What is an Employer of Record (EOR)? 2025 Guide | Wisemonk

Looking to expand your global workforce? An Employer of Record (EOR) might be exactly what you need. EOR services help businesses hire employees overseas without establishing a legal entity in a foreign country. This solution allows companies to manage international employees, ensure compliance with local employment laws, and handle all HR tasks, including payroll, benefits administration, and tax obligations. This article is for business leaders, HR professionals, and founders looking to expand internationally and streamline their global hiring process. In this guide, we’ll explore what an Employer of Record is, how it works, and why it might be the right choice for your global hiring needs.

What is an Employer of Record (EOR)?[toc=What is an EOR]

An Employer of Record (EOR) is a third-party service provider that becomes the sole legal employer for your international hires, handling everything from employment contracts, payroll, benefits administration (like health insurance), and tax withholding, while you retain control of daily operations.

By doing so, EOR services let global companies hire employees overseas, manage a global workforce across multiple countries, and avoid establishing a local entity or legal presence in each market. In our experience working with global companies, the EOR model is one of the cleanest ways to expand internationally with minimized compliance risks, though it's not a substitute for legal or tax advice in each jurisdiction.

How does an Employer of Record (EOR) work?[toc=How an EOR Works]

Now that we understand what an Employer of Record (EOR) is, let’s explore how the EOR service model actually works in practice. The EOR model is designed to streamline international employment by taking over the administrative and legal complexities, so you can focus on building and managing your team.

Here’s how the process typically works:

• Agreement & Onboarding: You select an EOR company and sign an agreement outlining responsibilities, fees, and the scope of EOR services. The EOR then prepares locally compliant employment contracts for your chosen candidates.
• Legal Employment: The EOR provider becomes the official employer of record for your team members in their respective countries. This means the EOR handles all legal employment obligations, while you manage the employees’ daily tasks and performance.
• Payroll & Benefits: The EOR agency manages payroll processing, ensures timely salary payments in local currency, withholds tax obligations, and administers statutory and optional benefits.
• Compliance & Risk Management: The EOR stays up to date with local labor laws, manages regulatory filings, and ensures your business remains compliant, reducing the risk of penalties or legal issues.
• Ongoing Support: Throughout the employment lifecycle, the EOR service provider handles HR administration, documentation, and, if needed, compliant offboarding.

Relationship Between Employer of Record, Client Company, and Employees

A clear understanding of these relationships is important to ensure a seamless experience:

• Employer of Record and Client Company: The EOR service manages compliance, payroll, and HR support, while you retain authority over hiring decisions and daily management.
• Employer of Record and Employee: The EOR is the formal employer, handling contracts, payroll, benefits, and compliance. Employees turn to the EOR provider for employment-related matters.
• Client and Employee: Your company directs daily work, sets goals, and manages performance. Employees report to your team for their job responsibilities.

This setup allows you to expand globally with confidence, knowing your EOR partner is handling all the behind-the-scenes employment complexities, while you focus on growing and leading your team. With a remote EOR, building a global team becomes faster, more flexible, and fully compliant no matter where you want to hire.

When should you use an Employer of Record (EOR)?[toc=When to use an EOR]

If you’re exploring international hiring or market entry, knowing when to use an Employer of Record can save you months of setup and thousands in compliance costs. Based on industry practices and our experience guiding global companies, here’s when an EOR makes the most sense:

• Global Expansion Made Easy: Use an EOR when you want to hire employees in another country without setting up a local legal entity. It’s the fastest and most cost-effective way to establish a presence in foreign markets while remaining compliant with local employment laws and tax regulations.
• Accessing Specialized Talent: When your company needs to hire international talent or contractors in countries where you don’t have an existing entity, an EOR lets you do so legally. You can hire local talent or onboard niche experts without delays or legal exposure.
• Simplifying Compliance: Different countries come with different labor laws, local taxes, and employment contracts. An EOR helps you navigate all of this, covering payroll, benefits administration, data security, and international HR compliance, so your team stays focused on performance, not paperwork.
• Agility and Market Testing: For companies looking to expand internationally or test new markets, using an EOR offers flexibility. You can scale teams quickly, hire for short-term projects, or operate in multiple countries, without committing to long-term infrastructure or legal obligations.

In our experience helping global business expand across borders, successful global companies use EOR services not just for compliance, but for agility, hiring globally while staying lean and legally protected.

