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

Looking to expand your business globally without the hassle of setting up a local entity? An Employer of Record (EOR) is a third-party service provider that legally employs workers on behalf of your company. It takes care of all administrative tasks such as payroll, benefits, and compliance with local employment laws while your business retains control over day-to-day operations. With the global workforce growing and companies looking to hire international talent, EORs have become a strategic solution for businesses aiming to scale quickly and compliantly. This solution is particularly valuable for HR professionals, global expansion teams, and businesses exploring international hiring.

In this guide, we will explore how EOR services work, the benefits they provide, and why they’re an essential tool for businesses expanding into new markets.

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

An Employer of Record (EOR) is a third-party company that legally employs workers on behalf of another business, handling payroll, taxes, benefits, and compliance with local labor laws. While the EOR is the legal employer, the client company retains control of the employee's day-to-day work, management, and responsibilities. This service is commonly used for hiring internationally or in different states without the need to set up a local legal entity.

What does an Employer of Record do?[toc=What an EOR does]

An Employer of Record (EOR) handles all legal employer responsibilities while your company manages the day‑to‑day work. Here’s what EOR services typically include:

• Facilitates international hiring: An EOR allows a company to hire and pay employees in a different state or country without having to establish a local entity, which simplifies and speeds up the process while mitigating risk. 
• Payroll Management: Calculating and distributing salaries, handling multiple currencies for international employees, and processing expense reimbursements.
• Tax Compliance: Withholding and filing all required income taxes, social security contributions, and other employment-related taxes with local authorities.
• Benefits Administration: Administering mandatory and non-mandatory employee benefits such as health insurance, retirement plans, and paid time off (PTO).
• Legal & Regulatory Compliance: Ensuring all employment practices adhere to constantly changing local and international labor laws, including drafting compliant employment contracts and managing workers' compensation and unemployment claims.
• Onboarding & Offboarding: Managing the logistical aspects of hiring and termination, including all necessary paperwork, background checks, and adherence to legal offboarding procedures.

In essence, an EOR serves as a crucial partner for businesses seeking a simple, fast, and compliant way to hire employees in new locations without navigating complex local laws themselves.

How does an 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 ensures 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 an EOR partner, 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?[toc=When use an EOR]

Businesses typically use an EOR to:

• Expand into international markets quickly without the time and expense of setting up a local legal entity or subsidiary.
• Hire remote workers in locations where the company does not have a registered presence.
• Minimize compliance risk by leveraging the EOR's local legal and HR expertise, shifting liability for potential violations to the EOR.
• Test a new market's viability before committing to a long-term, heavy investment in local infrastructure.
• Attract global talent by offering locally compliant employment terms and benefits. 

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

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

1. Partner-dependent (Indirect) EOR Model

• How it works: The EOR contracts with third-party providers in specific countries to handle local employment, payroll, and compliance tasks.
• Pros: This model can be a faster and more cost-effective way to expand internationally because the EOR doesn't need to establish its own legal entity everywhere.
• Cons: There can be more layers of communication, potentially leading to inefficiencies or delays as information is relayed from the local partner to the EOR, and then to the client. 

2. Owned-entity (Direct) EOR Model

• How it works: The EOR has established its own legal entities and handles all HR, payroll, and compliance tasks directly within each country.
• Pros: This model offers a more seamless experience with direct communication and local expertise, cutting down on potential miscommunication and inefficiencies.
• Cons: Setting up and maintaining local entities can be more complex and costly for the EOR, which can impact the service price. 

3. Hybrid EOR Model

• How it works: This model uses a mix of the other two. The EOR has its own entities in some countries while partnering with local third parties in others.
• Pros: This approach allows EORs to offer a flexible solution that combines the benefits of both models, providing direct services where they have a presence and using partners to cover other regions.
• Cons: Managing a hybrid model can be complex, requiring the EOR to coordinate both its internal teams and external partners. 

