How Much Does an Employer of Record (EOR) Cost?

If you are expanding your team internationally, you have likely reached the “build vs. buy” crossroads. Setting up a local legal entity can be a massive undertaking, often costing between $20,000 and $150,000 in upfront legal, tax, and administrative fees. Naturally, the alternative is an Employer of Record (EOR). 

But what is the true Employer of Record cost? To build a sustainable global hiring budget, you must look beyond the “sticker price” and understand the total cost of ownership (TCO). In today’s complex regulatory environment, the most expensive EOR is often the one that quotes you the lowest monthly fee. 

Average EOR Pricing Models

EOR providers typically follow one of three primary pricing structures. Understanding these helps you choose a partner that aligns with your company’s compensation strategy.

1. Flat Fee Per Employee (Fixed Monthly Cost)

This is the most transparent model. You pay a set monthly fee (e.g., $499) for each person employed through the EOR, regardless of their seniority or salary.

Best for: High-earning roles like Software Engineers, Project Managers, or Directors.

The Advantage: Your EOR costs remain predictable even when you give employees raises or bonuses.

2. Percentage of Gross Payroll

In this model, the EOR charges a percentage, usually 10% to 15% of the employee’s total monthly compensation.

Best for: Lower-wage markets or junior-level support roles where a $500 flat fee might be 50% of the employee’s salary.

The Trap: As your talent grows and earns more, your EOR bill increases automatically, even though the administrative work remains the same.

3. Tiered or Hybrid Pricing

Some providers offer tiered service levels. A “Basic” tier might cover only payroll and taxes, while a “Premium” tier includes dedicated HR advisory, private health insurance administration, and equipment procurement.

What You Are Actually Paying Beyond the Fee?

When evaluating EOR costs, it is essential to remember that you aren’t just buying software. You are investing in compliance infrastructure. A high-quality EOR provider protects you from the following risks:

• Local Tax & Statutory Contributions

Every country has unique employer-side taxes. In India, for example, an EOR must manage Provident Fund (PF) contributions at 12%, Employee State Insurance (ESI), and Gratuity accruals. In many European nations, employer social contributions can exceed 30% of the base salary. Your EOR fee covers the expertise required to calculate and remit these accurately and on time.

• Intellectual Property (IP) Protection

Standard employment contracts are often insufficient for cross-border work. A reputable EOR ensures that contracts are “bulletproof” under local labor laws, ensuring that all IP created by the employee is legally owned by your organization.

• HR Advisory & Risk Mitigation

What happens if you need to terminate an employee in France or Brazil? Without a partner who understands local “just cause” requirements, you could face litigation and settlements costing tens of thousands of dollars. Part of your EOR cost is essentially a compliance insurance policy.

The Hidden Fees That Inflate Your Budget.

Many low-cost EOR providers use a “bait and switch” approach. They offer a low headline rate but add several line items to your monthly invoice. Watch out for these:

• Setup & Onboarding Fees: A one-time charge (often $500–$1,000) to register the employee and draft contracts.
• Foreign Exchange (FX) Markups: Some providers offer “low fees” but charge a 2-4% markup on currency conversion when you fund payroll.
• Termination Fees: Unexpected charges for processing final pay, severance, or legal consultations during offboarding.
• Benefit Admin Fees: Charging extra to manage private medical insurance or laptop stipends.

Pro Tip: Always ask for a “Gross-to-Net” (G2N) simulation for a specific country before signing. This shows you exactly what the final invoice will look like, including employer taxes and every single fee.

How EOR Costs Vary by Region

Geography is the biggest driver of cost. Countries with complex labor laws (like Italy, Germany, or Brazil) often command higher service fees because the administrative burden on the EOR is significantly higher.