What is an employer of record? How EOR hiring works

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An employer of record (EOR) is a company that legally employs a worker on your behalf in a country where you have no entity. You choose the person and direct their work; the employer of record signs the local employment contract, runs payroll, withholds taxes, pays social contributions and provides legally required benefits. This guide explains how the EOR model works, what it costs, its limits and risks, and how to decide whether it is right for your next international hire.

The employer of record model in one paragraph

Normally, to employ someone in another country you must set up a local company, register with the tax and social security authorities, and run local payroll. An employer of record removes that step. The EOR already has a legal entity (or a partner entity) in the country, so it becomes the employee's legal employer. You sign a service agreement with the EOR; the EOR signs an employment contract with the worker. Day to day, the worker is fully part of your team, but the legal and administrative duties of employment sit with the EOR. You pay the EOR each month for the salary, employer costs and its fee.

Who does what

You, the client company, handle recruitment, interviews and the choice of who to hire, set the role, salary and objectives, manage day-to-day work and performance, provide equipment and tools, and decide on raises, promotions and when someone leaves.

The employer of record issues a locally compliant employment contract, registers the employee with tax and social security bodies, runs payroll and pays the salary in local currency, withholds and pays income tax and social contributions, provides statutory benefits and often optional extras such as health insurance, manages leave records and payslips, and handles the legal side of terminations in line with local law.

Clear division matters. The EOR handles compliance, but you still treat the person well and manage them fairly; local law protects them regardless of who signs the contract.

Employer of record vs PEO

The terms are often confused. A professional employer organisation (PEO), common in the United States, is a co-employment arrangement: your company already has a legal entity, and the PEO shares employer responsibilities to provide payroll, benefits and HR at scale. An employer of record is the sole legal employer, used where you have no entity at all.

Some providers use "global PEO" to mean EOR, which adds to the confusion. When comparing services, ask directly: "Who is the legal employer on the contract, and do we need our own entity in this country?"

Employer of record vs contractors

Many companies start by hiring people abroad as independent contractors. It is simpler and cheaper, but only appropriate when the person genuinely runs their own business: they control how and when they work, use their own tools, can work for others and bear some business risk. If a "contractor" works full-time for you, under your direction, as part of your team, many countries would treat them as an employee, with back taxes, penalties and claims at risk.

An EOR lets you hire such people properly as employees without setting up an entity. Our guide to employer of record vs contractor compares the two in detail, and contractor misclassification explains the tests authorities use.

Employer of record vs your own entity

Setting up a subsidiary gives you full control and can be cheaper per employee once you have a larger team in one country. It also means company registration, a local bank account, registered address, local directors in some countries, accounting, annual filings, payroll and employment law expertise. That takes time and fixed cost, and is hard to unwind if plans change.

An EOR is usually better for the first few hires in a country, for testing a market, or when hiring single specialists in many different countries. Many companies use an EOR first and set up an entity once the local team grows. Most EOR providers can help transfer employees to your new entity when the time comes.

What an employer of record handles in practice

• Contracts: employment agreements that meet local law, often in the local language, including notice periods, probation and leave.
• Onboarding: collecting documents, tax and social security registration, and right-to-work checks.
• Payroll: calculating gross-to-net pay, payslips, payments in local currency, and year-end tax forms.
• Taxes and contributions: withholding and paying income tax, pension, health and other statutory contributions.
• Benefits: statutory benefits, and optional health insurance, pensions or allowances.
• Leave: tracking holiday, sick leave and parental leave according to local rules.
• Expenses: reimbursing approved expenses through payroll.
• Offboarding: handling resignations and terminations, final pay and statutory payments.

What an employer of record does not do

An EOR does not recruit for you, though some offer recruiting add-ons or partnerships. It does not manage the person's work, set their goals or handle performance conversations. It does not make all risks disappear: if you treat someone unfairly or end employment without a valid reason under local law, there may still be costs, and the EOR will usually pass them through to you under the service agreement.

An EOR also does not automatically solve permanent establishment risk, the chance that having staff in a country creates a taxable presence for your company there. This depends on what the employee does, for example whether they sign contracts on your behalf. Ask your adviser if an employee will have a senior sales or management role in a new country.

How hiring through an EOR works, step by step

1. Choose the candidate and agree salary and start date informally.
2. Get a cost estimate from the EOR showing salary, employer contributions and fees.
3. Submit the hire on the EOR's platform: job title, duties, salary, benefits and start date.
4. The EOR drafts the contract and checks it against local law. Review it carefully.
5. The employee signs and completes onboarding: identity documents, bank details, tax forms.
6. You pay a deposit, often equal to one or more months of costs, depending on the provider and country.
7. Payroll runs monthly; you receive an invoice and the EOR pays the employee.

Time to onboard varies by country and provider, from a few days to several weeks. Ask for the expected timeline before promising a start date.

