Working with an Employer of Record (EOR) can help you grow your business quickly and compliantly. It allows you to hire the very best people globally while saving time and money. But there’s a cost associated with using a service like this.
Every EOR service provider has different pricing structures and price points. Some are more budget-friendly, while others offer a more premium service. So it’s difficult to say exactly how much you’ll pay for an EOR. However, there are some common EOR fees and costs you can expect to pay. Let us break them down for you.
A Breakdown of Expected Fees & Costs
Here are some of the most common EOR fees and costs you might have to pay:
EOR Setup Fee
Many EOR providers charge a one-off setup fee for new employees. This covers the cost of setting up the contract, onboarding the employee, and enrolling them onto payroll. The actual cost of this setup fee will depend on your chosen provider.
To protect their business, EOR providers usually hold a deposit for each employee. This could be a lump sum or a percentage of the employee’s salary. The deposit is withheld for the duration of an employee’s employment and is kept aside in case your company becomes unable to pay the employee’s salary for whatever reason (i.e., in the case of insolvency). If it’s not needed, you’ll receive the deposit back upon termination of the employment contract.
Employee’s Salary & Local Employer Costs
While the EOR is responsible for processing payroll, your business is still liable to pay the EOR to cover the costs of the employee’s salary and any necessary employer costs (otherwise known as “contributions”).
Every jurisdiction has its own requirements when it comes to employer contributions, so what you pay in one country will differ from the next. These costs typically go towards local social programs and mandatory employee benefits, like retirement funds.
You can use our OmniCalculator tool to discover what employer costs you can expect to pay based on the employee’s country and salary.
Supplementary Employee Benefits
Each country has minimum requirements for employee benefits. But if you want to stay competitive and meet expectations, you should consider offering supplementary benefits, too, such as health insurance or a higher pension contribution. If these benefits are managed by your EOR, they will invoice you for the costs. Additionally, you may need to pay a benefits management fee.
Ongoing EOR Service Fee
The service fee is one of the most common costs associated with using an EOR. This is additional to setup fees and typically recurs on a monthly, per-employee basis. Each EOR provider approaches the service fee differently; some have a fixed fee for all employees, no matter their salary or where they’re based, while other providers have varying fees. EOR service fees can range from a couple of hundred dollars per month to over a thousand, depending on your chosen provider.
For compliance reasons, employees typically need to be paid in the currency of their jurisdiction. However, many EOR providers allow you to pay invoices in the currency of your choosing. As a result, you may need to pay a fee to cover the currency exchange.
It’s worth noting that how you pay these costs differs from one EOR to the next. Some providers consolidate fees into a single monthly invoice, while others don’t. Depending on the EOR and fee type, you may be charged in advance or in arrears.
Consider the Total Cost of Your EOR
While every EOR has a different price point, it’s important to think about the total cost to your business. And that’s not always as simple as a number on the invoice. Total cost doesn’t just include the actual fees; it also includes things like time savings, flexibility, and accuracy.
Consider the following questions when evaluating your potential EOR providers:
- How much time and care does the EOR spend on ensuring you and your team members receive the best possible experience?
- Are there any hidden fees or unexpected costs?
- Does the EOR rely on technology so much that it lacks that crucial human element to handle complex and sensitive situations?
These are all harder to put a price tag on, but they’re equally as important as the overt price of the EOR service. A top-quality user and employee experience will lead to better productivity, enhanced engagement levels, and higher retention. These all impact your bottom line in the long run.
Ultimately, cost is just one deciding factor you can use to choose the right EOR provider for your business. Here are four other important qualities you should consider too.