Employer of Record
Unlock the world of global employment with comprehensive insights into employment laws, social security, employment contracts, payroll management, employee benefits, income tax regulations, minimum wages, working hours, leave policies, and more.
Employer of Record (EOR)
An Employer of Record (EOR) is a third-party company that serves as the legal employer of a worker on behalf of another business. While the client company directs the employee’s daily tasks and performance, the EOR assumes full responsibility for payroll, taxes, statutory benefits, employment contracts, and legal compliance in the worker’s country. It is also commonly referred to as a Global PEO (Professional Employer Organization).
As companies cross borders, navigating employment laws and local complexities becomes critical. Learn how EORs can serve as a strategic ally. Understand their core functions, optimal use cases, benefits, and how global employment models differ.
Key Responsibilities of an Employer of Record (EOR)
An Employer of Record (EOR) assumes the legal and administrative responsibilities of employing talent on behalf of a client company. While the client directs day-to-day tasks, the EOR manages HR, payroll, compliance, and employee documentation in line with local labor laws. Below is a breakdown of key functions typically handled by an EOR across the employee lifecycle:
Core HR Responsibilities of an EOR
- Employee Records Management
Maintaining accurate, up-to-date employee data including personal details, job role, visa/work permit status, emergency contacts, and compliance documents.
- Onboarding & Offboarding
Managing the full onboarding process: contract issuance, document collection, local registrations, system setup, and orientation support. Handling resignation/termination formalities including notice periods, exit interviews, and final settlements.
- Leave & Absence Management
Tracking and managing statutory leave entitlements, vacation, sick leave, parental leave, and other absences—while ensuring local compliance.
- Document Management
Organizing and securely storing contracts, ID proofs, tax forms, work permits, and performance documentation with audit-readiness.
- Performance & Disciplinary Support
Supporting the client in administering performance reviews, disciplinary actions, and terminations in accordance with local HR laws.
- Work Permit & Immigration Support
Assisting with visa sponsorship or work permit applications for foreign employees, where legally allowed.
Payroll & Compliance Responsibilities
- Payroll Processing
Calculating gross-to-net pay including base salary, bonuses, benefits-in-kind, and deductions; ensuring error-free and timely salary disbursement.
- Tax & Social Contributions
Withholding and filing income taxes, pension contributions, unemployment insurance, and healthcare/social security in compliance with national laws.
- Payslip Generation
Issuing compliant payslips with statutory and voluntary deductions clearly displayed.
- Compliance Reporting
Preparing and submitting monthly/quarterly/year-end reports to labor ministries, tax authorities, or social security boards.
Workforce Administration (Add-on)
- Time & Attendance Tracking
Aligning with client’s systems (or providing tools) to accurately log working hours, overtime, shift differentials, or part-time schedules.
- Expense Management
Reviewing and reimbursing approved employee expenses such as travel, meals, or client-related purchases as agreed in the scope of services.
- HR Policy Distribution
Circulating HR policies, handbooks, and updates to ensure employees are aware of workplace norms and entitlements.
Compliance & Risk Management
- Labor Law Compliance Monitoring
Staying updated on local employment regulations and updating employment contracts, benefits, or payroll practices accordingly.
- Data Security & Privacy Compliance
Ensuring secure systems and processes that adhere to GDPR, SOC 2, HIPAA (if relevant), and local data privacy laws.
- Audit Trail & Activity Logs
Maintaining logs of HR actions such as promotions, warnings, changes in pay, or leaves to support legal defense and internal audits.
Extended Support (Add-on)
- Self-Service Portals
Providing employees with access to view payslips, download tax documents, update personal details, request leave, and raise HR-related queries.
- Benefits Administration
Supporting setup and management of statutory and supplementary benefits such as healthcare, pension, meal cards, allowances, or flexible benefits, depending on country-specific laws and employer scope.
- Severance & Termination Handling
Managing compliant offboarding processes, including final settlements, notice periods, severance calculations, documentation, and deregistration with local authorities.
- Workplace Injury & Insurance Coordination
Assisting in the case of workplace incidents by coordinating with mandatory labor insurance or workers’ compensation schemes, where applicable.
- Country Exit Support
Helping the client wind down operations in a specific country, ensuring compliant terminations, local authority notifications, and closure of registrations.
- Local Representation (as Required)
Acting as the official local employer or providing a local registered address when legally required for employment contracts, tax registrations, or labor filings.
- Salary Benchmarking Support
Help clients determine market-aligned salaries using local compensation data, industry trends, and statutory norms.
- Talent Acquisition Support / Recruitment Assistance
Assist with sourcing, shortlisting, or coordinating interviews for candidates — often through a recruitment partner.
- Background Verification
Conduct background checks (criminal, education, employment history) to ensure compliant and reliable hiring.
- Health Insurance Administration
Help clients select and manage compliant health insurance plans, including statutory and supplementary options.
- Benefits Consulting & Vendor Coordination
Support in identifying and coordinating employee benefits like meal cards, transportation, gym memberships, etc.
- HR Helpdesk / Employee Query Resolution
Provide centralized support for employee HR queries related to payslips, tax forms, leave balances, etc.
- Relocation & Mobility Assistance
Coordinate support for expatriate employees, including housing, schooling, and local registrations (where applicable).
