Employer of Record (EOR)

Employer of Record (EOR)

An employer of record (EOR) is a third-party organisation that becomes the legal employer of a company’s workers in a country where that company has no registered entity. The EOR holds the employment contract and carries the statutory obligations payroll, tax withholding, benefits and employment-law compliance while the client company directs the employee’s day-to-day work.

What does an employer of record do?

An EOR assumes the legal employer’s duties in the hiring country:

• Issues a locally compliant employment contract
• Runs payroll in local currency and withholds income tax and social contributions
• Administers statutory benefits, leave and pension obligations
• Maintains statutory employment records and filings
• Carries the employment and misclassification risk as the legal employer

How does an employer of record work?

The client selects the candidate and agrees the salary and terms. The EOR issues the employment contract in the hiring country and onboards the employee onto its local payroll. From then on the EOR pays the employee, withholds and remits tax and social contributions, and invoices the client for the employment cost plus a fee. The employee reports to the client throughout.

Who uses an employer of record?

Typical users are companies hiring their first employee in a new country, companies testing a market before incorporating, companies running distributed teams across multiple jurisdictions, and companies that have inherited employees somewhere they hold no entity — after an acquisition, for example.

How is an employer of record different from a PEO or a staffing agency?

An EOR is not the same as either. A PEO co-employs staff alongside a client that already holds a legal entity in that country; an EOR is the sole legal employer and removes the entity requirement altogether. A staffing agency sources candidates; an EOR employs people the client has already selected.

Full breakdown: EOR vs PEO vs entity setup

Can you hire contractors through an employer of record?

No. An EOR employs people on employment contracts. Engaging independent contractors compliantly is a separate arrangement — see contractor of record.

Related terms

Foreign subsidiary · Contractor of record · PEO

Looking for a provider? See TopSource’s employer of record services across 164 countries.