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 handles all employment responsibilities including payroll, taxes, benefits administration, and compliance with local labor laws.

How Does an EOR Work?

When you use an EOR, your company maintains day-to-day management of employees while the EOR becomes the legal employer. This arrangement allows companies to hire talent in countries where they don't have a legal entity.

The process typically works like this:

1. You identify talent in a target country
2. The EOR creates an employment contract compliant with local laws
3. The EOR handles onboarding including tax registration and benefits enrollment
4. You manage the employee's work and performance
5. The EOR processes payroll and handles all compliance

When Should You Use an EOR?

An EOR makes sense in several scenarios:

• Testing new markets before committing to entity setup
• Hiring remote talent in countries where you have no presence
• Rapid scaling when you need to onboard quickly
• Compliance concerns in complex regulatory environments
• Cost optimization when entity setup isn't justified

EOR vs Setting Up a Local Entity

Setting up a foreign subsidiary typically costs $20,000-50,000 and takes 3-6 months. An EOR lets you start hiring within days for a per-employee fee of $199-699/month.

| Factor | EOR | Local Entity | |--------|-----|--------------| | Setup time | Days | 3-6 months | | Setup cost | $0 | $20,000-50,000 | | Monthly cost | $199-699/employee | Varies | | Minimum headcount | 1 | Usually 5+ | | Compliance risk | EOR handles | Your responsibility |

Key Benefits of Using an EOR

Speed to hire: Onboard employees in days, not months Compliance assurance: The EOR assumes liability for employment law compliance Cost efficiency: No entity setup or maintenance costs Flexibility: Scale up or down without long-term commitments Global reach: Access talent in 150+ countries through major providers