- Training & Compliance Workshops
Deliver mandatory or client-requested training on local labor laws, anti-harassment, or ethical workplace conduct.
- Offboarding Surveys & Retention Insights
Conduct exit interviews and share data-driven insights on attrition and employee satisfaction.
- Device Arrangement & Logistics
Coordinate delivery of laptops or work devices through trusted local vendors on behalf of the client, especially for remote employees.
When to Use an Employer of Record (EOR)
An Employer of Record (EOR) is a smart solution for companies looking to hire internationally without setting up a legal entity. It's especially useful in the following situations:
- Hiring in a New Country:
Expand into new countries without setting up a local legal entity.
- Market Testing:
Test a new region’s potential before making long-term business commitments.
- Speed-Critical Hiring:
Quickly onboard employees in global markets when time is of the essence.
- Bridging Talent Gaps:
Access specialized talent internationally when skills are unavailable locally.
- Affordable Global Talent:
Optimize salary budgets by hiring skilled professionals in cost-effective regions.
- 24x7 Global Operations:
Build teams across time zones to ensure continuous service delivery.
- Localized Client Support:
Hire employees who speak the client’s language or understand local customs for better service.
- Short-Term or Project-Based Hiring:
Support seasonal, temporary, or project-based work without investing in long-term infrastructure.
- Avoiding Legal Risks:
Prevent issues like Permanent Establishment (PE) and employee misclassification by staying compliant.
- Cross-border payments are restricted or cause account issues:
Clients sometimes face challenges when paying foreign contractors or employees, such as blocked PayPal accounts, transfer limits, or delays. In such cases, EOR or AOR partners act as intermediaries, ensuring smooth, compliant international payments.
- Global mobility and visa sponsorship:
When companies need to relocate employees to countries where they don’t have an entity, an EOR can sponsor work visas, support immigration documentation, and enable legal employment without the need for local incorporation.
Benefits of Using an EOR
- Fast Hiring and Onboarding:
Accelerate recruitment by bypassing the need for entity setup.
- Guaranteed Compliance:
Stay compliant with local labor, tax, and employment laws in every country you hire.
- Lower Salary and Operational Costs:
Save costs by accessing global talent and avoiding overheads of running a local entity.
- Local Expertise in HR & Legal:
Rely on in-country experts for compliant employment contracts, payroll, and benefits management.
- Scalable Workforce Management:
Easily scale teams up or down depending on business needs and market conditions.
- Reduced Legal and Admin Burden:
Minimize your internal workload while reducing risk, focus on growing your core business.
Global Employment Models Explained
Core Employment Solutions
- Employer of Record (EOR)
A service provider that officially employs a worker on behalf of another company, managing local compliance, payroll, tax filings, and employment contracts.
- Direct vs Indirect EOR
- Direct EOR refers to providers that hire workers through their own legal entities in each country.
- Indirect EOR involves using local partners or subsidiaries to act as the legal employer.
- Third-Party Employer
A broad term used when employment responsibilities are handled by an external organization instead of the company the worker reports to.
Co-Employment and Shared Employer Models
- Professional Employer Organization (PEO)
A U.S.-based employment model where the PEO shares employer responsibilities with the client, typically requiring the client to have a legal presence in the country.
- Co-employment
A legal relationship where employer responsibilities are split, often, the client manages day-to-day tasks while the PEO handles HR and payroll compliance.
- Global PEO
A non-U.S. variation of the PEO model that often functions like an EOR, helping companies hire internationally without setting up a local entity.
Flexible Talent and Contractor Models
- Umbrella Company
Common in the UK and parts of Europe, this model employs independent contractors and handles their tax and payroll, typically for short-term or freelance projects.
- Contingent Staffing
Refers to temporary or project-based workers, such as freelancers or agency temps, who are not full-time employees.
- Staff Augmentation
A practice where businesses bring in external professionals to work alongside internal teams, usually for specific projects or to cover skill gaps.
- Labor Dispatching
A regulated employment model in countries like China, where a licensed agency hires and sends workers to perform jobs at client companies.
- Labor Leasing
A similar concept to dispatching, especially in Germany, where temporary workers are hired by one company and placed at another under strict labor laws.
- Agent of Record (AOR)
A model used to engage independent contractors compliantly. The AOR manages onboarding, contracts, insurance, and regulatory checks, ensuring risk-free contractor use.
On-Demand Workforce Models
- Workforce-as-a-Service (WaaS)
A modern approach to sourcing talent flexibly, workers are provided on-demand through a tech-driven platform or service, tailored to short-term needs.
- Talent-as-a-Service (TaaS)
A subscription or on-demand model for accessing pre-vetted professionals, often freelance or contract-based, through digital marketplaces or networks.
Strategic Global Workforce Models
- Global Employment Organization (GEO)
A centralized structure for managing international employment needs, often leveraging local partners to stay compliant across multiple jurisdictions.
- Global Capability Center (GCC)
An offshore center set up by multinational companies to handle support functions like IT, finance, or HR. Hiring in GCCs is often done through EORs, staffing firms, or direct employment.
- Secondment
A temporary arrangement where an employee is assigned to work for another company or within a different part of the same group, often across borders.
