At a glance
The problem: Portfolio companies scaling internationally often assume they can take a PEO-style setup overseas. They can’t. PEO is a US-only model, and the alternatives have real cost and compliance limits.
The solution: Match each need to the right model. Use contractors for short, defined tasks, Employer of Record (EOR) for small overseas teams needed now, and outsourcing for strategic functions that must scale.
The outcome: Faster access to global talent, fewer entities and less compliance exposure, and spend focused on the functions that drive value creation.
In a deal: During an acquisition or carve-out, EOR keeps inherited employees paid and covered while legacy entities wind down. Outsourcing then takes over the functions that need to last.
When a portfolio company raises capital and starts hiring beyond US borders, the workforce model it chooses early on shapes its costs, compliance risk, and ability to scale for years. Many leadership teams start with what they know from the US market, which is the PEO, only to discover it doesn’t apply abroad. Operating partners who understand the full set of options, and when each one fits, can guide portfolio companies to the right choice at each stage of growth.
PEO doesn’t travel. EOR, often sold as “global PEO,” is its international equivalent.
A Professional Employer Organization (PEO) runs a company’s back-end HR through a co-employment arrangement. That covers payroll, benefits, onboarding, and related tasks. PEOs are common among US growth companies, but the model exists only in the United States.
Outside the US, the equivalent is an Employer of Record (EOR). Some providers market it as “global PEO” or “international PEO,” but the structure is different. There is no co-employment. The EOR hires the employee on its own local entity. It takes legal responsibility for payroll, taxes, benefits, and compliance. The client company runs the employee’s day-to-day work: company email, a US-based manager, and full integration into the team. The EOR handles onboarding, terminations, and other back-end actions, but only when the client instructs it to.
Cost is a big reason companies look overseas in the first place. A software engineer in a major US tech hub like San Francisco typically earns around $180,000 in base salary. Once taxes and benefits are added, the fully loaded cost often exceeds $225,000. India offers strong engineering talent at a very different cost base, and EOR lets a company tap that market without setting up its own entity.
Source :ECEC Home: U.S. Bureau of Labor Statistics
Three models, three different jobs
| Contractors | Employer of Record (EOR) | Outsourcing (BPO) | |
|---|---|---|---|
| Best for | Short, clearly scoped tasks | Small teams in a new country, hired now | Strategic functions that need to scale |
| Typical duration | Weeks to months | Temporary, until an entity makes sense | Long-term partnership |
| Who finds the talent | You | You | The provider |
| Who manages the work | You | You | The provider, against SLAs and KPIs |
| Typical cost | About $49/month per contractor, based on published pricing from leading EOR platforms | Roughly $400–$900/month per person in platform fees. Salary, employer taxes, benefits, deposits, and FX costs come on top | Contracted scope, typically with a one-time transition fee |
| Watch out for | Misclassification. Many countries require conversion to full-time after a set period | Headcount thresholds and permanent establishment risk | Needs a clearly defined scope of work. Less day-to-day control than in-house staff, and a transition period to plan for |
Contractors work when the need is narrow and the timeline is short. Examples include a digital marketer for two months or extra help during a staffing gap. The scope has to stay defined. Once a contractor starts doing work outside that scope, or stays on too long, many jurisdictions treat them as an employee.
EOR works when a company has already found its candidates and needs them working now. Typical cases are small engineering, sales, or customer support teams serving a specific market. The arrangement is flexible and can be switched on or off quickly.
Outsourcing works on a different basis. The company is buying expertise and outcomes, not headcount. The provider recruits, vets, and manages the team, commits to SLAs and KPIs, and scales capacity up or down as the business needs.
Where EOR stops making sense
EOR is built as a bridge, not a destination. Three limits matter for anyone underwriting a growth plan:
Cost scales with every hire. Platform fees of roughly $400 to $900 per person per month are only the start. Salary, employer taxes, benefits, deposits, FX costs, and onboarding and offboarding fees all come on top, so costs climb quickly once a team grows past a few people.
There is a practical ceiling. Once a team in one country reaches a certain size, often around 10 employees, EOR providers commonly recommend setting up a local entity and moving off the EOR.
Permanent establishment risk grows. Governments look for ways to establish that a company has a taxable presence in their country. A growing EOR team can draw exactly that scrutiny.
EOR is a good answer to “How do we hire three engineers in India next month?” It does not answer “How do we build a scalable finance function that supports our next stage of growth?”
Where outsourcing fits
Outsourcing is designed for high-impact, long-term work, where expertise and continuity matter more than individual hires. In finance and accounting, that means accounts payable, accounts receivable, bank reconciliations, close support, and reporting. An experienced team delivers this work against agreed service levels.
A business process outsourcing partner can also add capabilities as the business matures. These include IT and cybersecurity, BI and analytics, and AI and automation. Portfolio companies are often under-resourced in these areas but can’t justify building an in-house team.
ContinuServe delivers these functions from its Bangalore delivery center, so a portfolio company that started with a handful of EOR hires in India can scale the function without building its own entity or management layer.
For operating partners, the distinction is simple. EOR solves a hiring problem. Outsourcing solves a capability and scale problem.
The M&A angle: EOR as a transition tool
EOR is especially useful in acquisitions. When Company X acquires Company Y, it may inherit dozens of foreign entities, some supporting only a few employees each. The acquirer may not want to keep those entities or pay taxes in those countries. Yet those employees are often critical during the transition services agreement period, which commonly runs six months or more.
EOR lets the acquirer wind down those entities and move the employees onto an EOR arrangement, so payroll and benefits continue without disruption. When the transition period ends, the business can decide which functions to integrate, which to retire, and which to hand to a long-term outsourcing partner.
This reflects a broader pattern. EOR often acts as a stepping stone to larger outsourcing engagements. It solves the immediate need, and outsourcing takes over once the function needs to scale.
Questions for operating partners
Before choosing a model for a portfolio company’s next expansion step, ask:
- Is this a short, defined task, a small team we’ve already sourced, or a function that must scale?
- How many people will we have in this country in 12 to 24 months?
- At what point does EOR cost more than the alternatives?
- Are we buying headcount or outcomes?
The bottom line
No single model covers every stage of global growth. Contractors provide speed, EOR provides reach, and outsourcing provides scale and expertise. Portfolio companies that match each need to the right model expand faster and spend more efficiently. They also avoid compliance problems that tend to surface at the worst possible moment, often in the middle of a deal.
ContinuServe helps PE-backed companies build finance, HR, IT, and analytics functions that scale with the business. If a portfolio company is planning an international expansion or a carve-out, we’ll run a workforce model review with you. We’ll map where contractors, EOR, and outsourcing each fit, what each will cost as the team grows, and when to make the switch.
Contact us to request a workforce model review.
