A developer in another country: contractor, employer of record or your own entity, with 2026 costs

You found a good developer. They live in Kraków, or Pune, or São Paulo, and you are a small company in the US with no office anywhere else. There are three ways to pay them: as a contractor who sends you an invoice, as an employee of an employer of record (EOR) that hires them on your behalf, or as an employee of a company you set up in their country. The monthly bill for the same person can differ by more than 60% between those routes, and the cheapest one carries a risk that only shows up later.

This piece puts numbers on each route. It uses the list prices Deel, Remote and Oyster publish in October 2026, the employer contributions in India, Poland and Brazil, a worked monthly bill for a developer at $5,000 a month in each country, what a misclassified contractor can cost (Poland changed its rules in July 2026), the IP clauses that decide whether you own the code, what moving the money costs, and the points at which a small company should move from one route to the next.

The three routes in one table

What the platforms charge in October 2026

These are the published starting prices on each company's pricing page, checked on 29 October 2026. Larger teams negotiate lower EOR fees; a company hiring its first person abroad usually pays list.

Two lines in that table matter more than the headline. The EOR deposit is usually about one month of the employee's cost, held until they leave (Lano publishes one month, two in some cases, refunded within 60 days of the last invoice; Niural refunds 60 days after the contract ends). For a $5,000-a-month developer in Poland that is $6,000 or so of cash you will not see for a year or more. And contractor of record at $325 is a middle route: the person stays a contractor, but the provider vets the contract and takes on the misclassification risk. It costs half an EOR fee and none of the employer contributions.

Employer contributions: why the same salary costs very different amounts

With a contractor you pay the invoice and nothing else; they pay their own tax and social insurance. With an employee, through an EOR or your own entity, you pay the gross salary plus the employer's share of social charges, which the law sets per country. The gap between countries is large:

Worked example: one developer at $5,000 a month

Here is the monthly bill for the same $5,000 gross (or $5,000 invoice) under each route. For India we assume basic pay at 50% of gross and PF on the ceiling; for Poland 20.48% employer ZUS; for Brazil 35.8% charges on 13.33 salaries spread over 12 months. Fees are list prices. The calculation is in plain arithmetic; there is nothing hidden in it.

India's employer charges are low because the statutory PF base is capped at INR 15,000; if you match PF on the full basic, add about $280 a month and the EOR total becomes roughly $6,020. Brazil's $2,544 is $556 of 13th salary and vacation bonus averaged over the year plus $1,989 of charges on all of it, which is the same 51% on-cost that Brazilian EOR guides publish.

Do not read the contractor column as the cheaper deal for the same person. A contractor pays their own social insurance, takes no paid leave and has no notice period, so a fair contractor rate is higher than the gross salary for the same job. In Poland, B2B contractors usually ask well above the employment gross because they lose paid holiday and sick pay. If your developer would take $5,000 as an employee, expect $6,000 or more as a contractor, and the gap between the routes shrinks.

Misclassification: what the cheap route can cost later

Calling someone a contractor does not make them one. Every country looks at how the work is actually done. Poland made this sharper on 8 July 2026: the Labour Inspectorate (PIP) can now issue a decision that turns a B2B contract into employment without going to court first. Per Legal 500's summary of the law:

Put numbers on it with the example above: a Polish developer invoicing $5,000 a month for five years, then reclassified. The employer share of ZUS alone is 20.48% of $60,000 a year, $12,288, so $61,440 over five years, before the employee share, interest, the fine of up to EUR 15,000 and the lawyer. The contractor route saved $1,574 a month against an EOR in the same example, $94,440 over five years, so on paper it still wins. The difference is timing: the savings came in small pieces, the bill arrives at once, and it usually arrives when the relationship has already gone wrong, because a departing contractor's complaint is a common way an inspection starts.

On the US side the rules are simple for a contractor who lives and works abroad and is not a US person: collect a Form W-8BEN before the first payment and keep it on file. No 1099 and no US withholding is due for services performed wholly outside the US. If they come to the US and work there, even for a few weeks, that changes, and the payment can fall under 30% withholding on Form 1042-S.

