What is an Employer of Record (EOR)?

An Employer of Record (EOR) is an organization that employs and pays your workers compliantly on your behalf. With an EOR, your organization can hire employees domestically or internationally. You don’t need to establish a legal presence or register for a business tax ID.

Consider a scenario where your US organization wishes to hire a specialist based in Spain. By partnering with an Employer of Record with a Spanish entity, you can employ the worker through them. The new hire stays where they are while effectively contributing to the US organization’s operations.

The Employer of Record must ensure compliance with local labor laws and regulations. They handle payroll and manage HR tasks. This makes international employment easier.

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, offer the following services:

• Legal employment of your domestic and international workers
• Creation of locally compliant employment contracts
• Assistance with mergers and acquisitions
• Background checks
• Global payroll processing and tax filing
• Employee benefits and perks administration
• Equity management
• Work visa and immigration support
• Intellectual property protection
• IT asset management
• 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 partnering with an EOR?

An Employer of Record allows companies to hire part-time and full-time employees abroad without setting up their own legal entity in a foreign country.

Entity setup usually requires significant time and resources. 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. You can hire anyone, anywhere, and source the best talent for your team within your budget. No need for entity set-up, legal requirements, visas, or employee relocations
• Rapid global expansion: An Employer of Record can increase speed to market. Set up in strategic locations and test new markets within days instead of weeks and months
• Minimized compliance risk: An Employer of Record has an in-house network of legal, tax, and employment experts. These teams ensure you follow each country’s unique employment laws and tax regulations. If a legal issue arises, the EOR protects you. As the employee’s legal employer, the EOR takes full responsibility for non-compliance penalties
• Streamlined HR and payroll processes: Employers of record manage all things HR and payroll for your foreign workers. Onboard them, set them up with competitive employee benefits, and provide them with equipment. The EOR also takes care of salary payments, withholding the appropriate taxes from their paychecks, distributing payslips, and more
• Unified employee experience: The self-service platform houses all of your workers, no matter their location or worker classification. This can help you create a consolidated employee experience

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: Pros and Cons

How does hiring through an Employer of Record work?

When you use an Employer of Record, it assumes the role of the legal employer for anyone you hire. These employees enter into contracts with the Employer of Record rather than with your own organization.

Your organization maintains control over setting the employees’ salaries, managing day-to-day operations, and assessing job performance.

The EOR handles all the administrative burdens for your workforce. It creates employment contracts, takes care of benefits administration, and withholds payroll taxes and other employee contributions. It also manages all the legal duties, ensuring compliance with local employment laws when hiring internationally.

For example, if you hire a new employee from Germany, your EOR’s legally established German entity is the employer on paper. The Employer of Record is legally responsible for following local tax rules, payroll details, and employment laws.

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

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 strategies. With an Employer of Record, your talent pool opens up to a global audience.

In addition, EOR enhances your employer brand and improves the employee experience. It gives businesses of all sizes access to competitive benefits and perks.

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

Overcome time and resource restraints

Many companies have limited resources to support market entry. This means they lose out to competitors with bigger budgets and teams who can establish a legal entity faster.

Employer of Record services level the playing field. They enable companies of all sizes to quickly build a local presence in attractive markets. You don’t need to invest a lot of time or money to create a legal entity and set up HR and payroll functions.

Mitigate compliance concerns

As your organization 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. The software updates you about regulatory changes concerning worker classification criteria, visa requirements, and new employment laws in the areas where you operate.

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

Using an EOR is 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 a significant upfront investment. No need to pay registration fees, meet requirements such as buying an office or hire local HR experts. Furthermore, it spares you the complexities of navigating the entity setup process. You won’t have to navigate bureaucracy or acquaint your team with local labor laws.

However, once your company is ready, Deel Entity Setup makes the transition to owned entities straightforward. Our service guides you through the incorporation process. We support you with registration forms, fee payments, and applying for a business tax ID. We even facilitate the move from EOR-managed 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?

EORs can be present in any country, but providers may not have entities in them all. Some EORs have limited coverage or use in-country partners to extend their global reach.

Others have extensive global coverage. These ones 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.

Learn which countries Deel EOR can unlock through our global hiring guide.

What are the alternatives to an EOR?

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

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. A Professional Employer Organization (PEO) is for companies seeking domestic HR services and workforce management support.

Unlike Employer of Record providers, 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 employer responsibilities related to your employees.

Another crucial difference is that PEOs operate locally, so you can’t hire international employees through a PEO. However, you could mix and match and employ some workers through a PEO, some through an EOR, and others through your own foreign subsidiaries.

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

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

EOR providers sometimes call themselves global employers of record. They make this distinction because all EORs can hire people in your company’s home country. However, not all EORs provide international coverage.

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

Deel EOR leads the market in international 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: 5 In-Demand Talent Hubs for Hiring With Deel-Owned Entities

Employer of Record vs. staffing agency

Companies can use a staffing agency to bolster their workforce, secure project support, or cover temporary positions. On the other hand, EOR services allow your company to hire employees through them permanently. You can take the talent with you when you leave the provider, unlike with a staffing agency.

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 to engage freelancers and contractors. These workers fall under the category of independent workers, which means they don’t have employee status. A local entity doesn't need to process these workers’ payroll, taxes, and social security contributions.

While foreign contractors are an essential part of a contingent workforce, hiring them still comes with some risks. Countries have differing employment laws, which can be easily misunderstood. This could expose you to legal and compliance issues such as misclassification.

Deel provides Contractor of Record (AOR) services for hiring and paying contractors. This helps you confidently and compliantly engage and manage contractors alongside your EOR and directly employed workers. Our solution lets you assess the risk of misclassification, onboard workers, and handle invoice payments.

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 (EOR) service provider, it’s crucial to look for ones that offer:

• Wholly-owned entities: This ensures a consistent service instead of potentially having to chase up 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: Provides access to exclusive discounts on essential benefits such as health insurance. This can be a significant advantage for your team
• Comprehensive API and integration capabilities: Allows you to customize the platform and processes based on your specific needs. This enables seamless connections with existing HR, accounting, data security, and other tools you currently use
• Around-the-clock global support: Gives 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: Implement robust protocols to protect your data across all jurisdictions where you hire. This commitment to security is vital, given the rise in cyber threats
• No minimum number of employees requirement: Flexibility for businesses of all sizes. Whether you’re looking to hire one employee or scale up significantly
• Transparent pricing: Ensures that you fully understand the costs associated with their service, enabling better budgeting 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

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

How much does an EOR typically cost?

While the cost of EOR services varies depending on the provider, upfront costs are typically low. This is because you don’t need to pay any entity setup fees. Instead, EOR platforms usually charge a service fee per employee. These fees are typically more predictable than entity management costs, 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?

Easily hire, pay, & manage a global team with Deel

Today’s world of work requires solutions that go beyond borders. With Deel, you can engage talent in other countries in minutes, eliminate payroll admin tasks like managing benefits and taxes, and never have to worry about international legal compliance again.

Request a demo.