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What is an Employer of Record (EOR)?
What is an Employer of Record (EOR)?
Updated over a week ago

An Employer of Record (EOR) is an organization that acts as the legal employer for clients who want to hire employees in a country where they don’t have an entity or the expertise to hire compliantly. The EOR serves as an intermediary and takes on all legal obligations related to employment, such as contracts, compensation, benefits, and taxes. This arrangement enables clients to hire from various countries while complying with local employment laws. The client company maintains control over daily operations.

Employer of Record (EOR) allows companies to hire employees abroad without establishing a local entity, which can be expensive and time-consuming. By partnering with an EOR, companies can save money and overcome regulatory hurdles associated with international employment.

An EOR is responsible for the following:

  • Ensuring compliance with payroll and tax regulations

  • Collecting and filing tax documentation under local tax laws

  • Providing employee benefits and pension plans (if eligible)

  • Managing visas, immigration, and work permits (if eligible)

  • Creating locally compliant employment contracts

  • Advising on required notice periods and termination regulations

Entity and Payroll

Expanding to a new country often requires setting up a local business entity to pay employees, which can entail legal requirements. In certain countries, establishing an entity can demand significant capital to be invested in a local bank account for renting a physical office. The process of setting up an entity is often slow and complicated. Additionally, managing payroll locally is typically mandatory to comply with social security contributions and taxes. This can be challenging for managing global payroll, particularly when adding more countries. However, partnering with an EOR can eliminate this need, reducing tax and labor compliance risks.

Compliance and Employment Contracts

Countries have different employment contract regulations considering local laws, statutory requirements, and country-specific norms. An EOR stays abreast of all local changes to these regulations and regularly informs the client organization of any changes. This saves time, administrative work, and the risk of non-compliance.

Cultural Considerations

Adapting to new cultures is one of the biggest challenges when expanding globally. A lack of cultural awareness or language skills can lead to misunderstandings and hinder expansion efforts. Understanding a new culture and country can take years, but an Employer of Record (EOR) can help companies create global and multilingual communication strategies for their international presence.

Why Choose an EOR?

Outsourcing employment services to an Employer of Record (EOR) offers many benefits, including:

  • Saving time and money on hiring international employees

  • Reducing compliance risks associated with hiring in foreign countries and avoiding penalties for non-compliance

  • Increasing access to the best candidates from the global talent pool

  • Reducing repetitive, labor-intensive manual tasks for the HR department

  • Enhancing employee data security by working with a reliable partner

  • Adapting to the future of work and hiring trends

You can find more details about EOR on our Employer of Record Terms of Service.

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