Employer of Record (EOR)

What is an Employer of Record?

An employer of record (EOR) is a company that legally employs workers on behalf of another business. The EOR handles the formal employer responsibilities, including employment contracts, payroll, tax withholding, benefits, and compliance with local labor law. The client company directs the person’s day-to-day work.

In short, the employee works for you but is employed by the EOR. Businesses most often use an EOR to hire people in countries where they don’t have a legal entity of their own, which makes it a common tool for global staffing and remote staffing.

How does an employer of record work?

1. You choose the person. The client company finds the candidate and agrees on the role, pay, and start date.
2. The EOR hires them. The EOR issues a locally compliant employment contract and adds the person to its payroll.
3. The person works for you. You manage their tasks, schedule, and performance like any other team member.
4. The EOR runs the admin. It pays the employee, withholds and files taxes, provides required benefits, and keeps up with local rules.
5. You pay the EOR. The client pays the EOR the employee’s costs plus a service fee, usually monthly.

What is the difference between an EOR and a PEO?

Both take on HR and payroll work, but the legal setup differs:

• Employer of record: the EOR is the sole legal employer. You don’t need your own entity in the employee’s country.
• Professional employer organization (PEO): the PEO is a co-employer. It shares employer responsibilities with your business, which usually must already have a legal entity where the employee works.

As a rule of thumb, a PEO helps a company manage HR for employees in places where it already operates, while an EOR lets a company hire in places where it doesn’t.

What is the difference between an EOR and a staffing agency?

With an EOR, you find the candidate and the EOR only handles employment. With a staffing agency, the agency also finds and vets the candidate for you, and often employs them too. Some providers combine both, recruiting the talent and acting as their employer.

That’s how Persona works. We recruit, vet, and employ talent globally, then manage payroll, benefits, taxes, and compliance, so you get a vetted remote team member without setting up an entity or running international payroll. See our staffing options.

When should you use an employer of record?

• Hiring in a country where you don’t have a legal entity
• Testing a new market before committing to an entity
• Hiring a small number of people abroad, where an entity isn’t worth the cost
• Converting an independent contractor to an employee to reduce classification risk
• Bringing someone on quickly while longer-term plans are worked out

Dos and Don’ts of Using an Employer of Record

Dos

• Check that the EOR operates in every country where you plan to hire
• Ask exactly which benefits and protections employees will receive
• Get a clear breakdown of fees and employment costs before signing
• Confirm who owns the intellectual property your team member creates
• Treat EOR employees as full members of your team

Don’ts

• Don’t assume employment rules are the same in every country
• Don’t use an EOR to avoid obligations the law places on you
• Don’t choose an EOR on price alone without checking its compliance record
• Don’t leave termination and notice terms vague in the contract
• Don’t forget that you still manage the person’s day-to-day work