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

Alternatives to using an Employer of Record (EOR)  for international hiring and HR management depend on a company's goals, budget, and desired level of control. The primary options are:

1. Establishing a Local Legal Entity
2. Professional Employer Organization (PEO)
3. Hiring Independent Contractors
4. Administrative Services Organization (ASO)
5. Staffing Agencies

1. Establishing a Local Legal Entity:

Your company can set up its own foreign subsidiary or branch office in the target country to directly hire employees. 

• Best for: Businesses planning a significant, long-term presence and investment in a specific market, where having complete control over all operations, HR policies, and intellectual property is a priority.
• Key Differences from EOR: This approach gives you full control and IP protection, but it is the most complex, expensive, and time-consuming option, often taking months to set up and requiring a deep understanding of local laws and tax regulations. 

To learn more about the differences in setting up an entity vs. using an EOR, refer to this guide on Employer of Record vs Own Entity: What to Choose in 2025

2. Professional Employer Organization (PEO): 

A PEO is a co-employment model where the PEO and your business share employer responsibilities and liabilities. 

• Best for: Companies that already have a legal entity established in the country where they are hiring, but want to offload HR administrative tasks like payroll processing, benefits administration, and compliance management.
• Key Differences from EOR: You retain more control over daily operations and core HR decisions, but you also share in the legal risks and responsibilities. PEOs often offer access to more comprehensive, cost-effective benefits packages due to their large scale.

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

3. Hiring Independent Contractors:

You can engage international workers as independent contractors rather than full-time employees. 

• Best for: Short-term projects, seasonal work, or when specific, specialized expertise is needed, and where a long-term employment relationship isn't the goal.
• Key Differences from EOR: This is a more flexible, lower-cost option, but your company is responsible for ensuring the worker is correctly classified according to local labor laws. Misclassification can lead to significant legal and financial penalties, which the EOR model helps avoid. 

Read more: Independent Contractor vs EOR Employee in India 2025

4. Administrative Services Organization (ASO):

An ASO provides outsourced administrative and HR services without entering into a co-employment or legal employer relationship. 

• Best for: Companies of any size that want to outsource specific, non-core HR processes while retaining all employer rights and liabilities.
• Key Differences from EOR: The ASO acts purely as an administrative service provider; your company remains the sole legal employer and carries all the risk and responsibility for compliance.

To learn more about the difference between an ASO and a PEO, refer to this guide on PEO vs. ASO: Which HR Model is Right for U.S. SMBs?

5. Staffing Agencies:

Staffing agencies help companies quickly find and place workers for temporary, contract-based, or even permanent roles. They act as intermediaries, managing recruitment, screening, and sometimes basic HR coordination.

• Best for: Businesses needing quick workforce solutions, project-based staff, or temporary coverage without going through a full recruitment or onboarding process.
• Key Differences from EOR: Staffing agencies are not the legal employer. They only facilitate hiring and may process payroll on your behalf, but your company retains employer responsibility and compliance obligations. This makes them suitable for local, short-term hiring, not for managing global or long-term employment like an EOR.

To understand the difference between an Employer of Record and Staffing agencies, refer to our guide on "Employer of Record vs Staffing Agency: Key Differences"

What is the benefit of partnering with an Employer of Record?[toc=EOR Benefits]

Partnering with an Employer of Record gives your company instant access to global hiring, full compliance, and streamlined HR so you can focus on growth.

• Scale into new countries in days instead of months.
• Avoid the cost and complexity of establishing a local legal entity.
• Transfer employer legal liability and compliance risks to the EOR provider.
• Free up internal HR and finance teams to focus on strategic initiatives.
• Gain access to global talent pools and better candidate options.
• Benefit from ready‑made infrastructure for payroll, benefits, and local employment laws.

How much does an EOR typically cost?[toc=EOR Pricing]

The cost of using an EOR can range from $200 to $1,000+ per employee per month, depending on factors such as the country, services required, and the number of employees.

Pricing Models:

• Flat Monthly Fee per Employee: A predictable cost model, typically ranging from $200 to over $1,000 per employee per month, depending on the country and services provided.
• Percentage of Payroll: The fee is a percentage of the employee's gross salary, usually 10% to 15%, which can be more expensive for higher-salary positions.
• Hybrid or Custom: Some providers offer a combination of the above models or tailor the pricing to specific business needs.
• Additional Costs: Be aware of extra fees for setup, onboarding, currency conversion, and offboarding. Some EORs also charge for specific add-on benefits or custom services.

