What Is an Employer of Record (EOR)?

Hiring internationally usually means legal complexity, tax headaches, and months of setup. 

An Employer of Record makes it simpler. 

An Employer of Record (EOR) is a third-party company that legally employs people on your behalf. 

Your employees continue to perform their normal work duties on behalf of your company and you’re still responsible for the day-to-day management of your business. An Employer of Record takes care of payroll, tax, compliance with local employment laws, and everything else that comes with being the legal employer. 

Using an Employer of Record enables companies to hire talent globally without establishing legal entities in each country. It’s often the case that an Employer of Record allows companies to expand into new countries with greater ease, speed and cost-effectiveness. 

For example, say you're a US-based startup hiring your first developer in the UK. An Employer of Record steps in as the legal employer, drafting a compliant contract, enrolling them in a pension scheme, sorting out payroll and handling tax with HMRC - all without you needing to set up a UK entity.

The result? Your time is freed up to focus on running your core business and focussing on the day-to-day business activities that are going to fuel your long-term growth. 

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What is an Employer of Record? A beginner's guide for global businesses

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What services does an Employer of Record provider typically offer? 

While every provider is different, a quality Employer of Record typically delivers a full-service experience that covers the essentials of global employment for you and your business. 

Payroll management

An Employer of Record will typically run global payroll, making sure employees are paid accurately, on time, and in line with local laws. 

That includes handling currency conversion, routing payments through local banks, and issuing pay slips that meet local requirements. A good EOR keeps payroll consistent across countries while adapting to each jurisdiction.

Benefits administration

Offering a strong employee benefits package isn’t just about compliance (though that’s obviously very important). It’s also key to attracting and retaining your top talent. 

An EOR provider will typically offer mandatory and supplementary benefits, from pensions and social security, to health and life insurance.  The best EOR companies will help you tailor benefits to local employees’ expectations, without overcomplicating your HR setup. 

Local labour law compliance

Navigating employment law across borders is one of the biggest risks of global hiring. It’s also one of the most time-consuming elements of planning a global expansion. 

The good news?  Using an Employer of Record can help you stay compliant AND saves you time you’d otherwise spend making sense of employment laws yourself. 

Here are a few examples of where an EOR can help. 

• Employment law: making sure you’re compliant with working hours, minimum wage, notice periods, and protection laws. 
• Statutory benefits: offering the legal minimums parental leave, sick leave, social contributions
• Dismissals: an EOR will build proper process for terminations, severance and disputes in key hiring markets. 
• Workplace standards: an EOR will help you stay aligned with local health and safety regulations
• Discrimination law: working with an EOR ensures you observe hiring and management practices that meet local requirements. 

Without this support, the risks of global employment can get very real very fast. In Brazil, employers must provide 120 days of maternity leave. In Italy, non-compliance with labour laws can lead to fines of up to €50,000, or even criminal charges! 

Tax filing and reporting

EORs take full responsibility for employment-related tax - from income tax withholding and social/national insurance contributions to year-end filings. They ensure calculations are accurate, filings are on time, and records are audit-ready.

Data protection and privacy

Different countries have different rules around employee data. EORs help you meet those standards, including:

• GDPR and other regional privacy laws
• Secure data storage and handling
• Privacy-compliant HR processes
• Risk mitigation for data breaches

This ensures your international HR setup won’t expose you to legal or reputational risk. 

Onboarding and offboarding

EORs manage the full employee lifecycle, from hire to exit, in line with local laws. 

During onboarding, it’s typical for an EOR to handle everything from employment contracts and payroll setup to benefits enrolment and documentation collection.

The contracts they draft aren’t boilerplate. Each one is tailored to local legal requirements and includes the necessary clauses around:

• Mandatory local provisions
• Termination conditions and notice periods
• Working hours, overtime and leave entitlements
• Intellectual property and confidentiality
• Non-compete clauses that meet local enforceability standards

These contracts protect both your business and your employees — reducing the risk of disputes or non-compliance.

When it’s time to offboard, EORs manage final payments, benefits termination, and required documentation - all in accordance with local law.

Immigration and visa support

If you’re hiring talent across borders, EORs help manage visa requirements and work permits. That includes advising on eligibility, preparing applications, and coordinating with local authorities.

HR support and consultation

Many EORs go beyond admin. They offer advice on employee relations, performance management, and local HR policies, helping you build a consistent but locally aware employee experience.

