity. Global payroll outsourcing focuses on processing and consolidating payroll, usually where a compliant employment structure already exists.

Is it compliant to hire without incorporation?

It can be fully compliant when the correct model is used. Working with experienced Employer of Record and global payroll providers helps ensure local labour laws and payroll requirements are met.