A Quick Guide to Employer of Record (EOR) Services

Expanding into new markets is exciting, but the legal and operational challenges of hiring talent across borders can quickly delay momentum. That’s where an Employer of Record (EOR) comes in. Instead of juggling payroll laws, compliance risks, and entity setup, businesses can rely on an EOR to legally employ workers on their behalf while staying focused on growth.

‍

This guide breaks down what an EOR is, how it compares to alternatives, and why it’s become the must-have tool for companies wanting to scale globally.

‍

‍

‍

What Exactly Is an Employer of Record?

‍

The Legal Backbone of Global Employment

An EOR becomes the official employer of record in a country, taking on all statutory obligations, taxes, social contributions, and benefits, so your company doesn’t have to. This legal shield protects businesses from fines or misclassification penalties when hiring abroad.

‍

‍

How an EOR Structure Works

EORs act as intermediaries between your company and the employee. You control daily operations, but the EOR manages the legal employment relationship, ensuring compliance with local labor laws and regulations.

‍

‍

Real Example: Hiring Abroad Without a Local Entity

For instance, a U.S.-based tech startup can hire a designer in Poland through an EOR. The EOR issues a Polish employment contract, manages payroll, and pays taxes locally, allowing the startup to expand globally without opening a legal entity.

‍

‍

‍

Core Responsibilities of an EOR

‍

While services vary by provider and country, here are the most common functions:

‍

‍

Managing Local Compliance

Each country has unique employment laws. EORs stay up to date with regulatory changes, ensuring contracts, pay, and benefits comply with local labor standards.

‍

‍

Payroll and Benefits Administration

From running payroll in local currency to providing mandatory benefits like health insurance or paid leave, EORs handle all the paperwork and filings to prevent administrative headaches.

‍

‍

Smooth Onboarding and Offboarding

EORs handle the entire employment lifecycle, offering compliant onboarding, setting up tax IDs, and managing contract terminations in accordance with local laws.

‍

‍

Mitigating Employment Risk

EORs minimize exposure to risks like employee misclassification, incorrect terminations, or late tax payments that can lead to penalties and reputation damage.

‍

‍

‍

Why Companies Choose an EOR

‍

Speed and Efficiency in Expansion

Instead of taking months to open a foreign subsidiary, companies can start operations in new markets within days through an EOR partnership.

‍

‍

Significant Cost Savings

Entity setup involves legal, tax, and HR infrastructure that can cost hundreds of thousands annually. EORs offer a scalable and affordable alternative.

‍

‍

Compliance Made Simple

EORs bring local HR and legal expertise to ensure businesses stay compliant with labor laws and tax rules, reducing the need for in-house or local specialists.

‍

‍

Access to Global Talent

EORs enable companies to hire top professionals in any country or timezone, helping them build diverse teams and close skill gaps in a competitive market.

‍

‍

‍

EOR vs. Other Hiring Solutions

‍

EOR vs. PEO: Full Employer vs. Co-Employer

Unlike PEOs that share employment responsibilities, EORs take full legal accountability, making them ideal for international hiring where local entities don’t exist.

‍

‍

EOR vs. Staffing Agencies: Legal vs. Recruiting Role

Staffing agencies help source candidates, while EORs handle everything after hiring, including employment contracts, payroll, and compliance.

‍

‍

EOR vs. Setting Up a Foreign Entity

Opening your own subsidiary is strategic for large-scale expansion, but for lean, flexible hiring, EORs offer a faster and less expensive path.

‍

‍

‍

Real-World Examples

‍

Startups Scaling Engineering Teams

Tech startups use EORs to tap into developer hubs like Mexico City or Eastern Europe without legal or administrative setup.

‍

‍

Nonprofits and NGOs Hiring Locally

Nonprofits rely on EORs to employ staff in emerging markets where they lack physical offices but need a local presence.

‍

‍

Enterprises Testing New Regions

Global brands use EORs to test new markets, running pilot teams before committing to a full local operation.

‍

‍

‍

How to Choose the Right EOR Partner

‍

When evaluating providers, do these tasks:

‍

‍

Confirm Country Coverage

Ensure the EOR operates in the regions where you plan to hire. Global providers simplify multi-country hiring under one system. Choose a provider that not only has presence over multiple countries, but also covers the entities and has actual expertise for each country.

‍

‍

Review Platform Capabilities

Choose an EOR with a digital platform for contract management, reporting, and payroll tracking to reduce manual errors. Some providers provide full HR service support in-house, as well as their own ATS.

‍

‍

Check Support and Transparency

Opt for providers with responsive legal and HR support, clear pricing, and a reputation for compliance accuracy. Choose an EOR service that provides direct 24/7 support already included in your plan.

‍

‍

Evaluate Scalability

If your team grows quickly, your EOR should be able to scale across new countries and handle multi-currency payroll efficiently. Some solutions outsource their global payroll and PEO, so make sure to choose a provider that allows you to expand to new countries or add new employees with no hassle.