Just to add to Professor Greyrose's reply. It's also limited by how many people are in it with you. If you are in a dungeon/instance with 3 people, you cannot hire more than 1 henchmen even if all your friends aren't in the battle circle. I have not tried this in a long time, so it may have been changed, but in my experience henchmen count towards filling the maximum players of 4 for instances.
