Key takeaways
- The EOR is the legal employer. It signs the local contract, runs payroll and pays social security through its own entity, so you can hire without registering a company abroad.
- Published fees run from $199 to $699 a month. Most large providers list $400 to $700 per employee, on top of salary and employer contributions.
- Some countries regulate the model. Germany caps placements with one client at 18 months, the Netherlands requires authorisation from 2027, and Singapore no longer accepts EOR work pass sponsorship for foreign companies.
- Some risks stay with you. Permanent establishment, back taxes from past contractor years and termination decisions remain your responsibility.
Our take
Pick an EOR on two things before price: whether it owns the entity in your country, and how it has handled terminations there. Platform features are easy to compare and rarely decide whether the arrangement works.
Manjuri Dutta, Co-Founder & Editor, EmployerRecordsVideo guide
What is an employer of record? The 9-minute explainer
How an EOR works, what it really costs, where it’s restricted and the risks that stay with you.
Chapters
- 0:00Intro
- 0:26What an EOR is
- 0:40Why EORs exist
- 1:13The three parties
- 1:34Two contracts, one invoice
- 2:03From offer to first payslip
- 2:40Who handles what
- 3:07The liability clause
- 3:28What an EOR costs
- 3:58Worked example: Germany
- 4:40Costs not on the pricing page
- 5:03EOR vs PEO, entity, contractor
- 5:37Is an EOR legal?
- 6:24What an EOR doesn’t cover
- 7:12When an EOR makes sense
- 7:505 questions before you sign
- 8:27Recap and free tools
What is an employer of record?
An employer of record (EOR) is a company that becomes the legal employer of a worker in a country where your business has no entity. It signs the local employment contract, runs payroll, withholds income tax and pays social security, while your company chooses the person, sets the pay and directs the work.
The arrangement is legal because the EOR's registered local entity does the employing. Without that entity you have two other options: set up your own subsidiary, or pay the person as a contractor, which only holds up if the working relationship is truly independent.
The term comes from US payroll, where professional employer organisations started acting as the employer of record for tax and insurance purposes in the 1980s. Cross-border EOR services grew through the 2010s and expanded quickly once remote hiring became normal. Ten published estimates put the 2025 market between $4.4 billion and $6.8 billion, and they differ because research firms count different things. Our employer of record statistics compare every estimate.
How does an employer of record work?
An EOR arrangement runs on two contracts. Your company signs a services agreement with the EOR, and the EOR signs an employment contract with the worker. Each month the EOR invoices you for salary, employer contributions and its fee, then pays the employee and the authorities.
- Choose the candidateYou source and interview. Recruitment is a separate service if the EOR offers it.You
- Set the packageYou agree salary and start date. The EOR checks it against local minimums and mandatory benefits.You
- Issue the contractThe EOR drafts a local contract under its entity, including IP and confidentiality terms.EOR
- Run payrollPay in local currency, tax withholding and employer contributions from the first month.EOR
- Manage the workProjects, goals and performance reviews stay with your team.You
- Change or exitPay rises, leave and terminations run through the EOR under local rules.EOR
Providers advertise onboarding in one to three days. In practice the start date depends on the employee's notice period with their current employer, background checks and, for foreign nationals, the work permit. See our guide to EOR visas and work permits for how sponsorship works.
What does an EOR handle, and what stays with you?
The EOR takes on everything that depends on local employment and payroll law. Decisions about the person and the business stay with you, and so does your own company's tax position.
The EOR handles
- Employment contract under local law
- Gross to net payroll and payslips
- Income tax withholding and employer social security
- Statutory leave, sick pay and pension
- Supplementary benefits you choose to offer
- Notice, severance and termination paperwork
You handle
- Who to hire and at what salary
- Daily direction, tools and performance
- Approving pay changes and bonuses
- The decision to end the employment
- Your company's corporate tax and permanent establishment position
Read the liability clause. EOR services agreements often cap the provider's liability and ask the client to cover problems caused by how it manages the employee, such as overtime it directed or a discrimination claim. Ask for the cap in writing and what insurance stands behind it.
How much does an employer of record cost?
