What Is an Employer of Record? Cost, Rules, Alternatives

What is an employer of record?

An employer of record (EOR) is a company that legally employs someone on your behalf, in a country where you have no legal entity of your own. On paper the EOR is the employer. In practice you picked the person, you set the work, and you decide how long the job lasts.

They are the employer for the law. You are the employer in every way that matters day to day.

The split is the whole idea. The provider already has a registered company in that country. That lets it issue a compliant contract, run local payroll, withhold the right taxes and provide the benefits the law there requires. You get an employee who is properly employed, without registering a business abroad to do it.

The name is literal rather than clever. Someone has to be the employer of record in that country, and if it is not going to be you, it has to be somebody. That is the service.

What does an employer of record actually do?

Six things, and they are the six that get a company in trouble abroad. None of them are optional, and all of them are specific to the country the person lives in.

1. 01Issues an employment contract that is legal where the person lives, in the right language, with the right notice terms.
2. 02Runs local payroll, in local currency, on the local date.
3. 03Withholds income tax and social contributions, and files them with the right authority on time.
4. 04Provides the benefits that country makes compulsory, which is often more than a US employer expects.
5. 05Handles the end of the job properly: notice, severance, final pay and the paperwork that goes with it.
6. 06Carries the employer liability for all of the above, which is the part you are really buying.

Read that last line again, because it is the one people skim. You're not buying a payroll tool. You are buying somebody else's willingness to be the legal employer, in a jurisdiction whose employment law you have never read.

Why not just pay them as a contractor?

Plenty of companies do, and for genuinely independent contractors it is the correct answer. The risk is that you do not get to decide which one it is. The tax authority does, and it looks at how the relationship actually works rather than at what your contract calls it.

You don't get to decide whether they are a contractor. The tax authority does, from the facts.

In the United States the IRS sets out three categories it weighs. Behavioral control: "Does the company control or have the right to control what the worker does and how the worker does his or her job?" Financial control: "Are the business aspects of the worker's job controlled by the payer?" And the type of relationship: "Are there written contracts or employee type benefits (that is, pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?"

The consequence is money. The IRS is blunt about the consequence. Misclassify an employee, with "no reasonable basis for doing so", and "you may be held liable for employment taxes for that worker". The Department of Labor comes at it from the worker's side. "Misclassification occurs when an employer treats a worker who is an employee under the FLSA as an independent contractor", and misclassified people lose minimum wage and overtime protection.

This is the same judgement call that decides how you engage any remote hire, which we walk through in hiring remote employees. Other countries run their own versions of the same test, with their own penalties. The pattern is consistent: the longer and more exclusive the arrangement, the worse the contractor story looks.

How is an employer of record priced?

A flat fee per employee per month, on top of that person's salary and whatever their country obliges an employer to contribute. Published list prices run from $599 to $699, read from each provider's own page on 26 September 2026.

The fee is the smallest of the three numbers. A $60,000 hire carries the salary, the fee, and the employer's own payroll taxes. In the UK that third line is 15% National Insurance on pay above the threshold for 2026 to 2027. We work a full hire through, line by line, in what an employer of record costs.

One footnote that matters when you compare quotes. Deel lists a separate US product at "$125 per US PEO employee per month", which is cheaper because it is not the same service. The next section says why.

How does this differ from a staffing agency or a PEO?

All three put a company between you and the person, and they are not interchangeable. The difference is who found the person, who employs them, and whether you already have a company in that country.

The one that catches people is the PEO. In the United States it usually assumes you already have a company, and it shares employment with you rather than replacing it. Our read on why Deel can price it at $125 against $599: less is being carried on your behalf.

A staffing agency is a different job again. You are buying the search as much as the employment, and the person is generally theirs rather than yours. We compare the two properly in employer of record versus a staffing agency. If you have already found who you want, you are paying for something you no longer need.

When you don't need one

This is the part the providers are least keen to write down, so here it is. Three situations where paying an employer of record fee is money you can keep.

You already have a company there

If you have an entity in that country, you can employ people directly and you are paying a fee to duplicate something you own. A local payroll provider costs a fraction of an employer of record.

The person genuinely is an independent business

Several clients, their own tools, their own hours, project work with a defined end. That is a contractor, and treating them as one is correct rather than risky. The test is the reality of the arrangement, and here the reality agrees with the label.

They live where you already are

Hiring in your own country needs your own payroll, not a cross-border product. It sounds obvious. It still gets sold, and people still buy it.

What to check before you sign

Six questions, and the answers differ more between providers than the pricing pages suggest. Ask them in writing.

1. 01Do you own the entity in this country, or do you subcontract to a local partner? The answer changes who is really liable if something goes wrong, and subcontracting is common enough that it is worth asking every single time.
2. 02What is the notice period and the severance obligation here, and who pays it if we end the job early?
3. 03How is intellectual property assigned, and does that assignment survive if we move the person off your books?
4. 04What does it cost to convert this person to our own entity later, and is there a fee or a lock-in?
5. 05What is the full monthly cost for this country, including employer contributions, not just your fee?
6. 06How long does onboarding actually take here, and what have the last three hires in this country taken?

The last one is the one that separates a good provider from a brochure. Anyone can quote a fee. Fewer can tell you what happened the last three times they did it in that country.

How we handle it for the people we place

We place staff rather than sell employment products, so our interest here is narrow and worth stating plainly. Most of the people we put into roles are engaged as contractors, because that is what they genuinely are: their own business, several clients, their own equipment.

When a role is full time, exclusive and permanent, that story stops being true, and an employer of record is the honest answer rather than a clever one. We will say so, even though it adds a cost we do not earn anything on.

If you are earlier than that and still working out what the role even is, start with the job rather than the paperwork. Our guides to hiring remote employees and what a virtual assistant actually is cover the part that comes first, and what a virtual assistant costs covers the budgeting.

And if the role is a defined seat rather than a vague list of tasks, write it down before you hire. Our executive assistant job description shows the shape a usable one takes.