What an employer of record costs

EOR pricing has three parts: the employee's salary, the employer costs required by local law (social contributions, statutory benefits, sometimes a thirteenth-month salary), and the EOR fee. Fees are usually a flat monthly amount per employee, though some providers charge a percentage of salary. There may also be deposits, onboarding fees, benefits costs and currency conversion margins.

Current entry prices for the main providers: 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). For a full breakdown, see how much an employer of record costs, and estimate the total for a specific country and salary with our EOR cost calculator.

The main employer of record providers

These are the providers we track; the table shows current entry prices from the vendors' own pages.

Prices from vendor websites, checked 2026-10-12; they update automatically.

Compare them in the employer of record ranking and on the best EOR for startups. Head-to-head: Deel vs Remote, Deel vs Oyster, Oyster vs Remote and Deel vs Multiplier.

Own entities vs partner networks

Some EOR providers own legal entities in most countries they serve; others rely on local partners in some countries. Partner models are not necessarily worse, but they add a link in the chain: payroll and employment questions may pass through a third party, and service quality can vary.

Ask each provider, for the specific country you need: do you own the entity here or use a partner? Who will the employee contact with questions? How quickly are payroll errors fixed? Reviews from companies hiring in the same country are more useful than general ratings.

Benefits through an EOR

Statutory benefits are included by law: for example, social security, pension contributions, paid leave and, in some countries, mandatory health insurance or a thirteenth-month salary. Beyond that, many employees expect supplementary benefits to make an offer competitive, such as private health insurance, extra leave, a home office allowance, learning budgets or equipment.

EORs offer benefit packages at an extra cost per employee, and some let you add your own allowances through payroll. Check what local candidates consider standard; a salary that looks generous in your home currency may still be uncompetitive if it lacks the health cover local employers provide.

Equipment, expenses and stock options

You can send equipment directly, use the EOR's equipment service if offered, or give an allowance through payroll. Allowances may be taxable depending on local rules; the EOR can advise. Expenses are usually submitted on the EOR platform and reimbursed with salary.

Stock options and equity are possible with EOR employees, but the tax treatment varies widely between countries. The option plan is granted by your company, not the EOR, and local securities and tax rules may apply. Get local advice before promising equity, and make sure your plan documents allow grants to people employed through a third party.

Ending employment through an EOR

Termination rules vary greatly. Some countries allow ending employment with notice for any lawful reason; others require a valid reason, a fair process, and statutory severance. Probation periods often allow easier termination, but only if correctly set in the contract.

Always involve the EOR before acting. They will advise on notice, final pay, any severance and required documents. Costs of notice and severance are usually charged to you. Budget for these in countries with strong employee protections, and never tell an employee they are dismissed before the EOR confirms the process.

Data protection and the EOR

An EOR handles personal data: identity documents, bank details, salaries, tax numbers and sometimes health information. Check the provider's security and data protection terms, where data is stored, and how they comply with laws such as the GDPR, Kenya's Data Protection Act, Nigeria's Data Protection Act and India's Digital Personal Data Protection Act. Limit who in your company can see payroll data on the platform, and use two-factor authentication on the account.

When an employer of record makes sense

• You want to hire one or a few people in a country where you have no entity.
• You are testing a new market before committing to a subsidiary.
• You need to hire quickly, within weeks rather than months.
• Your "contractors" have become full-time team members and should be employees.
• You hire specialists spread across many countries.

Our guide to hiring employees in another country covers the full set of options, and how to hire remote developers covers finding the right people.

When it does not

• You already have, or soon will have, many employees in one country; an entity may be cheaper.
• The person genuinely runs their own business and works for several clients; contractor arrangements may be appropriate. See contractor payroll platforms.
• The role creates a strong permanent establishment risk that an entity would handle better.
• The country is not served well by any EOR provider.

Country-specific guides

Rules on contracts, payroll and contributions differ by country. Our country guides explain local requirements: hiring in Kenya, Nigeria, South Africa, India and the Philippines. For take-home pay estimates, see take-home pay by country.

How to choose an employer of record

1. Check country coverage for where you are hiring now and next.
2. Compare the total monthly cost, not just the fee, using a real salary.
3. Ask about entity ownership in your countries.
4. Review the contract template and the service agreement, including liability and termination costs.
5. Check benefits options and their prices.
6. Test support with a few questions before signing.
7. Ask about deposits, payment currencies and invoice timing.

Common mistakes

• Promising a start date before checking the provider's onboarding time.
• Comparing only the monthly fee and missing employer costs, deposits and currency margins.
• Assuming the EOR removes all termination risk.
• Offering a salary that ignores local benefit expectations.
• Keeping long-term full-time workers as contractors instead of moving them to an EOR.
• Not reading the employment contract the EOR drafts.

Questions