Definition
An employer of record (EOR) is a third-party company that legally employs workers on another business's behalf, usually in a country where that business has no local entity. The EOR handles contracts, payroll, tax and benefits, while the client directs the person's day-to-day work.
How an employer of record works
You find and choose the person; the EOR becomes their legal employer in that country. It issues an employment contract that follows local law, registers the employee with the tax and social security authorities, runs monthly payroll with the correct deductions, provides statutory benefits and often supplementary ones such as health insurance, and manages leave, expenses and, if needed, termination in line with local rules.
You set objectives, manage the work and decide on pay rises. The EOR invoices you for the salary, employer costs and its service fee. Because the EOR is the legal employer, the contract, payslips and statutory records are in its name, even though the employee works only for you. Some providers can also sponsor work permits where the person needs one.
An EOR employs the person once you have chosen them. To choose across time zones, springhire's one-way video interviews let candidates record answers when it suits them, and AI transcribes and ranks the responses.
Employer of record vs PEO vs staffing agency
A professional employer organisation (PEO) also handles payroll and benefits, but usually under a co-employment arrangement in a country where you already have your own legal entity. An EOR is the sole legal employer, which is why it works where you have no entity at all. A staffing agency recruits and supplies workers, often temporary ones, and may employ them; an EOR generally does not find candidates, it employs people you have already chosen.
When an employer of record makes sense
An EOR suits hiring a few people in a new country, testing a market before committing to a subsidiary, hiring one specific person who lives abroad, or bridging the months while a local entity is set up. It is usually a poor fit for a large team in one country over many years, where per-employee fees can exceed the cost of running your own entity.
It also does not remove every risk. Depending on what the employee does, local tax authorities may still treat your company as having a taxable presence there, so take tax advice before expanding through an EOR.
What to check before signing
Find out how the provider prices the service, typically a fixed monthly fee per employee or a percentage of payroll, and what that fee includes. Confirm that the employment contract assigns intellectual property to your company, how confidential data is handled, what notice and severance apply on termination, and whether the provider owns its local entity or subcontracts to a partner. Some countries restrict how labour can be supplied to another business, so ask how the provider complies in each country you hire in.
Frequently asked questions
Employer of record means the organisation legally recorded as a worker's employer for contracts, payroll, tax and benefits. When a business uses an EOR provider, the provider holds the legal employment, while the business directs the work and pays the provider for salary, employment costs and a service fee.
No. A PEO usually co-employs staff alongside a company that already has its own legal entity in that country, sharing employer responsibilities with it. An employer of record is the sole legal employer, which lets a company hire in countries where it has no entity at all.
Most EOR providers charge a fixed monthly fee per employee or a percentage of salary, on top of the employee's pay, employer taxes and benefits. Fees vary by country and provider, so compare the full cost of employment for each country rather than the service fee alone.
Related terms
Part of the springhire HR glossary.
