EOR stands for employer of record: a company that legally employs a person on your behalf in a country where you have no entity of your own. Your hire works for you day to day; the EOR holds the employment contract under local law, runs payroll, withholds and files taxes, administers statutory benefits and carries the legal employer obligations. You receive one invoice, salary costs plus the EOR's fee, and in exchange you can employ someone in a country without incorporating there. The model matters because employment obligations attach where the worker is, not where your company is, and the EOR supplies the local employer those obligations require. This page explains the mechanism, the boundaries and the cost logic.
The mechanism: two contracts, one employer
An EOR arrangement runs on two documents. A service agreement between you and the EOR sets the fee, invoicing, liability and exit terms. An employment contract between the EOR's local entity and your hire, written to the labour law of the hire's country, makes the EOR the legal employer: it pays wages in local currency, withholds income tax, remits employer and employee social contributions and administers mandatory benefits. Direction of the actual work stays with you, and that split is the whole product. Where the EOR has no entity of its own in a country, it employs through a local partner instead, which works but adds a layer; asking which entity will sign your hire's contract is the first due diligence question in any country.
EOR is not a PEO, and not a contractor platform
The nearest US relative is the professional employer organisation, and the difference is load-bearing. A PEO co-employs staff you already legally employ through your own US entity: per the industry body NAPEO, the PEO pays wages and taxes under its own EIN and issues the W-2s while you keep operational control, under a contractual allocation of employer responsibilities. The US even has a certified tier: an IRS-certified PEO must post a bond of 5% of its federal employment tax liability, with a floor of $50,000, and is treated as the employer liable for federal employment taxes on wages it remits. An EOR is the answer to a different question, sole legal employment where you have no entity at all, and no equivalent federal certification exists for it. Contractor platforms answer a third question, paying genuinely independent contractors, and the boundary there is classification: the IRS weighs behavioural control, financial control and the type of relationship, and a full-time person under your direction is an employee in substance whatever the invoice says.
What it costs and when it stops making sense
EORs charge a management fee per employee per month, with advertised entry tiers typically in the low hundreds of dollars; salary, employer contributions and benefits pass through at cost on the same invoice, and many vendors hold a deposit against termination liabilities. Against the alternative, incorporating, registering for payroll and retaining local advisers in a country you may leave, the fee is cheap for one to five hires, which is why the standard pattern is EOR first, entity when the market proves out. The crossover comes with concentration: at tens of employees in one country the accumulated fees pass the cost of running your own entity, and several vendors sell exactly that transition. The other boundary is regulatory: some countries cap how long EOR arrangements can run, and licensed activities may require the operating company itself to employ the staff, so check the specific country before relying on the model.
What to verify before using one
Four checks separate marketing from substance. Entity: which legal entity employs your hire in the specific country, owned or partner. Money: a specimen invoice for your actual hire, with salary, employer costs, benefits, fee and any deposit itemised, before signature. Contract: sight of the local employment contract draft, checked against your offer terms and the country's statutory floor on probation, notice and termination. Exit: what notice ends the service, what an offboarding costs, and how the deposit comes back. Published pricing is where verification starts, and it is what this site indexes vendor by vendor, but the agreement you sign is what controls; nothing on this page is legal or tax advice, and country-specific decisions deserve country-specific professional advice.
Questions people ask about what is eor
What does EOR stand for?
Employer of record: the company that is the legal employer of a worker on paper, running payroll, taxes and compliance in the worker's country, while the client company directs the day-to-day work.
Is an EOR legal?
In most major hiring markets, yes, though some countries cap the duration of EOR arrangements or restrict them for licensed activities. Verify the current rule for the specific country before relying on the model; the vendors' own country guides state their positions, and local advice settles edge cases.
What is the difference between EOR and PEO?
A PEO co-employs staff of an entity you already have, a mostly US product where the PEO runs payroll under its own EIN while you remain an employer. An EOR is the sole legal employer where you have no entity. Several vendors sell both, at different prices.
How much does an EOR cost?
A management fee per employee per month, with advertised entry tiers commonly in the low hundreds of dollars, plus salary and statutory employer costs passed through at cost. Deposits, currency margins and add-on services move the real invoice above the headline; a specimen invoice makes it concrete.