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When should businesses use an Employer of Record?

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The benefits of using an Employer of Record

An Employer of Record doesn’t just handle global employment admin - it unlocks strategic advantages that help you grow faster, hire smarter, and expand globally without unnecessary risk and complexity. 

Access a wider range of global talent pools

When your local talent pool can’t deliver the skills you need, an EOR gives you the flexibility to look overseas to hire the right person. 

Specifically, working with an Employer of Record gives you the ability to: 

• Access niche or specialist skills that are hard to find in your home country or your traditional hiring markets. 
• Hiring in new regions and countries without needing a local entity
• Onboarding the experienced team members you need fast, with no relocation delays
• Eliminating barriers to global expansion by giving you ready access to global employment expertise, as opposed to having to train your own staff on key legal & compliance issues. 

Build a truly global, diverse team

Working with an Employer of Record gives you access to a more diverse workforce  across cultures, countries and time zones. The benefits for your company are numerous, but they include: 

• Improving problem-solving and innovation through diverse perspectives
• Enabling you to build teams that understand your international customer base
• Maintaining around-the-clock productivity with distributed teams
• Develop more inclusive products by involving varied voices early

Avoid the hidden costs of global expansion

Setting up a legal entity in a new country isn’t just expensive: it’s a long-term commitment. 

An Employer of Record helps you avoid sunk costs and stay flexible as you grow. Instead of hiring lawyers, leasing office space, and building local infrastructure, you can. 

• Hire skilled talent in new markets without needing a local legal entity
• Start operations in weeks, not months with no upfront setup costs
• Avoid fixed costs that limit your ability to scale or pivot quickly
• Offer strong local salaries while saving on high-cost market rates
• Test new markets with minimal financial risk - and exit just as easily

Enter new markets without long-term risk

Hiring through an EOR gives you a fast, low-risk way to explore new regions and markets that would normally be out of reach. 

Specifically, an Employer of Record increases your freedom and flexibility to: 

• Build a local presence by hiring talent on the ground — no entity setup required
• Learn how the market works, from people who actually live and work there
• Start building customer relationships through local representatives
• Validate your business model with minimal investment
• Exit easily if the opportunity isn’t right,  without the associated cost or complexity of winding down operations

This approach gives you a test-and-learn strategy for global growth, ensuring you don’t inadvertently pile time and resources into markets and expansion strategies that don’t bear fruit. 

Keep your teams focused on growth

Every hour spent researching foreign employment law or untangling multi-country payroll is an hour not spent building the business. 

With an EOR handling the admin, you and your team can stay focused on what matters:

• HR can spend less time on compliance and more time on culture and people
• Finance can prioritise planning and forecasting over payroll logistics
• Legal doesn’t have to navigate every country’s employment law from scratch
• Leadership can focus on strategy, not the mechanics of hiring overseas

An EOR doesn’t just save time. It removes the operational drag that slows down international growth. What’s not to love? 

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Local vs global EOR services: which do you need?

Not all EOR providers work the same way and the differences matter when you’re planning to scale. Some operate in a single country. 

Others work globally. And depending on the market, even the definition of “Employer of Record” can change.

Here’s what to know if your leadership team is considering different EOR vendors. 

Local EORs: country-specific support

A local EOR operates within a single jurisdiction. They understand the employment laws, tax requirements, and cultural expectations of one country — and they’re set up to employ people legally on your behalf there.

For example, if a US-based company wants to hire someone in Spain, they might work with a Spanish EOR to onboard and manage that hire locally.

This can work well if you're only hiring in one or two countries and want highly tailored, in-country expertise. But if you're growing across multiple regions, managing several local EORs can get quickly become more complex. 

Global EORs: one partner, multiple countries

Global EORs offer a centralized way to manage employees across many countries. Instead of juggling a patchwork of local providers, you work with one EOR that operates — either directly or through in-country partners — in dozens of jurisdictions.

That means:

• Faster onboarding in new countries
• One point of contact for compliance, payroll and support
• Consistent reporting and processes across your global team
• Lower admin and legal overhead as you scale

If you're expanding into multiple markets at once, or want to keep things lean, a global EOR is usually the more efficient choice.

EOR compliance differences by country

The concept of an EOR isn’t always called the same thing - and it’s not always regulated in the same way. In Germany, for instance, EORs operate under the Labour Leasing Act and are referred to as Arbeitnehmerüberlassungproviders. 

