What is an Employer of Record (EOR)

An employer of record (EOR) is a third-party organization that employs and pays one or more individuals on behalf of another business. EOR services enable companies to seamlessly hire and work with employees, either domestically or internationally, without the need to establish a legal presence or navigate complex compliance requirements in the employee’s country.

Consider a scenario where a US-based company wishes to employ a skilled professional residing in Spain. By partnering with an Employer of Record with a Spanish entity, the company can lawfully employ the Spanish worker. The new hire works in Spain while effectively contributing to the US company’s operations.

The Employer of Record is responsible for ensuring adherence to local labor laws and regulations, administering payroll, and managing various HR tasks and administrative duties, thus simplifying international employment processes.

See also: Everything EOR: A Guide to Employer of Record

What are Employer of Record services?

Employer of Record services vary depending on the provider. The most comprehensive Employer of Record providers, such as Deel EOR, provides the following services:

• Legal employment of your domestic and international workers
• Creation of locally compliant employment contracts
• Background checks
• Global payroll processing and tax filing
• Employee benefits and perks administration
• Equity management
• Work visa and immigration support
• Intellectual property protection
• Equipment management
• Employee onboarding and offboarding
• Engagement tools to support remote work and distributed teams Contract termination

✨ Discover how MELD compliantly manages a remote and globally distributed team with Deel.

“We needed a way to ensure that the right talents are hired compliantly and managed in the most efficient way possible [...] With Deel, we can find and hire top talent fast, no matter where they live [...] Deel has removed all the pain points around contracts, onboarding, and paying our team. We’re now more efficient, and we can focus on building our app as opposed to dealing with hundreds of employment matters.” —Lavinia Radu, Head of Human Resources.

See also: Employer of Record Services for Enterprises

What is the benefit of using an Employer of Record?

An Employer of Record allows companies to hire part-time and full-time employees abroad without setting up their own legal entity in the new country, which usually takes months and requires significant financial investment. Hiring through an Employer of Record is cost-effective and removes the regulatory obstacles to international employment.

Here are some additional benefits of using an Employer of Record:

• Access to global talent: Using an Employer of Record enables you to tap into a wider talent pool and hire anyone, anywhere. You can gain the best talent for your team within your budget without being held up by entity set-up, navigating legal requirements, figuring out visas, or relocating employees
• Accelerated global expansion: An Employer of Record can increase speed to market by helping companies establish their local presence faster than their competitors by getting boots on the ground in strategic regions and testing new markets and talent hubs
• Minimized compliance risk: An Employer of Record comprises an in-house network of legal, tax, and employment experts to ensure you operate in line with each country’s unique employment laws and tax regulations. And if a legal issue should arise, you’re protected: As the employee’s legal employer, the Employer of Record takes full responsibility for non-compliance penalties

✨ Discover how Revolut outpaces its competitors in entering new markets with Deel.

"We get to hire local talent in any country where we want to expand long before we set up an entity there. Effectively, this gives us a head start. We use Deel as a testing ground to help us see with more certainty whether we should prioritize it in our expansion plans or not." —Luka Besling, HR Manager, Revolut

See also: Hiring with Employer of Record: Benefits and Downsides

How does hiring through an Employer of Record work?

When you use an Employer of Record, it officially assumes the role of the legal employer for any individuals you hire: These employees enter into contracts with the Employer of Record rather than with your own company.

While you maintain control over setting the employees’ salaries, defining their daily tasks, and assessing their job performance, the Employer of Record takes on all legal responsibilities for your workforce and manages all aspects related to employment, such as creating employment agreements, handling salary and benefits administration, and managing payroll tax obligations to ensure compliance with local employment laws when hiring internationally.

For instance, if you hire a new employee from Germany, EOR’s legally established entity within Germany acts as the employer. This means the Employer of Record is entirely accountable for adhering to local taxation requirements, payroll specifics, and employment legislation.

While the Employer of Record handles the logistical aspect of hiring, it does not control your company’s day-to-day operations.

✨ Discover how SiteMinder confidently expanded in global markets while staying compliant with Deel.

"Transitioning to Deel has saved us approx 2-3 days per month in administration time and costs. We used to have multiple people across the globe trying to coordinate and diagnose issues or run manual processes. The time saved includes multiple salaries and productivity time.” —Bec Donnelly, Vice President of People at SiteMinder

See also: More Than a Service: EOR as a Strategic Partner in Business Growth

What are some advantages of using an Employer of Record?

