Employer of Record (EOR): What It Is and How It Helps Businesses Hire Globally
- Viet Nguyen
- Mar 1
- 3 min read
Expanding your team internationally can be a game-changer for your business, but navigating legal, payroll, and compliance challenges in foreign markets is complex. That’s where an Employer of Record (EOR) comes in.
What Is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of a company in a country where they don’t have a legal entity. The EOR handles everything from payroll to compliance, allowing businesses to hire talent globally without setting up a local entity.
How Does an Employer of Record Work?
Instead of a company needing to register as a legal employer in multiple countries, the EOR becomes the official employer of the worker. However, the worker still reports to and works for the hiring company. The EOR takes care of all legal and administrative responsibilities, allowing businesses to focus on operations without the burden of international employment laws.
1. Employment Contracts
An EOR ensures that employment contracts comply with local labor laws. This includes setting up terms of employment, probation periods, notice requirements, and country-specific benefits. Using an EOR reduces the risk of worker misclassification and non-compliance with legal regulations.
2. Payroll and Tax Compliance
Managing global payroll means handling different tax regulations, social security contributions, and employee benefits. An EOR ensures payroll accuracy, timely payments, and proper tax deductions, mitigating financial risks for the company.
3. Benefits and HR Administration
Each country has unique mandatory employee benefits, such as healthcare, pensions, paid leave, and severance. The EOR manages benefits administration, ensuring legal compliance while offering competitive perks to attract top talent.
4. Compliance and Legal Support
Labor laws vary by country, and non-compliance can lead to legal risks, penalties, and fines. An EOR ensures compliance with labor laws related to termination, employment classification, minimum wage, and working hours. They also stay updated with evolving regulations to protect the business.
5. Termination and Offboarding
When an employee exits the company, the EOR handles the offboarding process in accordance with local laws. This includes final salary payments, exit paperwork, and compliance with termination policies, reducing potential legal disputes.
Why Use an Employer of Record?
Companies use an Employer of Record service for several reasons:
Hire Internationally Without a Local Entity – Setting up a legal entity in another country is costly and time-consuming. An EOR enables rapid hiring without this complexity.
Faster Market Entry – Businesses can onboard employees quickly, sometimes within days, instead of months.
Compliance & Risk Mitigation – Avoid issues related to worker misclassification, tax errors, and employment law violations.
Cost Savings – Companies can eliminate the costs of entity registration, local HR teams, and legal consultants.
Focus on Business Growth – Hiring through an EOR service lets companies expand their teams without administrative burdens.
Who Should Use an Employer of Record?
An EOR is ideal for:
Startups and scale-ups looking to hire remote employees internationally.
Companies expanding into new markets without establishing a local entity.
Businesses hiring distributed teams across multiple countries.
Organizations that need full compliance in international hiring.
Employer of Record vs. PEO: What’s the Difference?
Many companies confuse an Employer of Record (EOR) with a Professional Employer Organization (PEO). The key difference is that an EOR serves as the full legal employer of the worker, while a PEO acts as a co-employer, requiring the company to have a legal entity in the country where the worker is hired.
An EOR allows businesses to hire internationally without setting up a local entity. It manages payroll, compliance, and benefits while ensuring that all employment regulations are met. On the other hand, a PEO provides HR and administrative support but does not take on the legal employer role, meaning companies still need to establish a local presence.
For businesses looking to expand into new markets quickly and without the complexity of setting up entities, an EOR is often the more practical choice.
Is an Employer of Record Right for You?
If you’re looking to expand globally, hire international employees, or enter a new market quickly, an Employer of Record (EOR) is the fastest and most compliant way to do it. It simplifies hiring, reduces risks, and saves costs, allowing businesses to focus on growth without the complexities of global employment laws.
Hire in Latin America with Workmate
Thinking about hiring in Latin America? Workmate provides EOR services to help businesses hire, manage payroll, and stay compliant across multiple countries.