In our experience helping global companies scale quickly, understanding these pricing structures helps you make better decisions about which model fits your business needs and budget.

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

Hiring global talent is no longer limited by borders. With Employer of Record (EOR) services available across most major markets, companies can quickly expand into new countries without setting up local entities. The EOR takes care of everything from payroll and taxes to compliance and employment contracts, so you can seamlessly build teams in regions like India, the UK, and Germany while focusing on your core business growth.

Explore our country-specific EOR guides to learn more about hiring in:

• Employer of Record in India
• Employer of Record in the UK
• Employer of Record in UAE
• Employer of Record in Canada
• Employer of Record in Germany
• Employer of Record in Australia
• Employer of Record in the Philippines
• Employer of Record in Mexico

Global Reach of EOR Services

EOR services are available across major global regions, with comprehensive coverage in:

• North & South America: EOR services are available in the US, Canada, Mexico, Brazil, Argentina, and several other Latin American countries.
• Europe: Most of Europe is covered, including countries like the UK, Germany, Spain, and Eastern European nations like Poland and Romania.
• Asia & Middle East: Key markets such as India, China, Japan, and the UAE are covered.
• Africa: EOR providers operate in South Africa, Nigeria, Egypt, and several other African nations.
• Australia & Oceania: Services are available in Australia and New Zealand.

EOR services offer a flexible, compliant, and efficient way to hire talent globally. However, depending on your business needs, you might also explore alternatives like independent contractors, PEOs, or setting up your own legal entity. Each of these options has its pros and cons, depending on your expansion goals, resources, and target markets.

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

Choosing the right Employer of Record (EOR) solution requires careful evaluation of several key factors, including the provider's global coverage and local expertise, compliance infrastructure, technology, service quality, and transparent cost structure. 

Key Factors to Consider:

• Geographic Coverage and Local Expertise: Choose an EOR with legal entities or local partners in your target countries. Country-specific EOR providers with in-country experts ensure compliance with local labor laws, benefits, taxes, and HR practices.
• Compliance and Legal Knowledge: Confirm the provider’s compliance track record. They should stay updated on labor law changes and manage contracts, IP protection, data privacy (GDPR), overtime, and terminations in full legal compliance.
• Pricing Model and Transparency: Understand the total cost upfront. EORs may charge a monthly fee per employee or a payroll percentage. Watch for hidden fees like setup or currency markups and compare total ownership costs before deciding.‍
• Service Quality and Support: Evaluate support quality and response time. Reliable EORs provide dedicated account managers and 24/7 support across time zones, ensuring seamless HR operations and employee assistance.
• Reputation and Track Record: Check client reviews, case studies, and references from similar businesses. A proven track record indicates reliability and strong performance in managing international employment.
• Scalability and Flexibility: Select an EOR that scales with your growth. They should easily handle new hires and market expansions without service disruption.

For deeper insights into selecting the right EOR, check out this detailed guide on "How to choose an Employer of Record"

Wisemonk: Your Trusted EOR Partner for Global Hiring [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 what you get with Wisemonk as your EOR partner:‍

• Fast onboarding: Hire top talent in days, not months, with fully compliant contracts and seamless setup.
  
• Effortless payroll management: We handle salaries, taxes, and statutory filings accurately and on time across geographies.
  
• Comprehensive employee benefits: From health coverage to paid leave, we offer locally compliant and competitive packages that attract top talent.
  
• Dedicated HR support: Our HR specialists handle day-to-day operations, employee engagement, and issue resolution, so your team stays happy and productive.
  
• End-to-end compliance: Stay protected from legal and regulatory risks with our always-updated local expertise.
  

While India is our core strength, we’re expanding rapidly into key global markets such as the United States, the United Kingdom, and beyond. With Wisemonk, you get a reliable partner for your India operations and your broader global hiring journey.‍

Ready to scale your global team fast, compliant, and without the headaches? Talk to our team today!