Quickly expand your business to global markets

EOR services allow you to easily tap into other markets and build a local presence in different countries. Hiring employees worldwide without a registered entity or subsidiary simplifies your business’s expansion, allowing you to hire in days, not weeks or months.

Streamline HR and payroll processes

Employers of record manage all things HR and payroll for your foreign workers: onboard them, set them up with the correct employee benefits, manage (order and send) their equipment, pay their salary, withhold the appropriate taxes from their paychecks, distribute payslips, and more.

Unify employee experience

With localized benefits, in-house expertise, and easy-to-use, self-service platforms, employers of record can help you create an inclusive, consolidated employee experience for all your workers, regardless of their type of contract or location.

Reach a broader talent pool

When you hire through an EOR, you don’t have to settle for workers in your local vicinity. You can hire the best talent with the right skills who are aligned with your values and can contribute to your company’s mission.

Why should your organization consider an Employer of Record?

Bridge talent shortages

Global skills shortages, increased competition, and changing worker preferences pressure businesses to rethink their talent acquisition and retention approach. With an EOR, your talent pool opens up to a global audience. In addition, the EOR improves your employer brand by providing companies of all sizes with access to competitive benefits and perks and enhancing the employer experience.

See also: Unlock Global Talent: Deel’s International Hiring Guide

Overcome time and resource restraints

Many companies have limited time and resources when venturing into new markets, which means they lose out to competitors with bigger budgets and teams who can establish their presence faster. EORs level the playing field by enabling companies of all sizes to quickly build a local presence in attractive markets without the extensive time and financial investment typically necessary to set up a legal entity and develop costly HR and payroll functions.

Mitigate compliance concerns

As your company grows, so does your compliance risk. Each country has its own set of regulations that can impact your operations, workforce, and business structure. EORs like Deel have built-in continuous compliance software that performs due diligence and generates workforce insights tailored to your business’s unique concerns, alerting you to any vulnerabilities, including misclassification risks, expiring visas, and non-compliance with employment laws such as minimum wages, benefits, and more.

Is opening an entity in another country easier than using an EOR?

Using an EOR is undoubtedly easier for hiring international talent, building a local presence, and consolidating global team management than setting up an international entity.

Opting for an EOR eliminates the need for significant capital investment to fulfill minimum capital requirements, avoids registration fees, and sidesteps the ongoing expenses related to HR, payroll, and compliance. Furthermore, it spares you the complexities of navigating the entity setup process, dealing with bureaucracy, and the necessity of acquainting your team with local labor laws.

However, Deel Entity Setup services can make opening an entity in another country much more straightforward. We can support you with incorporation, ongoing maintenance, and corporate obligations. Our legal team helps you create and manage your new entity to minimize non-compliance risk. We can also facilitate the transition to global payroll for your entire team.

See also: 7 Reasons to Open Your Own Entity Instead of Hiring Through an EOR

Which countries are Employer of Records present in?

The countries in which an employer of record is present depend on the particular employer of record. Some EORs have limited coverage or use in-country partners to extend their global reach. In contrast, others have extensive global coverage and provide access to hiring all over the world through their own network of wholly-owned entities. Deel EOR falls into the latter category, with over 100 wholly-owned entities from Germany to Australia.

In our global hiring guide, you can find out which countries Deel EOR can unlock for you.

See also: EORs with Owned Entities vs. In-Country Partners: What’s Better?

What are the alternatives to an EOR?

Establishing a foreign entity is the only alternative to an EOR for international hiring. If a business opens its own entity in the country or countries it wants to hire, it can legally employ international workers.

Employer of Record vs. professional employment organization (PEO)

An Employer of Record caters to businesses aiming to build and manage a global workforce without bearing compliance liabilities. Meanwhile, a professional employer organization (PEO) is tailored for companies seeking domestic HR services and workforce management support willing to accept a shared responsibility for compliance.

Unlike Employer of Records, who are the sole legal employer of your workers, PEOs provide co-employment services. A co-employment relationship means you and the PEO share legal liabilities and management responsibilities related to your employees. Another crucial difference is that PEOs operate locally, so you can’t hire international employees through a PEO.

See also: EOR vs. PEO: The Difference (And Why It Matters)

Employer of Record vs. global Employer of Record (GEO)

Employer of Records sometimes refer to themselves as global employers of record. This distinction in terminology often arises because while all EORs can employ individuals in the client company’s home country, not all possess extensive international coverage.

