How to Hire a Dedicated Software Development Team Without a Local Entity
The candidate is good, the band works, and then someone asks how exactly you plan to pay a person who lives in a country where your company doesn’t exist. That question stops more hires than salary disagreements do. It also has 3 answers, and they’re not interchangeable.
Registering a subsidiary is the fourth answer, and for one or 2 engineers it rarely survives the first spreadsheet: incorporation, a local director, accounting, payroll filings and a dissolution bill if the plan changes. Companies that hire dedicated software development team capacity across borders usually get there a different way.
3 Ways to Hold the Employment
An employer of record signs a local employment contract with the engineer on your behalf. The person is employed properly in their own country, with statutory benefits and local notice, while you direct their work. EOR engineering hires look exactly like your own staff from the inside of a sprint and sit on someone else’s payroll on paper.
The second route puts the engineer on a provider’s own staff. An IT outstaffing company employs people under its own entity, as its own employees, and assigns them to your team. The commercial relationship is a service agreement, and the employment questions stay with the provider because they belong to the provider’s business.
The third is a direct contractor agreement with the individual. It’s the quickest to start and the one that carries the most exposure, because whether somebody is a contractor isn’t decided by the title on the document. It’s decided by how the work runs.
| Route | Who employs | Main exposure |
| Employer of record | The EOR, locally | Thin local presence behind the paperwork |
| Provider’s own employee | The provider | Notice and IP terms you never read |
| Direct contractor | Nobody; they invoice you | Misclassification, back taxes, benefits claims |
| Your own subsidiary | You | Fixed cost that outlives the team |
Why the Contractor Route Gets Expensive Later
Labour authorities across Europe apply much the same test, whatever the local wording. Does the person work set hours for one client, use that client’s equipment, follow its instructions and have no other customers? Answer yes to most of those and you have an employee with a contractor’s invoice, which is a position that gets corrected retroactively.
The correction lands on the client, not the engineer. Unpaid employer contributions, holiday pay owed, sometimes a penalty, and a reclassified employment relationship with notice obligations you never planned for. A 2-engineer arrangement doesn’t usually attract attention. A team of 9 working your hours on your laptops does.
What an EOR Carries on Your Behalf
A proper employer of record registers the employment, runs local payroll, withholds and remits taxes, administers statutory leave and sick pay, and handles termination to local rules. Ask which entity does that in each country you care about, and whether it belongs to the provider or to a subcontractor found for the occasion. The same question goes to an IT outstaffing company employing the person as its own staff. Hiring without an entity means trusting someone else’s entity, so its substance is the whole question.
Ask 2 more things before signing. What happens if the engineer is dismissed or resigns, and which party carries severance where local law requires it. And whether the provider can employ in the next country on your list, because a team that starts in Poland often ends up with people in Romania and Bulgaria too.
What Stays With You Regardless of Route
Direction of the work, in every case. Whichever route you pick to hire dedicated software development team capacity, you set priorities, review code, run the sprint and decide what gets built. That’s true whether the engineer sits on an EOR contract or on a provider’s payroll, and it’s the reason we hire people who then build under our clients’ management instead of taking delivery of a scope ourselves.
IP assignment also stays your problem to verify. The chain has to reach from the engineer to you without a gap: the engineer’s contract assigns work product to their employer, and your service agreement assigns it onward. One missing link and the ownership question has no clean answer.
Where Entity-Free Hiring Goes Wrong
The first error is treating country coverage as a checkbox. A provider listing dozens of countries on a map may hold entities in 6 of them and partnerships for the rest. Ask per country, and ask who the engineer’s employer would legally be.
The second is signing a contractor agreement as a bridge. It stays in place, because nothing forces a review once the engineer is working, and the exposure grows with every month and every new hire on the same terms.
The third is leaving benefits undefined. Local statutory minimums are the floor, not the market. In several European markets private health cover is normal for engineers, and a package that ignores it loses candidates at the offer stage for reasons nobody writes down.
Settling It Before the Offer
Decide the route before you talk to candidates, because the answer changes what you can promise. A good engineer asks who their employer will be, what their notice period is and what happens if the project ends. Vague answers cost you the hire.
Then write down the 3 lines that matter: employing entity and country, notice both ways, and who carries severance. Teams that hire dedicated software development team capacity this way spend one extra meeting at the start and avoid the conversation where legal discovers the arrangement in month 7.
FAQ: Employing People Abroad
Is an EOR Arrangement Permanent or a Stepping Stone?
Both happen. Some clients run EOR engineering hires for years because the overhead never justifies an entity. Others incorporate once headcount in one country passes 15 or 20 and transfer the contracts. Ask how a transfer would work before you need it.
Can We Interview and Choose the Engineer Ourselves?
You should. Clients who hire dedicated software development team capacity this way run their own technical interview and make the call, and the employment structure only decides who signs the contract afterwards. A provider resisting that interview is solving its own problem.
How Quickly Can Someone Start Under an EOR?
Days for the paperwork once the terms are agreed, in countries where the provider already operates. The real clock is the engineer’s notice period at their current employer, which runs from 30 days upward depending on the market.
Does an IT Outstaffing Company Handle Equipment and Accounts?
Equipment varies by contract and should be named explicitly. System accounts are yours to issue, which also means yours to revoke, and that detail belongs in your offboarding checklist from day one.
