EOR company: what an employer of record company does, and how to choose one

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How to choose an EOR company, in four checks

1. Confirm you have no entity, and do not want one yet. An EOR company solves one problem: employing a person where your company cannot. If you already have a registered entity in the country, you want a payroll provider instead; if you will hire twenty people there within two years, the entity may be cheaper than two years of per-employee fees. Decide which of the three you are buying before comparing vendors.
2. Ask whether the company owns the entity in your country. Some EOR companies employ through their own local entity; others resell a partner's. Owned entities mean one contract, one point of accountability and usually a lower fee; partner models add a layer and a margin, and the partner's failure becomes your employee's problem. Ask, per country, and get the answer in writing.
3. Price the whole cost, not the fee. The monthly fee is the smallest line. Add the employer's statutory costs in the country, any deposit or prefunding the company holds, currency conversion spreads on payroll, offboarding charges and severance handling. Ask for a full quote on a named salary in the named country and compare quotes on that total.
4. Read the employment contract and the exit terms. The person will be employed under the EOR company's contract, so read it as their employer would: probation, notice, termination grounds and severance under local law, and what the EOR does when you end the engagement. Then read your own terms with the company: minimum term, notice to leave, and whether the employee can transfer to your entity later without a fee.

EOR company versus PEO and payroll provider

A PEO co-employs staff you already employ through your own entity, usually in the United States, to pool benefits and administration; it cannot employ someone where you have no entity. A global payroll provider runs payroll for your own entity abroad. An EOR company is the only one of the three that is itself the legal employer in the country, which is why it is the product for a first hire in a new country and why its fee is higher per head than either alternative.

Common questions

What does an EOR company do?

It employs your hire under its own local entity, holds the contract, runs payroll and tax withholding, provides statutory benefits and carries employment compliance in that country, while you manage the person's work. You pay salary, employer costs and a monthly fee per employee.

How much does an EOR company charge?

A flat monthly fee per employee or a share of salary, on top of the salary and the country's employer costs. The fee varies by country and by whether the company owns its entity there; the comparison pages on this site carry each provider's published pricing.

Is an EOR company the same as a PEO?

No. A PEO co-employs staff you already employ through your own entity; an EOR is the sole legal employer where you have none. The EOR versus PEO page on this site sets out the difference.

When should we set up an entity instead?

When headcount in the country will grow past the point where the per-employee fees exceed the entity's setup and running cost, typically a small team held for more than a year or two. The alternatives pages on this site work that comparison.

Coverage by country

• Employer of record vendors covering Singapore
• Employer of record vendors covering Mexico
• Employer of record vendors covering Spain
• Employer of record vendors covering Colombia
• Employer of record vendors covering United Kingdom
• Employer of record vendors covering France
• Employer of record vendors covering Hungary
• Employer of record vendors covering New Zealand