Can I just pay someone abroad as a contractor?

For genuine project work with real independence, yes. For a full-time worker following your direction, many countries will treat them as an employee under local law regardless of your contract, and will pursue the employer for unpaid contributions and benefits.

What is permanent establishment risk?

If someone in another country habitually acts for your company — particularly concluding contracts — that country may treat your company as having a taxable presence there, making its business profits locally taxable. It is a company-level tax risk, not just an employment one.

When is an EOR worth the cost?

When the person is effectively full-time, when the country has strict employment protections, or when they will be client-facing in a way that could create permanent establishment. For a genuine part-time freelancer on defined projects, it is usually unnecessary.

Founder operations: hiring, contracts and paying people

Guide · 2 min read

Hiring internationally: contractor, EOR or your own entity

Paying an overseas contractor is easy right up until the point their country decides they were an employee, or that you now have a taxable presence there.

The short answer

You can hire abroad as an independent contractor, through an employer of record that legally employs them locally, or by forming your own entity in that country. Contractors are cheapest but carry misclassification risk under local law; an EOR removes that risk at a per-person monthly cost.

Route	Good for	Indicative cost	Main risk
Independent contractor	Project work with genuine independence	Lowest	Misclassification under local law
Employer of record	Real employees where you have no entity	$500–$1,000+/person/month on top of salary	Low; less control over the contract
Your own local entity	Several people in one country, long term	Highest — formation, payroll, filings	Full local compliance burden

EOR pricing varies widely by country. Indicative ranges as at August 2026.

Paperwork for overseas contractors

Simpler than founders expect. A non-US person performing services outside the United States is generally not reported on a Form 1099. You collect Form W-8BEN for an individual or W-8BEN-E for an entity, and keep it on file.

For US classification specifically, see contractor or employee.

Frequently asked questions

Can I just pay someone abroad as a contractor?: For genuine project work with real independence, yes. For a full-time worker following your direction, many countries will treat them as an employee under local law regardless of your contract, and will pursue the employer for unpaid contributions and benefits.
What is permanent establishment risk?: If someone in another country habitually acts for your company — particularly concluding contracts — that country may treat your company as having a taxable presence there, making its business profits locally taxable. It is a company-level tax risk, not just an employment one.
When is an EOR worth the cost?: When the person is effectively full-time, when the country has strict employment protections, or when they will be client-facing in a way that could create permanent establishment. For a genuine part-time freelancer on defined projects, it is usually unnecessary.

Sources

Last reviewed August 23, 2026. Verify against the primary source before acting.

Founders 8 tracks obligations and deadlines for your reference. It does not provide legal or tax advice — filings are prepared and reviewed by qualified partners.

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