Global hiring can help you overcome skills shortages, boost innovation, and operate around the clock. But to avoid high costs and compliance issues, you need the right global hiring solution… Choose the wrong option and you can end up spending thousands in fees or hours navigating local laws and managing admin.
In this complete guide, we explore how an Employer of Record (EOR) allows you to easily enter (and exit) new markets without worrying about staying on top of local laws or paying high costs to a global staffing agency.
We’ll start by exploring exactly what’s involved in an EOR solution before giving you a complete picture of the risks and benefits associated. We’ll then take a closer look at how Employer of Record solutions stack up against other global hiring approaches and offer advice for choosing an EOR that provides maximum value and the most seamless possible service.
Throughout, we’ll provide insights from our Co-Founder & President of Field Operations, Amritpal Singh who has 20 years of global hiring experience and has grown a distributed team of 400+ people.
Get a closer look at Multiplier’s EOR platform
What is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party organization that helps you hire, onboard, and manage employees in another country. Let’s say your company is based in the USA, for example, and you want to hire a new team member in Germany. With an EOR, you can quickly hire and onboard new team members without having to set up a local entity which complies with local laws.
As the legal employer of your employees, an Employer of Record takes on responsibility for compliance and manages HR tasks while you retain operational control. This means you don’t have to worry about compliance or handling HR tasks like payroll, benefits administration, expense management and IT asset distribution. However, as an employer, you’ll still manage the employees’ day-to-day activities, such as job duties, performance, and work schedules.
What’s included in Employer of Record (EOR) services?
An Employer of Record service takes on the compliance obligations involved with hiring and managing employees. This includes supporting you in advising on local employment and tax laws and helping you avoid employee misclassification. An Employer of Record will usually help you manage the entire employee lifecycle from onboarding through to offboarding within an Employer of Record platform — software that helps you retain visibility over all key processes.
Beyond this, what’s involved in an Employer of Record (EOR) offer varies from provider to provider. However, the service should include:
- Global payroll support.
- Benefits administration and insurance access.
- IT asset distribution.
- Expense management.
- Local HR advisors with in-country expertise.
- Tax deposits and filings.
- Workers’ compensation administration.
- Issuance of tax forms, such as W-2s.
- Employment contract generation and management.
- Employee onboarding and offboarding support.
- Certificate of Insurance (COI) maintenance.
- I-9 form completion and storage.
- Employee termination procedures.
- Support for visas and work permits.
Which countries are (Employer of Record) EORs present in?
EORs cover many major markets across the world. Multiplier, for example, can help you onboard, hire, and manage employees in 150+ countries. This includes:
- Employer of Record India
- Employer of Record Philippines
- Employer of Record United States of America
- Employer of Record Canada
- Employer of Record Australia
- Employer of Record Brazil
- Employer of Record United Kingdom
- Employer of Record Egypt
- Employer of Record South Korea
- Employer of Record Malaysia and more countries
How does an Employer of Record work?
In this section, we lay out a step-by-step overview of how EORs typically work using Multiplier as a reference.
Step 1: Employer of Record contracts and agreements
When you identify a new hire, an Employer of Record crafts a contract that adheres to local labor laws and industry standards. Multiplier, for example, can generate a locally compliant contract in minutes.
At this stage, you’ll also sign an EOR agreement which includes the following:
- Scope of services: This section outlines the specific services the Employer of Record will provide.
- Duties and responsibilities: This will clearly state what the Employer of Record is responsible for to prevent misunderstandings and disputes.
- Fees and payment terms: This outlines the costs of the EOR’s services, how these fees are calculated, and the payment schedule.
- Terms: This is the duration of the contract and conditions under which either party can terminate the agreement.
- Liability and indemnity: This covers who is responsible in case of legal issues or disputes and to what extent each party is liable.
- Confidentiality: This details how the Employer of Record will work with you to protect sensitive information, including employee data and business strategies.
- Dispute resolution: This outlines the process for resolving any disagreements or conflicts that may arise during the term of the agreement.
- Governing law: The agreement should specify which jurisdiction’s law will govern the contract.
Step 2: Employer of Record onboarding
A great Employer of Record provides a meticulous onboarding process to ensure they have collected all the information required to stay compliant with local laws. However, the key is that they also move quickly so you can hire new staff before the competition.
