Employer of record cost: fees, employer taxes and hidden extras

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Employer of record cost is often quoted as a single monthly fee, but the real cost of employing someone through an EOR is the salary plus the employer contributions required by local law plus the EOR fee, plus deposits, benefits and currency charges. In some countries employer costs are small; in others they add a large share on top of salary. This guide explains every part of the bill, how pricing models differ, and how to estimate the true monthly and annual cost before you make an offer.

The three parts of the bill

Every EOR invoice combines three things:

1. Gross salary: what you agreed to pay the employee before deductions.
2. Employer costs: the contributions and benefits that local law requires the employer to pay on top of salary, such as social security, pension, health insurance, training levies or a mandatory extra month's salary.
3. EOR fee: the provider's charge for its service.

The employee's own income tax and contributions are deducted from the gross salary, so they do not add to your cost. Confusing the two is a common mistake: a country with high employee deductions may have modest employer costs, and vice versa.

EOR fee models

Providers price their fee in one of two ways:

• Flat monthly fee per employee, the same regardless of salary. This is the most common model among the big platforms, sometimes with different prices for annual commitments or for specific countries.
• Percentage of salary, which can work out cheaper for low salaries and much more expensive for high ones.

Current entry prices for the providers we track: Deel From USD 599 per employee per month, Remote From USD 699 per employee per month, Oyster From USD 699 per employee per month, Multiplier From USD 499 per employee per month (monthly contract). Full plan details are on our pricing pages for Deel, Remote, Oyster and Multiplier.

Employer costs differ hugely by country

Statutory employer costs are set by each country's law, so they are the same whichever EOR you use. They can range from a small percentage of salary to a large share in countries with heavy social security systems. Some countries cap contributions at a salary ceiling, so the percentage falls for higher earners; others do not.

Some examples from our verified country data:

• Kenya: employer NSSF at 6% of pensionable pay up to an upper limit, the Affordable Housing Levy at 1.5% of gross pay, and a small fixed NITA levy per employee. See hiring in Kenya.
• Nigeria: employer pension contribution of at least 10% of monthly emoluments, plus other levies depending on company size. See hiring in Nigeria.
• South Africa: employer UIF at 1% of pay up to a monthly ceiling, plus the Skills Development Levy for larger payrolls. See hiring in South Africa.
• India: employer EPF at 12% of basic wages, often calculated on a capped wage base, plus ESI for lower earners. See hiring in India.

Mandatory extras beyond contributions

Some countries require payments that are easy to miss in a simple estimate:

• A thirteenth-month salary, mandatory in the Philippines and several Latin American countries, effectively adding a month's pay each year.
• End-of-service or gratuity payments, such as the UAE's end-of-service gratuity, which builds up over time and is paid when employment ends. Our UAE gratuity calculator estimates it.
• Mandatory health insurance paid by the employer in some countries.
• Holiday bonuses or allowances required by law or collective agreements.

A good EOR quote includes these. Ask for an annual cost, not only a monthly one, so payments made once or twice a year are visible.

Deposits and prepayments

Most EOR providers ask for a security deposit when you hire, typically equal to one or more months of the employee's total cost, depending on the provider, the country and your credit profile. The deposit protects the provider if you stop paying while it remains legally responsible for paying the employee and any notice or severance.

Deposits are usually refundable when employment ends, after final costs are settled, but they tie up cash. For a startup hiring several people at once, deposits can be a significant amount. Ask whether the deposit can be reduced, replaced by a guarantee, or waived after a period of reliable payment.

Onboarding, offboarding and admin fees

Look for one-off fees in the price list or contract:

• Onboarding or setup fees per hire, especially in countries where the provider uses a partner.
• Offboarding fees when employment ends.
• Contract amendment fees for changes such as salary increases or role changes.
• Visa and immigration support, usually charged separately.
• Off-cycle payroll fees for bonuses or corrections paid outside the normal run.

Many large providers include most of these in the monthly fee, but practices differ. Ask for a written list of every possible charge.

Currency conversion costs

You usually pay the EOR in one currency, such as US dollars, euros or pounds, and the employee is paid in their local currency. The conversion rate the provider uses can include a margin above the mid-market rate. Over a year, a margin of even one or two percent adds up on a full salary.

Ask which exchange rate is used, whether there is a margin, and whether you can pay in the local currency directly to avoid it. If you already hold balances in several currencies, a multi-currency business account can help. Our guide on cutting international payment fees covers the general principles.

Benefits and allowances

Optional benefits add to the cost but are often needed to make an offer competitive. Typical add-ons:

• Private health insurance, priced per employee, sometimes with family cover.
• Supplementary pension contributions.
• Home office, internet or equipment allowances.
• Learning and development budgets.
• Extra paid leave beyond the statutory minimum (no direct cost, but affects capacity).

