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An Employer of Record legally employs your staff in a country where you have no entity, handling contracts, payroll, tax, benefits and compliance, while you direct the work. Someone can start in days rather than the months an incorporation takes, and you can leave with a notice period rather than a liquidation.
What it does not do is trade for you. No local invoicing, no local licences, no signing contracts that require a legal entity. If you need any of those, you incorporate regardless. Last updated September 2026.
| Employer of Record | Your own entity | |
|---|---|---|
| Time to first hire | Days to weeks | Months, and 2+ years in some countries |
| Setup cost | None | $60,000 to $120,000 |
| Ongoing cost | Per-employee fee | Legal, accounting, filings, premises |
| Compliance liability | Sits with the EOR | Sits with you |
| Can you invoice locally? | No | Yes |
| Cost of leaving | A notice period | Months and legal fees |
What is an Employer of Record?
A third party that becomes the legal employer of your people in a country where you have no presence. On paper they work for the EOR. In practice they work for you, on your projects, managed by your managers.
The EOR holds the employment contract, runs payroll under its own tax registration, enrols people in statutory benefits, and carries responsibility for local employment compliance.
You keep everything that matters day to day: what the person works on, how they are managed, whether they are performing.
What does an EOR actually do?
Employment contracts
Drafted to local standards rather than adapted from your home-country template. This is also the primary defence against misclassification, since the contract has to reflect a genuine employment relationship under local law.
Payroll and tax
People paid in local currency from local accounts, with correct deductions and filings in each jurisdiction. This matters more than it sounds: paying from a head office account means the amount varies month to month with the exchange rate, and several countries require payment into a domestic account.
Statutory and supplementary benefits
Enrolment in mandatory schemes, which differ enormously by country, plus any additional cover you choose to offer. See the benefits worth offering.
Compliance tracking
Employment law changes constantly. The EOR applies those changes rather than leaving you to notice them. See the five compliance risks of hiring abroad.
Onboarding and offboarding
Right-to-work checks where required, and exits handled to local notice and severance rules.
When should you use one?
Testing a market
The clearest case. Put two people in a country, find out whether the market responds, then scale or leave. Incorporating first commits you before you have the information.
Hiring someone you otherwise cannot
The candidate is in a country where you have no entity. Without an EOR that is a hire you simply cannot make.
When someone wants to relocate
An existing employee moving to a country where you have no presence would otherwise have to resign.
When immigration does not work
A visa refused, or a role that no longer meets sponsorship thresholds. Rather than losing the person, employ them where they already live. See global immigration for employers.
Converting contractors
Where a long contractor engagement has drifted into something that looks like employment. See how contractor conversion works.
Acquisitions and divestitures
Transferring staff during a transaction where the receiving entity does not yet exist.
What does it cost?
Either a flat fee per employee per month or a percentage of salary. Ask which, because the two behave very differently as salaries rise.
The comparison that matters is against your own entity. Incorporating typically runs $60,000 to $120,000 before you hire anyone, with legal, accounting and filing costs every year after.
Somewhere above roughly 15 employees in one country, fixed entity overheads usually become cheaper than per-employee fees. Below that the EOR is almost always cheaper, and it is always faster. Full numbers are in EOR vs owned entity.
What can an EOR not do?
Worth being direct, because this is routinely oversold.
It cannot trade for you. No local invoicing, licences, or contracts requiring a legal entity.
It does not remove permanent establishment risk entirely. If your people conclude contracts on your behalf in a country, you may create a taxable presence there regardless of who employs them.
It does not recruit, manage or develop your people. Culture, performance and progression stay with you.
It does not cover corporate tax, commercial contracts or product compliance. It covers employment.
How do you choose a provider?
Ask which of your countries they own entities in
The question most buyers miss. Providers either own a legal entity in a country or subcontract to a local partner. Both work, but they differ on accountability and speed when something goes wrong. Ask country by country, and get the answer in writing. See EOR operating models.
Ask about your markets, not the total
A headline country count tells you little. Ask about the difficult market on your list, not the four straightforward ones.
Check how pricing works
Fixed fee or percentage of salary, what termination costs, and what sits outside the fee.
Check the employer cost calculation
Employer social contributions and mandatory benefits vary widely and are additional to salary. A provider who cannot give you accurate total cost per country is not one to plan headcount with. Our employment cost calculator covers it.
Check data security properly
An EOR holds salaries, bank details, addresses and identity documents. Review the security posture rather than accepting a certification badge.
Read the service level agreement
Response times, escalation, and who carries liability for a compliance failure. Establish this in the contract rather than during an incident.
EOR or your own entity?
One question decides it: do you need to trade locally?
If you need to invoice customers in-country, hold local licences or sign contracts requiring a local entity, incorporate. If you only need people there, you do not.
Many companies sequence both: an EOR to enter and prove the market, an entity once the commitment is justified. Ask any provider how they handle that transfer before you sign.
Work with Global Expansion
We employ people on your behalf across 214 countries and territories, with contracts, payroll, benefits and compliance handled in each one.
Country requirements are in CountryPedia.
Tell us which countries are on your list and we will tell you how we operate in each, what the timeline looks like, and whether an EOR is actually the right structure for what you are doing.
Frequently asked questions
What is an Employer of Record?
A third party that becomes the legal employer of your staff in a country where you have no entity. It holds the contract, runs payroll, files taxes and carries employment compliance liability, while you direct the work.
How is an EOR different from a staffing agency?
A staffing agency finds and supplies workers, usually temporarily. An EOR employs people you have already chosen, on a permanent basis, in a country where you cannot employ them yourself. An EOR does not recruit for you.
How quickly can an EOR onboard someone?
Typically days to a few weeks, depending on the country and how fast right-to-work checks clear. Compare that with months for an incorporation, and over two years in some markets.
Is an EOR cheaper than setting up an entity?
Below roughly 15 employees in a country, usually yes, because there is no setup cost and no fixed overhead. Above that the entity often becomes cheaper, though it depends on the market and salary levels.
Who is legally responsible for the employee?
The EOR. It holds the contract, runs payroll, files taxes and carries compliance liability. You retain responsibility for how you manage the person day to day.
Can I move from an EOR to my own entity later?
Yes, and many companies plan for exactly that. Use an EOR to enter and prove a market, then incorporate and transfer the team. Raise it with your provider early so the transfer is clean.
What can an EOR not do?
Trade on your behalf. No local invoicing, no local licences, no contracts requiring a legal entity. It also does not recruit, manage or develop your people, and it does not cover your corporate tax position.