Our onboarding and implementation specialists are designed to get you up and running as quickly as possible. You can generate a locally compliant contract in minutes with only compensation information and employment terms. Then your new hire can be ready to work in as little as 4 hours after they upload their documents in our easy self-service platform.
Step 3: EOR payroll and benefits administration
You’ll delegate payroll calculations, tax withholdings, and employee benefits administration to the EOR. This ensures accurate, timely payments and strict adherence to complex local tax regulations.
With Multiplier’s global payroll solution, you can automate multi-country tax, benefits, and compensation calculations and view all payment journeys in a single dashboard. This means no more navigating between local vendors when hiring globally!
Step 4: Ongoing support from an EOR
The EOR provides continuous, personalized support throughout your contract. This includes addressing complex compliance challenges such as ensuring employees are terminated in line with local laws and helping you avoid employee misclassification where new hires are incorrectly classified as contractors.
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What are the benefits of an Employer of Record solution?
An Employer of Record is more than just a solution to facilitate remote work. It’s a strategic necessity as companies expand and encounter talent shortages.
Whether due to aging populations that shrink the workforce, emerging technologies that leave skill gaps, or the inevitable challenge of finding enough workers to scale, many companies can’t find enough workers. As Singh puts it, the problem is simple — “the only way for a country to expand its economy is to grow its companies. And the only way for companies to grow is to add more people.”
An Employer of Record helps them fill gaps with global hiring — expanding their talent pools without massively increasing their overheads or workload. Here’s how:
- Reduced complexity: An Employer of Record uses entities that are already established and leverages local experts with in-country knowledge. This means you can move into a new market more quickly and secure talent before the competition.
- Cost savings: Unlike local entities or staffing agencies, EORs charge an affordable, fixed rate. They eliminate costs like payroll services, compliance advisors, and transfer pricing, making them ideal for businesses of any size, including small-medium enterprises.
- Time savings: EORs expedite market entry and handle workforce management tasks—onboarding, payroll, benefits, and compliance—freeing up internal resources.
- Reduced Risk: With compliance handled locally by the EOR, companies avoid risks tied to market entry, regulatory fines, and fluctuating wage costs, offering a safer way to test new markets.
For a closer look at the benefits of Employer of Record solutions, check out our complete guide.
Employer of Record alternatives
To understand Employer of Record services, it helps to understand their alternatives too. Here we explore how an Employer of Record compares to an Agent of Record (AOR), Professional Employer Organization (PEO), and global staffing agency.
Organization | Employer of Record (EOR) | Professional Employer Organization (PEO) | Staffing Agency | AOR |
Definition | The EOR acts as the official employer and is responsible for hiring, managing HR and payroll, and ensuring legal compliance. | A PEO collaborates with companies in the same country to manage HR tasks resulting in shared legal responsibility for the employees. | A global staffing agency is an organization that hires international talent for you on a contract basis. | An Agent of Record (AOR) is a solution that helps you hire and manage international independent contractors. |
Responsibility | The EOR takes on full responsibility for ensuring employment compliance, managing tax obligations, and handling payroll matters. | The PEO shares employment compliance, tax, and payroll responsibilities with the client company. | The staffing agency takes on the responsibility for compliance with local laws. | An AOR doesn’t become the legal employer of your workers but instead acts as a hiring facilitator. This means they handle classification, oversee payments, create contracts, and manage compliance. |
Control | The client company retains authority over its employees’ day-to-day tasks and responsibilities. | The client company maintains control over day-to-day tasks and responsibilities while also collaborating with the PEO for HR management. | You maintain a regular working relationship with your international employees, though they are technically employed by the staffing agency. | Neither you nor the AOR has control over the contractors. |
Best For | Companies looking for a straightforward, cost-effective global hiring. | Small to mid-sized businesses looking for help with local HR tasks. | Companies that need contract or project-based staff. | Companies that want to hire contractors globally. |
Are there risks involved with using an Employer of Record?
Some companies worry that using an Employer of Record opens them up to permanent establishment risk where they accidentally create a taxable presence in a foreign country. However, this is typically a myth.
Most business activities managed through an Employer of Record (EOR) aren’t considered by the tax authorities because the EOR is exporting services from one country to another.
The main exception is when an employee hired via EOR services engages in direct sales within the country where they are employed, as this involves interacting with the local market. In this case, though, the EOR would invoice VAT for the service without you needing to think about it.
