"We will just hire them as a contractor."

That sentence is the most dangerous sentence a founder can say in 2026. Years ago, you could get away with paying remote talent via PayPal or Wise. You could pretend that your full-time developer in Germany was just a "consultant." No one checked. No one cared.

Those days are over.

Governments around the world are broke. They are aggressively hunting for tax revenue. They are cracking down on "false self-employment" with unprecedented speed. If you have a person working 40 hours a week for you, using your equipment, attending your meetings, but you are paying them as a contractor to avoid taxes, you are walking into a trap. The fines for misclassification can include back taxes, benefits repayment, and penalties that can bankrupt a small startup.

But you also cannot afford to set up a legal entity in every country where you find talent. It costs $20,000 and six months to set up a subsidiary in France or Brazil. You need to hire now. This leads to the Great Payroll Debate: Deel vs. Gusto.

Both are giants. Both are excellent. But they are not the same. Founders often choose the wrong one based on a quick Google search and end up in a mess of migration data six months later. Or worse, they choose the one that doesn't legally cover them in the country they are hiring in.

There is a clear winner depending on your specific business model. If you choose wrong, you are either overpaying by thousands of dollars in fees, or you are exposing yourself to a lawsuit. The decision comes down to one simple question. Where do your people sleep?

The All-American Team (Winner: Gusto)

If 100% of your staff is in the United States, or if you only have one or two international contractors who are truly freelance and not full-time, Gusto is the winner.

The User Experience on Gusto was built for the US market. The interface is friendly, warm, and incredibly easy for employees to understand. Gusto’s integration with US health insurance, 401(k), and state tax filings is superior. It handles the nightmare of US state-by-state compliance better than anyone.

For a purely domestic team, Gusto is generally more cost-effective and offers better "quality of life" features for the staff. If you are a US company hiring US talent, do not overcomplicate it.

The Global Hybrid (Winner: Deel)

However, if you have even one full-time employee outside of the US, or if you plan to hire aggressively in LatAm, Europe, or Asia, Deel is the mandatory choice.

The Employer of Record (EOR) is the killer feature. Deel has entities in 100+ countries. They can hire the person for you. Legally, the person works for Deel. Practically, they work for you. This handles all local taxes, benefits, and compliance instantly. Gusto cannot do this at the same scale or speed.

Deel also offers the Deel Shield which provides a misclassification guarantee. If the government sues you claiming your contractor is an employee, Deel covers the legal costs and liabilities if you use Deel Shield. That peace of mind is worth the subscription alone.

The Hybrid Trap

Can you use both? Yes, but be careful. Some companies keep their US HQ on Gusto and use Deel strictly for international folks. This works for a while, but it creates two sources of truth. Your finance team will hate you.

Our recommendation for 2026 is simple. If you are going global, move everything to Deel. Deel has improved their US payroll product significantly. Having one dashboard for your US team and your Brazil team simplifies your accounting and HR reporting.