Under this framework, employment via an EOR is typically limited to 18 months.

This is why local legal context matters. A good global EOR will be aware of these variations and will be able to help you navigate them without needing to become a regional expert yourself.

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EOR vs other global hiring models: what’s best for international expansion?

There’s more than one way to build an international team. Whether you're expanding into a new market or growing your footprint in an existing one, the model you choose can have a big impact on speed, compliance, cost, and long-term flexibility.

For example, companies that already have a local entity in specific countries may also opt to use something called a Professional Employment Organisation (PEO).  Similarly, it’s common for businesses to initially use contractors to test a new hiring market before committing long-term.  So how does an Employer of Record compare with other global employment models? 

EOR vs PEO: what’s the difference and when does it matter?

At a glance, both EORs (Employers of Record) and PEOs (Professional Employer Organisations) offer outsourced HR support. But the key difference is legal responsibility.

An Employer of Record becomes the legal employer, ideal for entering new markets quickly. 

A Professional Employment Organisation supports your HR operations - but only if you already have a legal entity in place.

Use an EOR when:

• You’re hiring in a country where you don’t have a legal entity
• You need to launch quickly and stay compliant from day one
• You want a low-risk way to test new markets before committing

Use a PEO when:

• You already operate in a country and want to outsource HR
• You’re looking for help managing local benefits and compliance
• You have an internal structure, but want external support

In short: EORs are built for market entry. PEOs are better for managing HR operations in a country where you already have a presence. 

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EOR vs PEO: the key differeces explained

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Employer of Record vs using a contractor 

Need a developer in Brazil to support a short-term build? Or a marketing consultant in Germany to localise your first campaign? With contractors, you can tap into that talent in days without setting up a legal entity or navigating employment law.

When expanding into new markets, many companies start by hiring contractors - and for good reason.

• They’re faster: contractors can be onboarded fast, often without legal red tape
• They’re cheaper: by employing contractors, you avoid payroll, benefits, and long-term employment costs
• They’re more flexible: contractors let you scale teams up or down as you get to grips with a new market. 
• They offer valuable expertise: contractors offer specialised skills for short-term projects

In the early stages of expansion, these advantages make contractors an attractive option,  especially for startups or teams testing product-market fit. 

But as your business matures in that market, the contractor model starts to show its limits. 

You have less control over how work is delivered. Contractors may be juggling multiple clients. You can’t build culture or loyalty the same way. And over time, the legal risks - especially around misclassification - begin to grow.

When to make the switch to an EOR

Once your business gains traction, an EOR offers a more stable, compliant solution. You can employ people full-time, offer benefits, build a more cohesive team and retain talent, all without setting up a legal entity.

You keep the flexibility, but you gain the foundations for something more stable. And that’s what global growth ultimately needs.

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Employer of Record vs professional services 

You might already work with external partners - legal counsel, recruiters, or compliance consultants - to support your international hiring. But while these services can help at specific stages, they’re not designed to handle employment end-to-end.

That’s where an Employer of Record fills the gap.

An EOR combines legal compliance, payroll, HR, and benefits into one solution — acting as the legal employer for your overseas team. Below, we look at how EORs compare to common professional service models, and where they may replace or complement existing support.

EOR vs external legal counsel

When companies first consider hiring abroad, their instinct is often to turn to legal counsel. 

And in some cases, especially for one-off, high-stakes decisions, that makes sense. But if you’re planning to build a team in another country, relying solely on external lawyers can be slow, expensive, and difficult to scale.

Law firms can advise you on how to stay compliant. But they won’t actually employ anyone for you. They won’t run payroll. They won’t file tax reports or administer benefits. And they certainly won’t manage onboarding or offboarding.

That’s the difference with an Employer of Record.

While it’s important to stress that an Employer of Record can’t give legal advice, they are in a position to help you navigate & make sense of local employment law - often at much lower cost.

Here are some of the ways that an Employer of Record is better placed to help you avoid some of the technicalities and complications that can befall businesses in new global markets. 

They save you valuable time

There’s no need for lengthy consultations with law firms. After all, EORs already operate in the jurisdiction, so often many of the legal landmines will be taken care of on your behalf.  We’ve already covered some of the examples here: payroll, contracts, tax, benefits and termination support. 