Meanwhile, some companies worry more generally about handing over control. They have to trust the Employer of Record with sensitive data, important HR processes, and ultimately legal responsibility.
It’s important to note that Employer of Record services are heavily regulated so the risk is actually fairly minimal, but it’s still important to take your time to find the right solution. Read our next section to discover what to look out for in an EOR solution.
How to choose an Employer of Record solution:
The top EOR companies have all of these key features:
- A centralized platform: You need a single global hiring tool where you can review all important information in one place and avoid delays with tools for expense management, benefits, and onboarding/offboarding.
- Comprehensive coverage: Multiplier, for example, allows you to hire team members in 150+ countries meaning you can source in-demand skills in emerging markets across the world.
- Owned entities: Employer of Record solutions either use their own entities or partner with local affiliates to help you legally hire talent; by choosing an EOR that owns a high number of their entities, you can avoid delays and unexpected costs.
- Local experts: To ensure compliance, an Employer of Record needs to be able to access insights about cultural/regional nuances of employment practices.
- Localized benefits: This means you can provide equitable compensation and attract talent across the globe.
- A strong global payroll solution: To help simplify your processes, an Employer of Record should give you complete visibility over the payment journey with automated calculations, integrations with HR workflows, and reports.
- An efficient onboarding process: This will allow you to move quickly to secure top talent before the competition.
- Compliance-by-design: A compliant-by-design Employer of Record solution automatically ensures that you follow local employment, payment, taxation, and data protection laws with no need for manual work.
- Strong measures to protect employee data: Multiplier, for example, is 100% GDPR compliant and SOC 2 Type 1,2 certified. We also host our data on AWS.
Multiplier meets all of the above points and more, providing a compliant-by-design Employer of Record solution that makes moving in and out of new markets easy. We also offer the lowest total cost of ownership on the market. Got questions? You can access human support, 24/5.
Make global hiring a breeze. Book a demo to find out more.
Employer of Record FAQs
1. How can I find a reputable Employer of Record provider?
Finding a reputable Employer of Record provider involves conducting thorough research. Look for providers with a strong track record, positive client testimonials, and extensive experience in the countries you’re targeting.
2. Can Employer of Record services be customized for my industry?
Yes, EOR services can often be customized to suit specific industry requirements. A good Employer of Record provider will understand the nuances of different industries and adjust their services accordingly.
3. How does Employer of Record differ from traditional employment?
Traditional employment involves a company directly hiring and managing all aspects of an employee’s work life, including payroll, taxation, and benefits. In contrast, an Employer of Record takes on these responsibilities, freeing up the company to focus on its core business operations. The company still maintains control of employees day to day.
4. What should I include in an Employer of Record agreement?
An Employer of Record agreement should clearly outline the responsibilities of both parties. It typically includes details about payroll management, employee benefits, tax compliance, termination procedures, and dispute resolution.
5. Is Employer of Record suitable for startups and small businesses?
Absolutely. EORs are particularly beneficial for startups and small businesses as they allow these companies to quickly tap into global talent pools without the need to navigate complex foreign employment laws, set up foreign entities, or pay high costs to a global staffing agency.
6. What industries benefit the most from Employer of Record services?
While Employer of Record services can benefit nearly any industry, they are especially advantageous for sectors like technology, healthcare, manufacturing, retail, consulting, and non-profit. These industries often require specialized talent that may not be readily available domestically, making international hiring a necessity.
7. How much does an Employer of Record typically cost?
Estimating the cost of an Employer of Record (EOR) typically relies on various factors that can make each pricing unique. Some of these factors include:
- Location: The country or region where your employees are based can significantly affect costs. This is due to varying local legal and compliance requirements which the Employer of Record must adhere to.
- Number of employees: Generally, EORs charge based on the number of employees you need to onboard. However, the charges per employee might decrease as the number of employees increases.
For specific pricing, it’s often recommended to consult the pricing page of the EOR provider or reach out directly for a custom quote tailored to your particular business needs and the specifics of your global hiring demands.
8. Does the Multiplier EOR have a software platform and what features does it include?
When considering an Employer of Record (EOR), discerning whether they offer a software platform is crucial. Not all EORs provide such a platform, but Multiplier differentiates itself with a robust, intuitive software solution.
Prospective users have the opportunity to explore its features through a demo before making any commitment. This allows companies to assess first-hand how Multiplier’s Employer of Record platform can streamline their global employment processes.