What are the benefits of using an Employer of Record service?[toc=Benefits of an EOR]

Why should you consider using an Employer of Record (EOR)? Here are the top benefits:

• Reduced Legal Risk: The EOR handles local labor laws, taxes, and employee rights, shielding your company from compliance issues and legal challenges.
• Faster Market Entry: Setting up a local entity can take months. An EOR lets you hire globally almost instantly, speeding up your global expansion.
• Focus on Core Business: With HR tasks, payroll, and compliance managed by the EOR, you can focus on scaling your business and driving growth.
• Cost-Effective Expansion: Avoid the high costs of setting up a legal entity. An EOR lets you tap into global talent without extra overhead.

In our experience as a leading employer of record service provider for global businesses, an EOR is the most efficient and low-risk way to expand globally, ensuring you stay compliant while avoiding costly mistakes.

What are the different types of EOR service providers?[toc=EOR Types]

Not all Employer of Record (EOR) providers operate the same way. In fact, most fall into two main categories, partner-dependent and owned-entity models. Each comes with its own advantages and trade-offs depending on your global hiring goals.

Partner-Dependent EORs

These providers rely on a network of in-country partners (ICPs) or third-party vendors to deliver services. Instead of employing talent directly, they resell local partner services under their brand.

• Can expand coverage quickly across multiple countries
• Offer flexibility for niche or emerging markets
• Often face challenges with data security, pricing consistency, and employee experience, since multiple parties are involved

Owned-Entity EORs

These providers establish and operate their own legal entities in each country where they offer services. This gives them full control over the employment process, from payroll to compliance.

• Provide stronger control over billing, service quality, and data protection
• Deliver more consistent employee experiences and faster support
• Expansion may be slower since they must set up local entities before entering a new market

In our experience supporting global employers, owned-entity EORs are often preferred for long-term stability and compliance, while partner-dependent EORs are best suited for fast global coverage or niche hiring needs.

Which countries are Employer of Record (EORs) available in?[toc=Global EOR]

EOR services are available across a number of countries. Explore our country-specific EOR guides to learn more about hiring in:

• EOR in India
• EOR in the UK
• EOR in UAE
• EOR in Canada
• EOR in Germany
• EOR in Australia
• EOR in the Philippines
• EOR in Mexico

EORs make global hiring seamless, but they’re not the only option out there. Depending on your goals, you might also consider alternatives like independent contractors, PEOs, or setting up your own entity. Let’s look at how these models compare.

What are the alternatives to an Employer of Record?[toc=EOR Alternatives]

When expanding internationally, businesses often compare using an EOR with setting up a local entity or other hiring models.

Here’s how they differ:

• Setting Up Your Own Entity:  Gives you complete control over operations, policies, and branding, but requires months of registration, high setup and maintenance costs, and full responsibility for local taxes, payroll, and compliance. Best suited for companies planning a long-term, large-scale presence in a single country.
• Using an Employer of Record (EOR): Lets you hire international employees within days, ensures compliance with local labor laws, and removes the need for entity registration or complex filings. Ideal for quick market entry, small teams, or pilot projects.

To get a clear understanding about the difference between an EOR and an own entity setup, refer to our article on Employer of Record vs Own Entity: What to Choose in 2025.

Other alternatives like independent contractors, staffing agencies, or PEOs can work for specific scenarios, but none offer the same balance of speed, compliance, and scalability that an EOR provides for global hiring.

EOR vs PEO: What’s the difference?[toc=EOR vs. PEO]

Many businesses confuse an Employer of Record (EOR) with a Professional Employer Organization (PEO), but their legal structures and responsibilities differ significantly.

Here’s a clear comparison to help you decide which fits your global hiring needs best:

Based on our experience working with global employers, an EOR is best suited for companies expanding into new markets or managing international workers without a legal presence. A PEO, however, makes sense if you already operate domestically and need help with HR, payroll, or benefits administration.

To learn more about the difference between a PEO and an EOR, refer to out article on PEO vs EOR: What's the Best Choice for Your Business.

EOR vs Staffing Agency: What's the difference?[toc=EOR vs. Staffing Agency]

While staffing agencies help find talent, they don’t provide the legal coverage or compliance protection that an EOR ensures for global teams.

To learn more about the how an EOR and a staffing agency differ, refer to our article on Employer of Record vs Staffing Agency: Key Differences.

EOR vs AOR (Agent of Record): What’s the difference?[toc=EOR vs. AOR]

In our experience, EORs are ideal for long-term employee hiring and compliance, while AORs suit companies working with independent contractors on flexible, project-based terms.

Refer to our article on AOR vs EOR: Key Differences Explained 2025 Guide, to learn more about the difference between an AOR and an EOR.

