Employer of Record(EOR)

An Employer of Record (EOR) is a third-party organization that becomes the legal employer of a worker on behalf of a client company, specifically so the client can hire in a country where it has no registered legal entity. The EOR handles local employment contracts, payroll processing, tax withholding, statutory benefits, and termination compliance under that country's labor law, while the client company directs the worker's day-to-day work as if they were a direct employee.

The relationship has three parties: the client company, the worker, and the EOR. The worker signs a compliant local employment contract with the EOR and receives statutory protections under local law. The client company pays the EOR a service fee (typically $400-$700 per employee per month, though rates range from budget options near $49/month to $599+/month at larger platforms) on top of the worker's gross compensation and statutory costs.

EOR is most commonly chosen over establishing a foreign entity when a company is hiring 1-15 people in a new country, when speed to first hire matters more than long-term cost optimization, or when compliance complexity in that market is high relative to the headcount involved. Companies typically switch from EOR to their own entity once headcount in a market grows large enough that per-employee EOR fees exceed entity setup and maintenance costs - commonly in the 8-15 employee range depending on the market.