Before anything else, you need to decide what legal structure you will use to employ the person. The main options are:

• Set up a local legal entity (subsidiary or branch) in the target country
• Use an Employer of Record (EOR) to hire on your behalf
• Engage the person as an independent contractor

For most companies hiring their first employee abroad, EOR is the most practical option. It does not require entity registration, it can be set up quickly, and it comes with built-in compliance for local employment law. A local entity makes more sense once you have a larger team and a proven business case for the market.

Step 1: Understand the Local Employment Framework

Every country has its own employment law, and the differences matter. Before you finalize compensation or draft any contracts, you should have a basic understanding of:

• Minimum wage requirements
• Mandatory benefits (annual leave, sick pay, health insurance contributions, pension contributions)
• Standard probation periods and how they affect notice rights
• Notice period requirements for both parties
• Termination rules: what grounds are required, what process must be followed
• Any collective bargaining agreements that apply to your industry

You do not need to become an expert in local employment law. But you need to know enough to structure the compensation package correctly and avoid making commitments you will struggle to keep. If you are using an EOR, much of this is handled for you, the EOR ensures the contract and payroll are structured in accordance with local requirements. If you are going it alone, engage a local employment lawyer before you draft anything.

Step 2: Structure the Compensation Package

The headline salary is only part of what the employee will cost you and receive. In most countries, employers are required to pay social security or social insurance contributions on top of gross salary. These can be substantial: in some EU countries they add 20–35% on top of the gross salary figure.

Mandatory benefits also affect the real cost. If the country requires an employer to provide health insurance, pension contributions, or meal allowances, these are employment costs, not optional extras.

When putting together the offer:

• Calculate the total employer cost, not just the gross salary
• Confirm what statutory benefits apply and include them in the offer letter
• Be clear whether any additional benefits you are offering (private health, stock options, etc.) are supplementary to statutory minimums, not substitutes for them
• Check whether performance bonuses or 13th-month payments are customary or mandatory in the market: in some countries they are expected even where not legally required

Step 3: Prepare a Compliant Employment Contract

The employment contract is a legal document, not a formality. In many countries, it must:

• Be in the local language (or at minimum include a local-language version)
• Be signed before the employee starts work
• Include specific clauses around working hours, location, notice periods, and grounds for termination
• Reference any applicable collective bargaining agreement
• Include data protection notices under GDPR (for EU employees)

A contract drafted under your home country’s law and translated will usually not be sufficient. It needs to be built on the foundation of local employment law, not adapted from a foreign template.

If you are using an EOR, they prepare this contract. 

Step 4: Register the Employee with the Relevant Authorities

In most countries, the employer (or EOR) must register a new employee with tax and social security authorities before or on their start date. This typically involves:

• Registration with the pension/social insurance authority
• Registration with the health insurance authority
• Setting up payroll withholding for income tax

These registrations are not optional. An employee who starts work without being registered is an unregistered worker, which creates immediate compliance exposure. The registration process is handled automatically if you use an EOR.

Step 5: Run Payroll Correctly from Day One

Once the employee starts, payroll must be run correctly and on time. This means:

• Calculating gross salary accurately
• Withholding the correct amount of income tax (which may be progressive and vary by income level and location)
• Deducting employee social security contributions
• Adding employer contributions on top of gross salary
• Remitting everything to the correct authorities by the required deadlines

Late or incorrect payroll filings attract penalties in most jurisdictions. If you are managing payroll internally, invest in local payroll expertise or software configured for the target country. If you are using an EOR, this is all handled as part of the service.

The Role of an EOR in This Process

Each step in this guide can be handled by an Employer of Record. The EOR determines the correct legal structure, ensures the contract is compliant, registers the employee, runs payroll, and manages ongoing compliance on your behalf. For most companies hiring their first international employee, the simplest approach is to find the right person and then let an experienced EOR handle everything else.

The alternative, building internal expertise in a country’s employment law for one or two hires, rarely makes economic sense. The EOR route gets you to a compliant, productive hire in days, at a cost that is typically a fraction of the alternative.

If you are ready to hire your first employee in a new country, the most important first step is understanding the structure you will use. Once you have decided on EOR, the remaining steps follow quickly. Find your candidate, agree on terms, and let your EOR partner take it from there.