Overview
An Employer of Record (EOR) is a third-party organization that becomes the legal employer of your workforce in countries where your company doesn’t have a legal entity. The EOR handles all legal employment responsibilities—including payroll, taxes, benefits administration, employment contracts, and compliance with local labor laws—while you maintain complete control over the employee’s day-to-day work, responsibilities, and performance management. This arrangement allows businesses to hire talent in foreign markets without establishing a local subsidiary, branch office, or navigating complex international employment regulations independently.
EOR services are essential for companies expanding internationally, hiring remote talent across borders, testing new markets before committing to a full entity setup, or managing compliance in countries with complex labor regulations. The business value is substantial: companies can enter new markets in days rather than months, significantly reduce legal and administrative overhead, mitigate compliance risks, and maintain flexibility to scale operations up or down without the long-term commitments associated with entity establishment. For many organizations, an EOR transforms international hiring from a months-long legal project into a streamlined operational process.
The core advantage of using an EOR extends beyond simple administrative convenience. Companies gain access to local HR expertise, ensure compliance with constantly changing labor laws, protect themselves from significant legal and financial penalties, and provide employees with locally compliant contracts and competitive benefits packages. This is particularly valuable in regions with strict employment protection laws, complex tax structures, or where labor regulations differ substantially from your home country’s framework.
How Much Does Employer of Record (EOR) Cost?
EOR pricing typically follows one of three models: a flat monthly fee per employee (ranging from $300 to $800+), a percentage of the employee’s gross salary (usually 8-15%), or a hybrid combining a base fee with a percentage component. The actual cost varies significantly based on the destination country, employee seniority and salary level, benefits package complexity, and the provider’s service structure. Higher-cost jurisdictions like Western Europe, Australia, and parts of Asia generally command premium pricing due to more complex compliance requirements and higher statutory benefit costs.
However, businesses must look beyond the headline rate when budgeting for EOR services. A critical issue affecting actual costs is the provider’s operational model and foreign exchange practices. Many EOR platforms function solely as aggregators or resellers, marking up services from local providers by 100% or more while adding foreign exchange conversion margins of 4-5% on top of wholesale rates. This means an assignment that costs $300 locally can result in monthly invoices exceeding $1,000—with the markup providing no additional value to your business or employees. These hidden costs compound monthly and can represent tens of thousands of dollars in unnecessary expenses per employee annually.
When evaluating total cost of ownership, companies should request transparent breakdowns showing the base service fee, local provider costs (if applicable), FX conversion rates compared to mid-market rates, and any additional charges for onboarding, offboarding, or administrative changes. The cheapest option isn’t always the best value, but understanding exactly what you’re paying for—and whether you’re being charged multiple layers of markup—is essential for accurate budgeting and vendor selection. Direct relationships with licensed local providers, combined with wholesale FX rates, can reduce actual costs by 40-60% compared to aggregator platforms while maintaining or improving service quality.
Benefits and Key Features
The primary benefit of EOR services is rapid market entry without entity establishment. Setting up a legal entity typically requires 2-6 months, costs $20,000-$100,000+ depending on jurisdiction, and creates ongoing compliance obligations even if you only employ one person. An EOR enables compliant hiring within 5-15 business days, eliminates entity maintenance costs and complexity, and provides immediate access to local benefits infrastructure that would otherwise require extensive negotiation and setup. This speed-to-market advantage is particularly valuable for companies testing market viability, hiring key personnel in new regions, or responding quickly to business opportunities.
Compliance management represents another critical feature set. Employment law varies dramatically between countries—from probation period requirements and termination procedures to mandatory benefits, working time regulations, and employee data protection rules. EOR providers maintain expertise in local regulations, ensure employment contracts meet statutory requirements, calculate and remit taxes correctly, manage mandatory benefits enrollment, and adapt to regulatory changes without requiring your HR team to become experts in dozens of legal frameworks. This significantly reduces the risk of costly compliance failures, which can include back taxes, penalties, legal disputes, and reputational damage.
Operational efficiency and employee experience improvements complete the value proposition. Quality EOR services provide local language support, establish employees on locally recognized contracts with competitive benefits, handle payroll in local currency on expected payment schedules, and manage administrative requirements like work permits or social security registrations. For your internal teams, consolidation of international employment management—regardless of whether employees are in five or twenty-five countries—into unified processes, reporting, and vendor relationships reduces administrative burden substantially. The best EOR solutions integrate these capabilities into centralized platforms where your HR team, employees, and local providers collaborate seamlessly, with account management support ensuring issues are resolved quickly and employment runs smoothly across all jurisdictions.