EORs are lower cost 

Avoid hours of billable legal time and retainers. Because you only pay one fixed fee for an EOR’s services, legal support & local employment expertise is already rolled up into the package. 

Scalable model 

Under ordinary circumstances, if you scale a business into a new country, you’d have to consult with legal counsel in every new country where you established a presence. 

An EOR helps you avoid this legal minefield because they’re automatically compliant in every market where they have coverage. 

EOR vs recruiters 

An EOR doesn’t replace a recruiter, it picks up where the recruiter leaves off, handling everything after the offer is accepted. 

Recruiters are invaluable when you need help sourcing the right candidate, especially in unfamiliar employment markets. But once you’ve found the right person, you still need a legal way to employ them. That’s where recruiters stop and where the Employer of Record’s work begins. 

Here’s where the EOR becomes the legal employer, drafting the compliant contract, running payroll, administering benefits, and managing tax and HR obligations. 

Here’s why pairing a recruiter with an EOR often makes more sense than relying on a recruiter alone:

• A recruiter will typically help you find talent, while an EOR helps you employ them.
• End-to-end compliance: from signed offer to first payslip, everything’s done by the book and you’ve got expert support helping you stay compliant. 
• Speed to hire: you combine the knowledge of a recruiter with the speed and simplicity of an EOR, letting you hire without costly delays. 
• A better employee experience: working with both a recruiter and an EOR means you get professional onboarding and benefits that match local norms, increasing the likelihood of satisfied employees. 

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How to choose the right Employer of Record

Choosing an EOR isn’t about checking off a feature list. It’s about finding a partner you can trust to keep your business compliant, flexible, and competitive, not just for your next hire, but for your next market.

Here’s what to look for and why it matters.

Choose an EOR that’s compliant across all hiring markets

Employer of Record isn’t a legally standardised term. In some countries, it’s tightly regulated — or operates under a different name entirely.

Germany, for example, treats EOR services as labour leasing under the Arbeitnehmerüberlassung Act, which limits EOR employment to 18 months. If your provider applies the same model across every country - regardless of local law - you’re not paying for simplicity. You’re paying for exposure to potential fines and reputational damage. 

A credible EOR will:

• Tailor employment structures to fit local regulation
• Flag where EOR isn’t legally viable and recommend alternatives like PEO or direct hire support
• Advise on country-specific restrictions, timelines, and compliance limits
• Make clear where they operate directly vs through local partners — and why that matters

If your EOR can’t explain how their model holds up in Germany, China, or Brazil, they’re not ready to support your expansion.

Look for a true global expansion partner, not just a software platform

Some EOR providers focus on the tech. Slick dashboards. Self-service onboarding. But when it comes to real-world hiring with cultural nuance, legal complexity, and employee expectations software only takes you so far.

The right EOR gives you more than a login. They give you access to in-country experts who know how things work on the ground.

That means:

• HR and legal specialists who understand local employment law
• Support for navigating misclassification risks and employment transitions
• Guidance on benefits, workplace norms, and talent expectations
• Help sourcing locally competitive benefits that actually attract candidates

It’s not about bells and whistles. It’s about your EOR knowing the terrain and being able to guide you through it. 

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The costs of using an Employer of Record

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Look for transparent, flexible pricing

Not all pricing models are created equal. Some EORs quote a low monthly rate. Then suddenly, they’ll layer on hidden fees for benefits, offboarding, or early termination.

Look for a pricing structure that:

• Is clear about what’s included (and what isn’t)
• Scales as you grow without punishing complexity
• Flags supplementary costs upfront, especially in regulated markets
• Doesn’t bury exit fees in fine print

You’re not just buying a service, you’re entering a long-term relationship. The financial terms should reflect that.

Supporting you at every stage of your business’s growth 

Some EORs are great for getting your first international employee in place. But can they support you when things get more complex?

A future-ready EOR will help you:

• Convert contractors into compliant employees without disrupting operations
• Navigate the employee side of mergers and acquisitions
• Manage multi-country compliance as you prepare for investment or IPO
• Transition seamlessly from EOR to entity when you're ready

Hiring internationally doesn’t need to mean more risk, more admin, or more uncertainty. 

The right EOR gives you a compliant, scalable way to build global teams, without losing focus on growth. Choose carefully, and you’ll have more than a provider. You’ll have a partner who simplifies global employment every step of the way. 

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