Published EOR fees start at $199 to $699 per employee per month, and most of the large providers list between $400 and $700. The fee sits on top of gross salary and the employer contributions the country requires, which you pay in full whichever hiring route you choose.
Published EOR starting prices, per employee per month
| Provider | Starting fee | Billing note |
|---|---|---|
| RemoFirst | $199 | No annual contract or minimum, varies by country |
| Skuad | $199 | Volume discounts available |
| Pebl | $399 | Formerly Velocity Global |
| Multiplier | $459 | Billed annually, $499 billed monthly |
| Papaya Global | $499 | Contract terms on quote |
| Deel | $599 | Month to month |
| Remote | $599 | Single list price |
| Atlas | $599 | $399 for qualifying NGOs, FX markup on top |
| Oyster | $699 | Monthly billing, annual discounts available |
Prices are the "from" rates on each provider's pricing page, checked on 26 October 2026. Many providers charge more in high-cost or complex countries. Our EOR pricing index tracks quotes by country.
What comes on top of the fee
Example: a €5,000 a month hire in Germany
A full-time employee in Germany on €5,000 gross a month costs about €6,693 a month through an EOR at a $599 list fee. The salary sits below the 2026 contribution ceilings, so employer rates apply to every euro, and the fee converts to about €535 at the ECB rate of 23 October 2026 (US$1.1193 to the euro).
€5,000 salary plus €1,158 in employer contributions and a €535 EOR fee.
33.9% on top of the salaryPaid leave, a 13th salary if agreed and any benefits you add come on top. Our guide to employer costs in Germany covers every contribution, and the EOR cost calculator runs the same sum for other countries and salaries.
EOR vs PEO, your own entity, contractors and staffing agencies
An EOR is the only route that lets you employ someone abroad without your own entity and without contractor classification risk. A PEO shares employer status with you and needs your entity, a staffing agency finds and supplies the worker, and a contractor is not an employee at all.
Five ways to engage someone in another country
| EOR | PEO | Own entity | Contractor | Staffing agency | |
|---|---|---|---|---|---|
| Legal employer | The EOR | Shared with you | Your subsidiary | No employer | The agency |
| Your entity needed | No | Yes | Yes | No | No |
| Who finds the worker | You | You | You | You | The agency |
| Time to first hire | Days to weeks | Weeks | Usually 2 to 3 months | Days | Days to weeks |
| Classification risk | None | None | None | High if it looks like a job | Low |
| Best for | Your first hires in a country | HR admin where you have an entity | Large, long-term teams | Independent, project work | Temporary or volume roles |
Registering a subsidiary often takes two to three months before it can run payroll, and longer where opening a local bank account from abroad is slow. The detailed comparisons are in EOR vs PEO and EOR vs entity setup.
Is an employer of record legal?
Yes, an EOR is legal in most countries, but several regulate it as labour leasing or agency work and set licences, time limits or registration rules. These five are the ones that most often change how employers plan a hire.
Countries that limit or regulate the EOR model
| Country | Rule | What it means for you |
|---|---|---|
| Germany | Labour leasing needs a licence under the AÜG, and a worker can be placed with the same client for 18 consecutive months at most. | Check the provider holds the licence. Earlier placements with you count toward the 18 months, even through another provider. |
| Netherlands | Suppliers of workers need authorisation under the Wtta from 1 January 2027, with enforcement from 2028. | Hirers that use an unauthorised supplier can be fined, so ask for the provider's authorisation. |
| France | EOR hires usually run through portage salarial, limited to autonomous, qualified professionals and 36 months per client. | Some roles do not qualify, so a long-term or junior hire may need an entity. |
| Mexico | Personnel subcontracting has been banned since 2021. Specialised services need REPSE registration, renewed every three years. | Ask how the provider structures the hire and check its REPSE status. The client is jointly liable. |
| Singapore | Since 2024, foreign companies cannot use an EOR to sponsor work passes for their staff. | Hiring a foreign national needs a local entity or another route, such as the ONE Pass. |
Breaking the German rules can make you the employer. If the licence is missing or the 18 months are exceeded, the employment contract can be treated as one between the worker and your company, with fines of up to €30,000 on top.
