Employer of Record (EOR)

An Employer of Record (EOR) is a third party firm that legally hires workers on your behalf in a country where you have no registered entity. The EOR carries payroll, tax, benefits, and local labour law compliance while you direct the daily work.

You keep the employee, the culture, and the outputs. The EOR keeps the paperwork, the local filings, and the audit trail. That split appeals to firms testing a new market, or hiring one specialist where a subsidiary would cost six figures and eight months.

An EOR is not a staffing agency, and it is not a contractor platform. The worker sits on the EOR’s payroll but reports to you, follows your goals, and uses your tools.

Deel, Remote, and Papaya Global pushed the model into the mainstream after 2020 — the year remote hiring forced Western employers to solve cross-border employment fast.

Key takeaways

• An EOR lets you hire in a new country in 1–2 weeks instead of the 6–9 months a legal entity takes.
• The EOR is the legal employer on paper; you stay the functional manager of the work.
• Global EOR market value passed $6.5 billion in 2024 and is forecast to double by 2030.
• EORs typically charge $500–$2,000 per employee per month, or 10–15% of gross salary.
• The model suits teams of 1–20 in one country; above 20, a legal entity often becomes cheaper.

How it works

An EOR signs the local employment contract, runs payroll in the right currency, withholds tax to the local authority, and enrols the worker in statutory benefits. You pay one monthly invoice — the EOR pays everyone else on the list.

The onboarding sequence is short and repeatable:

1. You pick the candidate and agree salary, start date, and role.
2. The EOR issues a locally compliant employment contract in the worker’s language.
3. The worker signs, submits identification, and is registered for tax and social security.
4. Payroll runs monthly, and the EOR remits taxes, files reports, and pays statutory contributions.
5. You get one consolidated invoice, plus time off and benefits data through a dashboard.

Behind that invoice sits a live compliance engine. The International Labour Organization maintains NATLEX, its public database of national labour and social security law, which tracks more than 180 national employment codes.

Each code sets its own rules on probation, notice periods, 13th-month pay, and termination cause. Your provider’s local counsel rewrites the contract when those rules move, so the worker’s terms never drift out of compliance.

The three usual ways to employ someone abroad compare like this:

Run the numbers on a single hire before you sign. A $60,000 salary at a 12% EOR fee costs roughly $600 a month, or $7,200 a year, before employer contributions. Incorporating rarely pays that back below 15 staff.

Examples

EOR is a mature category. Named providers now hire in 150 or more countries, and several specialise by region, by company size, or by industry. The Philippines shows how the model works as a market entry step for foreign firms.

• Deel, founded 2019, hires in 150 or more countries. In 2024 it reported crossing $500 million in annualised revenue, mostly from EOR and contractor payroll.
• Remote.com, Dutch-registered, owns local entities in 80 or more countries and is popular with US tech companies hiring across Europe and Latin America.
• Velocity Global, enterprise-focused and active since 2014, is favoured by Fortune 500 firms placing senior hires across Asia-Pacific.
• Multiplier and Papaya Global are mid-market providers that pair human resources tooling with EOR compliance, popular with Series B startups.

In the Philippines, an EOR is the standard entry mode for foreign firms hiring one to five staff before they commit to a full business process outsourcing build-out.

Providers register the worker with the Bureau of Internal Revenue, SSS, PhilHealth, and Pag-IBIG — and issue the mandatory 13th-month pay every December, which first-time foreign employers routinely forget to budget for.

Picture an Australian software firm hiring two engineers in Manila. An EOR has them signed and paid inside a fortnight. The same firm building its own subsidiary would still be chasing registration papers nine months on.

Related terms

An EOR sits inside a family of workforce models that overlap on payroll and diverge on legal risk. Knowing the neighbours helps you pick the right structure for each hire, and stops you paying for cover you already hold.

• Payroll: the transaction layer an EOR runs on your behalf every month.
• Human Resources: the internal function an EOR partly takes over for one country.
• Business Process Outsourcing: full function outsourcing where the vendor owns the work itself, not just the employment.
• Staff Leasing: a Philippine arrangement close to an EOR, with the vendor also running daily operations.
• Knowledge Process Outsourcing: a niche cousin where the vendor owns the analytical work an EOR never touches.

FAQ

Buyers ask the same five questions before signing an EOR contract. The answers below cover the split from a PEO, real cost, legality by country, the switch point to your own entity, and executive hires.

What’s the difference between an EOR and a PEO?

An EOR is the only legal employer where you have no entity. The Society for Human Resource Management (SHRM) co-employment guidance calls a professional employer organization, or PEO, a partner sharing duties with an entity you own.

How much does an EOR cost?

Most EORs charge $500–$2,000 per employee per month, or 10–15% of gross salary. On top of that you fund the salary itself and the local employer’s social contributions, which add 15–30% depending on the country — the line first-time buyers miss.

Is using an EOR legal everywhere?

EOR arrangements are legal across most OECD markets, but several countries restrict them. Germany caps continuous EOR employment at 18 months, and China and the UAE require a labour dispatch or PEO licence. Check the local rule before you make an offer.

When should you switch from an EOR to your own entity?

The rule of thumb is 15–25 employees in one country. Below that, EOR fees stay cheaper than incorporation, accounting, and payroll setup. Above it, direct employment usually wins on total cost and lets you hold local intellectual property and contracts.

Can an EOR hire senior executives?

Yes, though some jurisdictions require directors and officers to sit on the parent entity’s payroll, and equity grants often need a direct employment relationship to stay tax efficient.

Ready to compare EOR and offshoring options side by side? Explore vetted providers and cost benchmarks on the Outsource Accelerator hub.