How much does an Employer of Record (EOR) typically cost?[toc=EOR Costs]

Wondering what an Employer of Record actually costs? Pricing can vary based on location, workforce size, and service scope,  but here’s a quick snapshot comparing how EOR pricing stacks up against traditional entity setup and PEO models:

Based on our analysis of leading global EOR providers, most EORs charge a predictable per-employee monthly fee that bundles payroll, tax filings, and compliance support, far less than the cost of establishing a foreign entity. In our experience helping US companies expand abroad, this model offers both cost transparency and speed to market.

How to choose the right Employer of Record (EOR) provider?[toc=How to Choose]

Selecting the right EOR comes down to aligning your global hiring goals with the provider’s coverage, compliance expertise, technology, and transparency.

Here’s how to make an informed choice:

• Define Your Goals: Clarify if you’re hiring for short-term projects or long-term expansion. For fast entry or pilot hiring, an EOR is ideal; for larger operations, consider building a local entity.
• Check Model and Reputation: Prefer a direct EOR that owns entities in your target countries, these ensure faster onboarding and better compliance control. Review their client case studies and third-party rankings for credibility.
• Understand Pricing Clearly: Compare pricing models, flat per-employee fees or payroll percentages. Ask about extra costs like onboarding, FX, or offboarding fees to ensure full transparency.
• Verify Compliance and Security: Ensure the EOR assumes full responsibility for local labor laws, tax obligations, and employment contracts. Confirm they’re certified for data security (e.g., ISO 27001, SOC 2) and compliant with GDPR.
• Evaluate Technology and Support: Request a demo of their global payroll platform and confirm integration with your HR tools. Choose providers offering 24/7 multilingual support and dedicated account managers for smoother operations.

From our experience working with global companies, the best EOR providers blend strong compliance, transparent pricing, and responsive human support, helping you scale internationally without friction or risk.

Read more: Best EOR Services for Startups in 2025

Implementation Checklist: From evaluation to the first hire[toc=Implementation Checklist]

We’ve helped numerous global companies hire in multiple countries while maintaining strict compliance with local laws. To ensure a smooth transition, follow this structured checklist for a successful EOR partnership:

1. Finalize Agreement: Review and sign the EOR service contract, ensuring clear terms on scope, responsibilities, and data protection. Verify that payroll, tax compliance, and benefits administration are covered.
2. Submit Employee Details: Provide the EOR with employee information, job titles, compensation, and benefits preferences. The EOR will draft compliant employment contracts for your local hires.
3. Compliance Verification: The EOR checks that all employment contracts align with local labor laws, tax obligations, and statutory benefits, ensuring compliance before onboarding begins.
4. Employee Onboarding: Once contracts are signed, the EOR sets up payroll, benefits enrollment, and necessary right-to-work documentation.
5. Payroll & Ongoing Management: The EOR processes global payroll, handles local taxes, and provides continued HR support while you manage day-to-day operations.
6. Performance & Reporting: Track employee performance internally, while the EOR keeps compliance reports up to date and manages any local regulations changes.

With our extensive experience supporting businesses in global hiring and international workforce management, we can confidently say that a well-structured EOR implementation process reduces risk and accelerates your global expansion efforts.

Wisemonk: Your Trusted Employer of Record (EOR) Partner[toc=How Wisemonk Helps]

Wisemonk is a leading Employer of Record (EOR) helping global companies hire, pay, and manage employees, without the hassle of setting up a local entity. With our deep understanding of local employment laws, tax compliance, and cross-border workforce management, we enable businesses to expand quickly while staying compliant and efficient.

Here’s how we help global businesses.

• We act as the legal employer for your global team in India, handling employment contracts, payroll, benefits, and compliance under local regulations.
• Hire and onboard top Indian talent in under a week, fully compliant with India’s labor and tax laws.
• We handle PF, ESI, gratuity, professional tax, and income tax filings to keep your team compliant year-round.
• Provide competitive and compliant benefits like health insurance, paid leave, and retirement plans tailored to Indian labor norms.
• Ensure new hires are productive from day one with laptops and IT setups delivered directly to their doorstep.
• Our HR experts manage day-to-day HR tasks, ensuring employee satisfaction and smooth operations.

While India is our core strength, we understand that many businesses have global ambitions. That’s why we also support clients expanding into key markets like the United Kingdom, the United States and beyond. With Wisemonk, you get a reliable partner for your India operations and your broader global hiring journey.

Ready to hire in India, quickly, compliantly, and confidently? Talk to our team today.