What an EOR does not take off your plate
An EOR covers employment compliance. Four risks stay with your company, and each one has caught out employers who assumed the EOR carried it.
Contractor rules are tightening. EU member states must apply the Platform Work Directive by 2 December 2026, which presumes employment where a platform directs and controls the work. In the US, Uber and Lyft agreed a $175 million settlement with the Massachusetts Attorney General in 2024 over driver classification. Our guide to the cost of misclassification has more cases.
When should you use an employer of record?
Use an EOR when you have no entity in the country, need someone employed within weeks and expect a small team there. The deciding factor is your position in that one country, not the size of your company.
An EOR fits if
- You have no entity in the country
- The candidate will not wait months for a start date
- You are testing a market before committing
- You expect fewer than about 15 people there
- You have no in-house payroll or labour law knowledge for that country
Look at alternatives if
- You expect 15 to 20 or more staff in one country
- You already have a local entity
- The role is truly independent project work
- Your staff will sign deals or run a local office
Moving to your own entity later
The 15 to 20 headcount mark is a rule of thumb, not a law: the break-even depends on what an entity costs to run in that country and on the fee you pay. Before you sign, check the agreement for transfer or conversion fees and confirm how the employee's length of service carries over when they move to your entity.
How to choose an EOR provider
Ask how a provider employs people in your country before you compare platforms. These five questions show how it will behave when something goes wrong.
Do you own the entity in my country, or use a local partner?
With a partner, ask who it is, how long you have worked together and who carries liability for payroll errors.Do you hold the licence or registration this country requires?
For example the AÜG licence in Germany, Wtta authorisation in the Netherlands or REPSE in Mexico.What is the monthly cost for this exact hire, including all contributions, deposits and currency margins?
Get it in writing for one real salary in each country you need.How have you handled terminations in this country, and how long did they take?
This matters most where dismissal rules are strict, such as Germany, France, the Netherlands and Brazil.Does the contract assign IP to us, and where is employee data stored?
For EU hires, ask which GDPR transfer mechanism applies.Our ranking of the best EOR providers scores providers on these points, and the country EOR pages show who owns an entity where. For industry-specific needs, see how to choose the right EOR for your industry.
Questions about employers of record
Short answers to what employers ask most, checked against official sources on 26 October 2026.
What does EOR stand for?
EOR stands for employer of record: the company that is legally the employer for payroll, tax and employment law, while another business directs the work.
Is an employer of record legal?
Yes, in most countries. Some regulate it as labour leasing, including Germany with a licence and an 18-month cap, the Netherlands with authorisation from 1 January 2027 and Mexico with REPSE registration.
What is the difference between an EOR and a staffing agency?
A staffing agency finds workers and supplies them to you. An EOR employs someone you have already chosen and handles the contract, payroll and compliance.
Can an employer of record sponsor a work visa?
In some countries, yes, but not everywhere. In Singapore, foreign companies can no longer use an EOR to sponsor work passes, so confirm sponsorship country by country before making an offer.
How long can you use an EOR?
There is no general limit. Some countries cap labour leasing, such as 18 months with the same client in Germany and 36 months per client for portage salarial in France.
Can EOR employees receive stock options?
Yes. Your company grants the options under its own equity plan, and the EOR reports any taxable benefit through local payroll where the country requires it. Check local tax and securities rules before granting.
What happens if you switch EOR provider or move staff to your own entity?
The employee signs a new contract with the new provider or your entity. Agree in advance how length of service, accrued leave and any deposit are handled, and check the agreement for transfer fees.
Does an EOR remove permanent establishment risk?
No. An EOR covers employment compliance only. Whether your company has a taxable presence depends on what your staff do locally, such as concluding contracts or working from a fixed place of business.
About the author
Manjuri Dutta is Co-Founder and Content Editor at EmployerRecords.com, covering Employer of Record providers and global hiring platforms. She evaluates providers on entity ownership, statutory compliance, and real pricing rather than vendor claims, and built the verification process used across EmployerRecords' country guides, checking vendor claims against government registries and public filings.
View all articles by Manjuri