Common Use Cases
International expansion and market testing represent the most common EOR use case. When companies identify growth opportunities in new geographic markets, hiring local sales representatives, customer success managers, or market researchers through an EOR allows them to establish market presence and validate business potential before committing capital to entity establishment. For example, a US-based SaaS company expanding into Germany might hire three sales professionals through an EOR to build a customer pipeline and prove revenue potential before investing $50,000+ in GmbH establishment. If market conditions don’t meet expectations, the company can wind down operations without the complexity and cost of dissolving a legal entity.
Remote talent acquisition has become increasingly important as companies embrace distributed work models. Organizations frequently identify ideal candidates in countries where they lack legal entities and have no immediate plans for broader expansion. Rather than losing exceptional talent or limiting hiring to entity locations, EOR services enable companies to hire the best person regardless of location. A UK technology company might hire a senior machine learning engineer in Canada, a product designer in Portugal, and a customer support specialist in the Philippines—all managed through a single EOR relationship without establishing three separate entities. This approach maximizes talent pool access while maintaining employment compliance.
Specialized project work and temporary assignments also benefit from EOR arrangements. Companies executing fixed-term projects, opening temporary offices for events or construction projects, or deploying employees internationally for 6-18 month assignments can utilize EOR services to maintain compliance without permanent establishment concerns. For instance, a construction firm managing a two-year infrastructure project in Vietnam might employ 15 local staff and deploy five employees from headquarters through an EOR, ensuring all personnel are employed legally while avoiding the complexity of establishing and later dissolving a Vietnamese entity for a time-limited engagement. Similarly, companies with seasonal business fluctuations can scale workforces up and down through EOR relationships more flexibly than managing entity-based employment.
How to Choose a Provider
The most critical factor in provider selection is understanding their operational model and identifying whether you’re working with a direct provider network or an aggregator-reseller. Many platforms marketed as global EOR solutions don’t actually employ your staff or maintain their own local entities—they simply act as intermediaries, reselling services from local providers while adding substantial markups. These aggregator models typically charge 2x or more compared to the actual local provider cost, creating unnecessary expense layers. Additionally, these platforms often apply foreign exchange conversion rates 4-5% above wholesale mid-market rates, compounding costs further. An assignment costing $300 with a local provider can balloon to $1,000+ monthly when filtered through aggregator markups and inflated FX rates. Before committing, explicitly ask whether the provider maintains their own licensed entities in your target countries or resells third-party services, and request transparent cost breakdowns separating service fees from local provider costs.
Beyond cost transparency, evaluate the provider’s compliance infrastructure and service delivery model. Verify that providers maintain proper licensing in your target jurisdictions—this varies by country but often includes business registration, employment agency licensing, or specific authorizations to act as employer of record. Request evidence of employment practices liability insurance and ask about their compliance updating procedures as regulations change. The service delivery approach matters significantly: platforms that connect you directly with licensed local providers while offering centralized management technology typically deliver better outcomes than those adding multiple intermediary layers. Look for solutions providing unified platforms where your HR team, employees, and local providers collaborate in real-time, with visibility into employment documentation, payroll processing, and administrative workflows rather than operating through email chains and disconnected systems.
Finally, assess value-added capabilities that differentiate adequate from excellent EOR services. Dedicated account management—where a specific person understands your business, knows your employees, and proactively addresses issues—prevents minor administrative matters from becoming major disruptions. FX payment systems offering wholesale conversion rates rather than marked-up retail rates can save 3-5% on every payment, representing thousands of dollars per employee annually. Integration capabilities with your existing HRIS, payroll, or accounting systems reduce duplicate data entry and errors.
NEO addresses these considerations comprehensively by connecting clients with vetted, locally-licensed providers who ensure full compliance, while offering a centralized platform where employers, employees, and providers collaborate seamlessly. Our wholesale FX rates on payments maximize your budget efficiency, and our dedicated account management services provide ongoing guidance to ensure smooth operations across all your global employment activities. This integrated approach eliminates the fragmentation typically associated with managing international teams across multiple vendors and systems.
