Accounting technology / Glossary / Employer of record (EOR)

What is an employer of record (EOR)?

Definition

An employer of record (EOR) is a company that legally employs workers in a country on behalf of another business, which directs their day-to-day work. The EOR signs the employment contract, runs payroll, withholds and pays taxes and social contributions, and provides statutory benefits, so a business can hire abroad without setting up its own local entity.

Also calledEORglobal employment platform

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Legal employer: The EOR
Day-to-day work: Directed by the client
Pricing: Monthly fee per employee

How an employer of record works

The EOR uses its own entity in the country, or a partner's, as the legal employer. The client company agrees the role, salary and start date, and the EOR issues a locally compliant contract, registers the employee, runs payroll each month and handles leave, benefits and termination under local law. The client pays the EOR the employment costs plus a monthly fee per employee and receives an invoice, which is booked as a staff cost rather than through its own payroll. Companies use EORs to test a market, hire a few people in a country or employ staff before an entity exists, and often move them to their own payroll later. Deel and Remote are the largest EOR platforms, and Rippling offers EOR alongside its global payroll.

Common questions

What is the difference between an EOR and a PEO?+

An EOR is the sole legal employer, usually in a country where the client has no entity. A PEO, mainly a US model, co-employs staff alongside a client that already has its own entity.

How is an EOR invoice accounted for?+

As an operating expense for staff costs, usually split between the salary and on-costs passed through and the EOR's fee. The workers do not appear on the client's own payroll.

When should a company set up its own entity instead?+

When headcount in a country grows to the point where EOR fees exceed the cost of running a local entity, or when it needs to sign local contracts, hold assets or invoice customers there.