Signs a contractor has become an employee

Work through these once a quarter for every long-running contractor. Two or three yes answers mean it is time to move them to an EOR or a contractor of record:

IP: make sure you own the code you paid for

This is the clause small companies get wrong most often, because they assume paying for code means owning it. Under US law, software from an independent contractor is generally not a "work made for hire": that category covers employees, and for contractors only nine listed kinds of commissioned work, and software is not one of them. Without a written assignment, the contractor can own the copyright and you hold, at best, an implied licence. Local law adds its own rules:

What the contractor agreement should say, in plain terms:

With an EOR, the employee's work belongs to the EOR's local company first. Check that the EOR's agreement with you assigns it on to you, and that the employment contract it signs with your developer has a local-law IP clause. The big providers do this by default; ask to see the clause rather than assuming.

Moving the money

For a contractor you pay yourself, the transfer cost is small if you avoid a bank wire. Wise's fee for US dollars to Indian rupees, as captured on 11 June 2026, was:

On a platform, the employer pays the monthly fee and the contractor pays to withdraw. Withdrawal costs depend on the method: a local bank transfer in the same currency is often free, SWIFT wires carry a flat fee plus whatever the receiving bank takes, and conversion spreads apply when the platform converts. Ask your contractor which method they use; a 1% to 2% loss on every payment is a quiet pay cut, and it is one reason contractors ask for more.

When to move to the next route

Contractor to EOR (or contractor of record)

Move when the checklist above starts getting yes answers, when you hire someone full time for an open-ended role, or when the person wants paid leave, health cover and a contract they can show a bank for a mortgage. In Poland, use the 12-month transition from July 2026 to fix any B2B contract that looks like a job. If the work is project-based and they have other clients, contractor of record at $325 a month buys the vetting without the employer charges.

EOR to your own entity

An EOR fee of $599 a month is $7,188 a year per person. A small Indian subsidiary was quoted at $1,700 to $2,100 to set up and roughly INR 3 to 8 lakh ($4,000 to $10,000) a year in accounting, audit and filings before payroll. Using the midpoints:

On fees alone, the entity pays for itself at two people. In practice add a payroll provider, transfer pricing between the parent and the subsidiary, local corporate tax on its margin and your own time, and the honest break-even for a small company is three to five people in one country who you expect to keep for several years. Below that, the EOR's fee buys you the right to stop: if the one person leaves, an EOR ends; a subsidiary keeps costing money until you close it, which takes months.

A decision in five questions

If you are hiring abroad because you need something built and do not have the team for it yet, a clear brief matters more than the contract route. Our article on how to brief a contract developer covers the one-page spec, and if you are weighing a junior hire instead, see what entry-level hiring data shows in 2026.

Sources

Deel pricing, Remote pricing and Oyster pricing (checked 29 October 2026); Lano: invoice categories and deposits, Niural: security deposits (EOR deposit terms); PwC Worldwide Tax Summaries: India, other taxes, Poland and Brazil; Mynd: EPF contribution rates and wage ceilings (EDLI, admin, ESI); Global Expansion: Brazil employer costs 2026 (RAT, Sistema S, 13th salary, worked total); Legal 500: reclassification of B2B into employment in Poland (PIP law from 8 July 2026); Freenance: B2B vs employment in Poland 2026; Taxes for Expats: Form 1099 for foreign contractors (W-8BEN, services performed abroad, Form 1042-S); Mondaq: can software be created as a work for hire? and US Copyright Office Circular 9 (17 U.S.C. 101); India Copyright Act 1957, section 19 and Pine Labs v. Gemalto (Delhi High Court) on its five-year default; Remitly vs Wise for India (Wise fees captured 11 June 2026); Business Setup India: subsidiary costs and CalcGuru: annual cost of a foreign subsidiary in India. The worked example and the break-even table are our own calculations from these figures. This is a cost guide, not legal advice; have a local lawyer read the contract before you sign it.