Sep 07 2026Global Payroll for Small Business & Startup - Mistakes to Avoid

Wonderland GmbH employed people around the globe (Germany, France, Belgium, Netherlands, India, …) for over three years. In this short amount of time, we tested many different solutions. I’m publishing this article quite some time after the company’s merger into the US, but wrote it back when the info was fresh as I wanted to share some experience that I collected along the way so that you can make the right trade-offs for your company.

Like many startups, we had to decide whether we go for the most flexible job market or the lowest cost and payroll management overhead. Here are three choices:

Option 1: Global Payroll as a Service (Remote.com, Deel, Omnipresent)

There are a bunch of options out there that promise both low financial overhead per employee and low payroll management overhead. I have direct experience with one of these, but our evaluation of alternatives later on confirms that these are all very similar and only differentiate in how serious they are about compliance.

Employer of Record (EOR)

An EOR is a company that employs people on your behalf. They have a subsidiary or entity in that country that hires your employee and charges you for their work plus a surcharge for the management, basically like a contracting company. The laws of that country may or may not have a concept of your startup as a third party in this arrangement.

Compliance

The pitch these platforms make is that you don’t have to worry about the laws and requirements around employing in the countries they offer their services in.

“Great!” — you might think. Until you realize that your EOR has 500+ employees, which in many countries might get you into much stricter employer legislation than you might usually have to deal with as a small startup company.

Fees are Forwarded

The above compliance requirements together with the unrecognized type of EOR is a toxic combination: Whatever fees are incurred for compliance mistakes at the EOR will just be billed with your next payroll-funding invoice. So not only do you have higher requirements and a stricter audit of those requirements due to the large employer, but you have to pay for their mistakes anyway. This happened once for one country with the service.

EOR Exit Cost

But an even worse aspect to consider is letting go of employees.

Remember that especially with the unrecognized type of EOR, the employment law does not recognize you as the true employer. In some countries this means that any valid reason you might have to let go of an employee may not be a valid reason for the EOR to let go of the employee. Furthermore, the EOR might not be able to hire a similar role (for a different client) in that country unless the employee voluntarily leaves the company, which is problematic for the following reason:

If the employee leaves voluntarily, they often might not be eligible for their nation’s unemployment benefits, which puts your startup in a very terrible position: The EOR may only accept voluntary (mutually agreed upon) termination of the employment, or gross misconduct if you have it extremely well documented. The employee, however, will not want to leave without a proper severance and the EOR will be negotiating against you: After all, continued salary is spending your money, not theirs, and they even receive their management fee, so their motivation towards getting the stalemate resolved quickly is limited, and they usually want to avoid potential legal consequences, as they hit them, not you.

My personal takeaway was to avoid Remote, Deel, et al. for countries where “EOR” is not a recognized concept in the employment laws. With a couple more years of experience, I learnt that even for those where “EOR” is recognized, mutual termination was effectively enforced even elsewhere, to avoid legal risks.

Option 2: Dedicated Global Payroll Agencies

Alternatively, you can set up global payroll with agencies that help you with compliance in each country, but hiring employees directly.

For a while, we worked with an agency, which is international and has a good reputation. This was for only one country initially and we transitioned from an EOR.

Setup fees were very expensive because they refused to reuse the contract templates we had used with the EOR, claiming they were non-compliant and completely insufficient. The monthly payroll service cost for multiple employees was lower than that of a single employee, so that would be amortized.

We also faced lots of friction getting the insurance services we wanted to use, as they were not partnered with the agency. Finally, we faced a lot of trouble with paying payroll taxes. The agency caused monthly late fees on taxes for the entire duration of our contract with them due to incorrectly set up payment processing — repeated pleas to fix the problem fell on deaf ears. Back then, we “fixed” the issue by ending our contract with them and moving the employees back to EOR.

Option 3: Direct Employment through Local Agencies

Local payroll agencies are much more efficient (financially) than global payroll agencies. They usually only have a license for a specific country. The downside is that you’ll have to set up with one per country, but how many countries do you employ in?

The accountant will handle registration for your employer number and payroll taxes. They may or may not create the employment contracts for you. The setup cost is usually very low and so is especially the monthly payroll service cost.

The quality of this decision will of course depend on the agency. We did this for one country and it was an extremely great pick!

How to Find Local Agencies

To find one for other countries, ask your fellow founders from those countries; they will either recommend their agency or tell you some anecdotes about why you shouldn’t pick them.

Risks

Note that I did not have this one go wrong on me yet. So my imagination on how it could go wrong is more limited.

External consulting had recommended that we pay close attention to how intellectual property (IP) is created in which country. IP substantially developed in another country might justify taxation of revenues associated with that piece of IP there. This is why bigger companies opt for clean OECD structures, where a bunch of subsidiaries are created to hire employees and provide services to a company that holds the IP. That, though, is the most expensive and overhead-intense solution, and much more difficult to tear down.

Apart from that, your local agency will handle compliance for you. You’ll pay fees if they make a mistake, but you will with all solutions, and it will happen, don’t worry too much about it.

Summary

If you have a superhero local payroll accountant per country, you might have the lowest financial and payroll management overhead.

Be careful with “Global Payroll as a Service” marketing, it does not save you much money or headache but gets you compliance rules for large companies. The consistent HR platform for all non-local employees is nice, but not worth the cost.

Over time, I started to become very aware of what felt like pushy fear-mongering that was thrown at me from both the global payroll agency and those EOR platforms. It seems to be a very common sales tactic. With this article, I hope to have opened your eyes to it.