Employer of Record Services

An Employer of Record acts as the official employer for tax purposes when an employee works at a different company. The EOR assumes traditional employment responsibilities and liabilities by offering services such as HR and payroll, outsourcing these tasks to a single provider.

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Frequently Asked Questions

What is an Employer of Record?

An employer of record (EOR) is a third-party organization that legally employs workers on behalf of another company. The EOR takes on all official employment responsibilities, serving as a legal intermediary between the worker and the client company. These responsibilities include handling payroll, benefits, and tax compliance, managing employment contracts and worker documentation, ensuring legal compliance with local labor laws, processing employment visas and work permits for international workers, administering health insurance and other benefits, managing worker's compensation and unemployment claims, and handling HR-related issues and compliance.

Why is an Employer of Record Service Useful?

Think of an EOR as a legal intermediary that becomes the official employer while the original company (often called the client company) maintains day-to-day management of the workers. This arrangement is particularly valuable when companies want to hire employees in countries where they don't have a legal entity, quickly expand into new markets without establishing a local presence, reduce administrative burden and compliance risks, employ remote workers across multiple jurisdictions, or test new markets before making significant investments.

What is the Difference between Employer of Record and PEO?

While both employer of record (EOR) and Professional Employer Organization (PEO) provide employment-related services, they operate quite differently. The main difference lies in their legal structure and scope of operation. An employer of record becomes the legal employer of your workers, taking full responsibility for employment, including payroll, benefits, taxes, and compliance. The EOR model is particularly designed for international employment, allowing companies to hire employees in countries where they don't have a legal entity. A PEO, on the other hand, operates through a co-employment model primarily within a single country. In this arrangement, both the PEO and your company share employer responsibilities. The PEO handles administrative HR tasks, benefits administration, and payroll processing, but your company retains more legal responsibilities compared to an EOR arrangement. Key distinctions include that EORs take full legal responsibility and are ideal for international hiring, while PEOs share responsibilities and focus on domestic employment solutions.

How much does an Employer of Record Cost?

An employer of record (EOR) typically structures its pricing based on several factors. The cost usually includes a base fee plus additional charges as a percentage of the employee's salary. Standard pricing models generally range from 8% to 15% of the employee's annual salary, though this can vary significantly. The total cost depends on various factors including the employee's location, salary level, benefits requirements, and the complexity of local labor laws. Most EORs charge their fees in one of these common ways: a flat monthly fee per employee, a percentage of the employee's salary (usually 8-15%), or a combination of both. Additional fees may apply for services such as benefits administration, visa processing, or specialized HR support.

What are the Benefits of an EOR?

An employer of record (EOR) offers significant advantages for companies looking to expand their workforce globally or streamline their employment operations. The primary benefits include international hiring capabilities, risk mitigation, time and cost efficiency, and enhanced compliance management. From a global expansion perspective, EORs enable companies to hire talent in new countries without establishing their own legal entities. This means faster market entry, reduced setup costs, and the ability to test new markets with minimal risk.

How Long does it Take to Hire Through an EOR?

The hiring process through an employer of record typically takes between 1-3 weeks, depending on the country and specific circumstances. This timeline includes employee onboarding, contract preparation, registration with local authorities, and setting up payroll and benefits. Some countries may require additional documentation or have specific regulatory requirements that can extend this timeline. However, this is significantly faster than establishing your own legal entity, which can take several months or even years in some jurisdictions.

Who Manages the Employees - the EOR or the Client Company?

While the EOR is the legal employer, the client company maintains full control over day-to-day operations, work assignments, and performance management. The EOR handles all administrative and legal employment matters such as contracts, payroll, and compliance, but does not intervene in the employee's actual work, professional development, or business responsibilities. Think of it as a split responsibility: the client company manages the "what" and "how" of the work, while the EOR manages the "administrative how" of employment.

What Happens if I Want to Switch EOR Providers?

Switching EOR providers requires careful planning to ensure a smooth transition for both the company and employees. The process typically involves transferring employment contracts, updating payroll information, and re-registering employees with local authorities under the new EOR. Most EORs have established procedures for both onboarding and offboarding clients. The transition period usually takes 30-60 days and requires coordination between the old and new EOR to ensure continuous employment and benefit coverage for employees.

Is an EOR Responsible for Employee Performance?

No, the EOR is not responsible for employee performance. While the EOR is the legal employer, they are not involved in performance management, work quality, or productivity monitoring. These responsibilities remain entirely with the client company, which sets performance expectations, conducts reviews, and makes decisions about continued employment.

What are the Limitations of Using an EOR?

The main limitations of using an EOR include restricted flexibility in compensation structures, potential communication complexities, and cost considerations for large-scale hiring. EORs must operate within standardized processes and local regulations, which may limit customization options for benefits or employment terms. Some countries restrict the duration of EOR arrangements or require eventual establishment of a local entity. Additionally, having an intermediary in the employment relationship can sometimes create extra steps in communication and decision-making processes.

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Frequently Asked Questions

What is an Employer of Record?

Why is an Employer of Record Service Useful?

What is the Difference between Employer of Record and PEO?

How much does an Employer of Record Cost?

What are the Benefits of an EOR?

How Long does it Take to Hire Through an EOR?

Who Manages the Employees - the EOR or the Client Company?

What Happens if I Want to Switch EOR Providers?

Is an EOR Responsible for Employee Performance?

What are the Limitations of Using an EOR?