Employer of Record (EOR): What It Is and When to Use It
Hiring talent across borders is easier than ever—but it comes with legal and operational risks. An Employer of Record can help you stay compliant while scaling your team globally.
Global hiring is no longer reserved for large corporations. With remote work, companies of all sizes are building international teams. But there’s a catch: employing people in another country usually requires a local legal entity and compliance with labor laws, tax codes, and benefits regulations.
This is where the Employer of Record (EOR) model comes into play. It offers a way to hire globally without the administrative burden or legal exposure of setting up a foreign subsidiary.
What Is an Employer of Record?
Essentially, the EOR becomes the legal employer, but not the operational manager.
How It Works
- The client company identifies and selects a candidate in a foreign country.
- The EOR hires the worker under a local compliant contract.
- The EOR manages taxes, benefits, insurance, and legal reporting.
- The client company supervises the worker’s tasks and performance.
This model helps companies avoid misclassification by ensuring workers are properly hired under local labor law—even if the company has no legal presence in the country.
Benefits of Using an EOR
- Speed: Hire workers in days, not months.
- Compliance: Avoid misclassification and legal penalties.
- Flexibility: Test new markets without committing to a subsidiary.
- Focus: Let HR and legal teams concentrate on core employees.
Common Use Cases
- Remote Talent: Hiring a developer based in Brazil while HQ is in Germany.
- Short-Term Expansion: Employing sales reps in Southeast Asia to explore new markets.
- Pre-Entity Hiring: Starting operations in a country before legal incorporation.
- Risk Mitigation: Avoiding contractor misclassification in strict jurisdictions.
Risks and Limitations
EORs are not a universal solution:
- Higher cost per employee due to service fees.
- Less control over legal employment matters.
- Limited customization of contracts or benefits in some cases.
- Country restrictions where EOR services are limited or prohibited.
How EORs Differ from PEOs
While both EORs and Professional Employer Organizations (PEOs) support employment infrastructure, the key difference is legal responsibility.
| Feature | EOR | PEO |
|---|---|---|
| Legal employer | Yes | No (co-employer) |
| Entity required | No | Yes (client must have legal entity) |
| Global coverage | Typically yes | Usually domestic |
| Ideal for | Global hiring, startups | U.S.-based HR outsourcing |
Choosing an EOR Provider
Key factors to evaluate:
- Country coverage
- Legal and HR expertise
- Technology platform
- Integration with your HRIS or ATS
- Experience with your industry
Popular global EOR providers include Deel, Remote, Oyster, Safeguard Global, and Velocity Global.
HR’s Role in EOR Engagements
HR remains critical even when using an EOR:
- Vetting and selecting the provider
- Ensuring alignment with company culture
- Overseeing onboarding and performance
- Managing exits and transitions
Conclusion
The EOR model is transforming how companies approach global talent. It offers speed and compliance, but it also requires smart HR leadership. Done well, it unlocks markets, reduces risk, and supports a modern, distributed workforce—without compromising legal integrity.