Check how allowances are taxed locally; some are taxable income and may increase employer contributions too.

Termination costs

When employment ends, you pay for notice, any accrued but unused leave, and statutory severance where it applies. In countries with strong protections, ending employment without a valid reason and a fair process can lead to further compensation claims. The EOR passes these costs to you.

Include a realistic allowance for termination costs when you budget, especially if a role is experimental. Probation periods, where allowed and correctly set in the contract, usually make early termination cheaper.

Worked example: how to estimate the total

Here is a method you can apply to any country, using illustrative numbers rather than real rates:

1. Start with the annual gross salary, for example 30,000 in the employee's currency.
2. Add statutory employer contributions. If they total 10% of salary in this example, that is 3,000.
3. Add mandatory extras, such as a thirteenth-month salary of 2,500 if required.
4. Add benefits, for example health insurance at 1,200 a year.
5. Add the EOR fee for twelve months.
6. Add an allowance for currency margin, for example 1% of the total converted.
7. Note the deposit separately as a cash-flow item.

The real figures depend on the country's rules and the provider's quote. Our EOR cost calculator does this with current data for supported countries.

Comparing quotes from different providers

Ask two or three providers for a quote for the same person: same country, salary, start date and benefits. Then compare line by line:

• Do employer contributions match? They should, as they are set by law. Differences suggest an error or a different salary structure.
• Are mandatory extras included and annualised?
• What is the fee, and does it change with annual commitments?
• What deposit is required?
• Which exchange rate and margin apply?
• Which one-off fees might arise?

Use the EOR ranking and comparisons such as Deel vs Remote and Multiplier vs Remote to shortlist.

EOR cost vs setting up an entity

An entity has fixed costs: incorporation, registered office, local accounting and audit, payroll software or a provider, legal advice and someone's time to manage it. These costs are roughly the same whether you employ one person or ten, so the cost per employee falls as the team grows. EOR fees, by contrast, scale with headcount.

A rough break-even point is when the total EOR fees for your team in a country exceed the annual running cost of an entity plus local payroll. For many small teams that point is several employees, but it depends on the country. Remember the non-financial side too: an entity takes months to set up and is harder to close.

EOR cost vs contractors

Contractors are cheaper on paper because there are no employer contributions, benefits or EOR fees. But the comparison is only fair if the person can genuinely be a contractor. If they work like an employee, misclassification risk can bring back taxes, contributions, penalties and claims for benefits. See contractor misclassification.

For genuine contractors, a contractor payment platform is the right tool; see the contractor payroll ranking and estimate costs with the contractor payroll cost calculator. Our guide to paying international contractors explains the options.

How to keep EOR costs down

• Commit annually if the provider discounts it and you are confident in the hire.
• Negotiate once you have several employees with one provider.
• Pay in local currency where possible to avoid conversion margins.
• Choose benefits deliberately, focusing on what local candidates value.
• Review headcount by country each year; consider an entity where teams have grown.
• Check startup programmes some providers run.

Prices change; our software price tracker shows recent changes across EOR providers.

Budgeting for the first year

When budgeting a new international hire, plan for more than salary times twelve. A simple first-year budget includes: twelve months of salary, statutory employer costs, mandatory extras, benefits, twelve months of EOR fees, equipment and shipping, a deposit (as cash flow), recruitment costs if any, and a contingency for exchange rate movement.

Share the total with whoever approves the hire, so there are no surprises. It also helps you compare the role's cost with the value it should create.

Taxes on the EOR fee itself

The EOR's service fee may be subject to VAT, GST or similar taxes depending on where your company and the provider are based. If your company is VAT-registered, you may be able to recover it. Payroll costs passed through at cost are often treated differently from the service fee. Check how invoices are structured and ask your accountant how to record them.

Common mistakes

• Confusing employee deductions with employer costs.
• Forgetting a thirteenth-month salary or end-of-service gratuity.
• Ignoring the deposit when planning cash flow.
• Missing currency margins in the comparison.
• Budgeting no allowance for termination costs.
• Comparing EOR fees with contractor costs for roles that cannot lawfully be contractors.

Payment timing and invoices

EOR providers typically invoice once a month, before or around payroll, for salary, employer costs and fees. Some require payment several days before payday so they can fund local payroll on time. Late payment can delay salaries, which damages trust with your employee quickly. Set up a reminder or direct debit, keep enough balance in the payment currency, and check each invoice against the previous month: changes in salary, bonuses, expenses, leave payouts or exchange rates should all be explainable.

Questions