By designating themselves as global EORs, certain providers emphasize their ability to facilitate employment across multiple countries, highlighting their broader scope in assisting businesses with global hiring needs.

Deel has the most extensive country coverage, with EOR services in 150+ countries.

✨ Discover how Nium saves 12+ months of effort to expand into a dozen new geographies with Deel.

“Deel enabled us to achieve our mission to reach and expand new markets with a faster turnaround time. I would say it saved us at least 12 to 24 months of effort. I’d recommend Deel to anyone who would like to expand globally and has limited time and resources to build the capability internally.” —Nupur Mehta, VP of Human Resources at Nium

See also: Top 5 Countries with Deel-Owned Entities to Hire From

Employer of Record vs. staffing agency

Companies can tap into a staffing agency’s existing talent pool to bolster their workforce, secure project support, or cover temporary positions.

Conversely, the Employer of Record services facilitates the compliant engagement of talent directly recruited by the client company. To leverage EOR services, your company must first identify the talent it wishes to hire and then engage them through the Employer of Record’s legal framework.

See also: How Staffing Agencies Can Guarantee a Good Employee Experience With an EOR

Can you hire independent contractors through an Employer of Record?

Companies don’t need an EOR partner to engage freelancers and contractors since they fall under the category of independent workers, which means they don’t have employee status. Therefore, a local entity is not required to process these workers’ payroll, taxes, and social security contributions.

However, Employer of Records like Deel understand that contractors are essential to the contingent workforce, and engaging intentional contractors can subject the company to legal and compliance risks, such as misclassification if you fail to follow local contractor laws.

Deel provides agent of record (AOR) services for hiring and paying contractors so that you can confidently and compliantly engage contractors and manage them under the same global platform alongside your Employer of Record employees and direct employees.

✨ Discover how Cloud9 hired 223 contractors across 21 different countries through Deel.

See also: The Benefits of Hiring International Contractors with Deel

How to choose the right Employer of Record solution for your company?

When selecting an employer of record service provider, it’s crucial to look for ones that offer:

• Wholly-owned entities, ensuring consistent service without the risks associated with outsourcing to local vendors or partners. This approach mitigates disparities in service quality and compliance risks
• A global-first platform, designed to accommodate the needs of businesses operating on an international scale. This ensures that the service is built with global operations in mind from the outset
• A broad partner network providing access to exclusive discounts on essential benefits such as health insurance, which can be a significant advantage for your team
• Comprehensive API and integration capabilities, allowing you to customize the platform and processes based on your specific needs. This feature enables seamless integration with existing HR, accounting, data security, and other tools you currently use, ensuring a streamlined operation
• Around-the-clock global support, offering your team 24/7 assistance in their local languages. This level of support ensures that any issues can be promptly addressed, regardless of time zones
• High standards for data security, implementing robust protocols to protect your data across all jurisdictions where you hire. This commitment to security is vital in today's digital landscape
• No minimum number of employees requirement, offering flexibility for businesses of all sizes, whether you're looking to hire one employee or scale up significantly
• Transparent pricing, ensuring that you fully understand the costs associated with their service, enabling better budget planning and financial management

Choosing an EOR provider that meets these criteria can significantly impact the efficiency and compliance of your global operations.

✨ Discover how Change.org ensures all business processes are automated, customized, and elevated with Deel.

“When we scoped options for our global operations, we scoped many service providers. Our preliminary interaction with the portal representatives and their user experience made it an easy decision to go with Deel. Since then, what has been extremely impressive has been their customer service in handling issues with our multicultural teams across the globe.” —Mohan Mundkur, Finance Manager, Change.org

How much does an EOR typically cost?

While the cost of EOR services varies depending on the provider, the upfront costs are typically low as no entity setup fees are required. Instead, EOR platforms usually charge a service fee per employee. These fees are typically more predictable than entity management fees, which can vary based on the business structure and regulatory requirements.

Deel’s EOR pricing structure starts at $599/month and includes:

• Handling local payroll services, benefits administration, taxes, and compliance
• Competitive benefits packages tailored to each country
• Support from local HR and legal experts
• 20+ integrations for HR, Finance, and more

✨ Discover how Clara saves thousands of dollars per month with Deel’s EOR.

See also: How Much Does an EOR Cost vs. Opening an Entity?

💡 Learn more about how Deel unifies all aspects of managing an international workforce.