Employer of record explained: what is an EOR and how does it work?
Employer of record explained: a general guide as of October 30, 2026. Rules are country-specific.
An employer of record (EOR) is a company that legally employs your worker in a country on your behalf. The EOR signs the employment contract, runs payroll, withholds tax and handles statutory benefits, while you direct the daily work. It lets you hire without setting up your own local entity.
At a glance
- You choose the person and manage their work. The EOR is the legal employer.
- Use an EOR when you want a real employee in a country where you have no entity.
- It is not a way to avoid local law; the EOR must follow it and so must you.
- Providers charge a fee on top of salary; we do not quote prices because published figures are provider claims we cannot verify.
How does an EOR work?
- You pick the candidate and agree role, pay and start date.
- The EOR issues a local-law employment contract naming the EOR as employer.
- The EOR runs payroll, withholds taxes, pays statutory contributions and provides required benefits.
- You manage day-to-day work. When the person leaves, the EOR runs the legal exit.
In LiveRec payroll, when your company has no verified registration in the country where a worker is based, our local payroll partner employs them for you and the worker's page shows the Legal employer. See how LiveRec payroll works and add a worker and register a country.
EOR vs PEO vs contractor vs your own entity
| Option | Legal employer | Where used | Best when | Main risk |
|---|---|---|---|---|
| EOR | The EOR | Mainly cross-border | Hiring in a country without your entity | Ongoing fee; less control of contract terms |
| PEO (professional employer organisation) | Co-employment with you; you stay employer for many purposes | Mainly US domestic | You want HR, benefits and payroll help in the US | Not a way to hire abroad |
| Independent contractor | The contractor, in business for themselves | Anywhere | A real project-based, independent service | Misclassification, back taxes, penalties |
| Your own local entity | You | Any country | Longer-term, larger headcount | Set-up time, ongoing compliance, local directors/filings |
When does an EOR make sense?
- One to a few hires in a country; testing a market.
- You need compliant payroll and benefits fast.
- You are not ready to register an entity.
It makes less sense for a large team in one country (an entity is often cheaper over time; model it) or for work that is genuinely an independent contract.
What are the risks?
- Misclassification: calling an employee a contractor to avoid obligations can bring penalties. See the IRS and DOL pages above and the country's own rules.
- Permanent establishment (tax presence): using an EOR does not necessarily remove all corporate tax exposure in the worker's country. Ask a tax adviser.
- Contract control: local-law contract terms may differ from your home template.
Worked cost framework (Example only, not real prices)
Total monthly cost = gross salary + employer statutory contributions + benefits + EOR fee. Example: salary 1,000 units, contributions 150, benefits 50, EOR fee 100 gives 1,300 units, or 1.3 times salary. These numbers are placeholders. Ask three providers for a written quote that itemises each line, and ask what is excluded (severance reserve, equipment, visa).
What to ask an EOR provider
Who is the contracting entity? Which law governs? Is the fee fixed or a percentage? Notice and termination cost? Benefits included? Data location? Do you pass through local statutory increases?
FAQ
Is an EOR the same as a PEO? No. A PEO typically shares employer duties with you in the US. An EOR is the legal employer, usually abroad.
Does the worker become my employee? Legally they are the EOR's employee; in practice you manage the work. Tax and law treatment can vary; get advice.
Can I move the worker to my own entity later? Usually yes; ask the provider about transfer terms and fees up front.
Is EOR cheaper than a contractor? Not usually; it costs more but carries employee protections and lower classification risk.
Next step: read how to hire in India as a US company for a worked country example.
Sources
See front matter. Accessed 30 October 2026.
This is general information, not legal, tax or immigration advice. Rules change and your situation may differ. Consult a licensed attorney or qualified adviser.