What is an Employer of Record (EOR)? A Complete Guide for 2025

Hiring remote global talent extends beyond just locating the perfect candidate; it involves navigating legal compliance, tax obligations, and country-specific regulations. This is where the Employer of Record (EOR) proves invaluable. An Employer of Record lets you hire full-time employees in 150+ countries without opening a local entity. An EOR receives all employment liability and accountability. It gives you the freedom to hire globally faster and reliably.

The number of EOR employees has nearly quadrupled since 2020, according to Samuel Dahan in a study available at SSRN. Conservative estimates suggest that EORs could serve over six million workers by 2028, reflecting the durability of remote work models.

This guide explains what an EOR actually does, when you should (and shouldn’t) use one, and how to vet providers so you avoid legal and payroll nightmares.

How does an EOR work in practice?

An EOR (Employer of Record) works by creating a legal and administrative “bridge” that allows a company to hire employees in a country where it doesn’t have a registered legal entity. In practice, the process generally follows these steps:

1. Hiring the Candidate

Your company handles the traditional hiring process: finding, interviewing, and selecting the candidate. You negotiate the job role, salary, and day-to-day responsibilities with the new employee, just as you would with any other hire.

2. The EOR Becomes the Legal Employer

Once the candidate accepts the offer, the EOR service takes over the legal employment process. The EOR creates and signs a locally compliant employment contract with the employee. On paper, the employee works for the EOR, not your company. They will solve all the paperwork, and you will receive your talent’s actual work.

3. The EOR Manages All Administrative and Legal Tasks

The EOR puts the employee on its payroll, handles all local currency payments, and withholds the correct income tax and social contributions (like social security, healthcare, and unemployment insurance).

As an expert on local labor laws, the EOR company ensures full compliance with the entire employment lifecycle, from hiring and contracts to termination. They stay up-to-date on changing regulations and mitigate any legal risks to your company.

4. Your Company Manages the Day-to-Day Work

While the EOR is the legal employer, your company retains complete control over the employee’s daily work. You are responsible for assigning tasks, managing performance, conducting reviews, and integrating the employee into your company’s culture.

If you want to give the employee a promotion, a raise, or make any changes to their role, you communicate this to the EOR, who then handles the legal and administrative paperwork.

Finally, an EOR allows you to focus on the strategic side of hiring and managing your talent, while they take on all the complex, high-risk administrative and legal burdens associated with international employment. It saves you significant time, cost, and complexity of setting up a legal entity in a new country.

Summary of all EOR services

Here are the key functions of an EOR service. The service handles a range of crucial HR tasks, including writing legal job contracts to protect a business’s ideas and prevent legal issues. It manages monthly payroll and taxes to ensure employees are paid on time and the business remains compliant with tax authorities. 

Additionally, it sets up benefits and pensions to meet local regulations and avoid fines, and handles all new-hire and exit paperwork for a smooth employee lifecycle. EORs also calculate severance and manage layoffs to mitigate the risk of wrongful dismissal lawsuits and properly store HR records to ensure the company passes audits and complies with security standards like SOC 2 and ISO 27001.

EOR vs. Other Hiring Models

The EOR services are often confused with other hiring models like staffing agencies and Professional Employer Organizations (PEOs), Direct Hiring, and Staffing Agencies. 

An EOR acts as the legal employer, managing all aspects of compliance, payroll, taxes, and HR support, offering a fast and flexible solution, particularly for global expansion, but at a potentially higher cost. PEO involves a co-employment relationship, where responsibilities are shared between the PEO and the client, offering moderate speed and flexibility with partial HR support. Direct Hiring places all legal and administrative responsibilities on the company itself, resulting in a slower process with higher operational costs but providing high-quality hires. Lastly, Staffing Agencies are primarily focused on hiring on behalf of the client, handling payroll, but leaving the client to manage taxes and most other administrative functions, offering a fast but potentially variable-quality solution.

Benefits of Using EOR Services

Using an Employer of Record (EOR) provides a host of strategic advantages for companies aiming to quickly expand their workforce, navigate complex regulatory environments, or establish a presence in new geographical markets. Below are the main benefits of employing EOR services:

1. Rapid Global Expansion

EOR services facilitate your company’s entry into new international markets without the necessity of establishing local legal entities. This significantly reduces both the time and costs associated with global expansion. For instance, in the competitive tech industry, EOR allows for the hiring of top-tier talent while ensuring compliance with all relevant regulations and laws.

Client Testimonial:

2. Compliance with Local Laws

Hiring globally introduces complexities such as varying employment standards and local labor laws. EORs ensure that your employment practices are in strict compliance with these laws, covering minimum wage, overtime regulations, holidays, leave entitlements, and more.

3. Simplified Payroll Management

EORs provide a unified system to manage payroll operations across multiple jurisdictions efficiently, ensuring compliance with local tax withholding and statutory deductions. This service extends to managing payroll in local currencies and adhering to local tax laws, thus ensuring timely and accurate fiscal compliance.

4. Efficient Recruitment and Onboarding

Using EOR services will significantly enhance your recruitment and onboarding processes. EORs are experts in talent acquisition, quickly identifying and hiring the best candidates for your needs. They manage all administrative tasks, including paperwork and compliance checks, ensuring a smooth and swift integration of new hires. The established procedures and tools expedite recruitment and onboarding, reducing time-to-productivity.

Client Testimonial

5. Cost Savings

EOR services consolidate several functions under one umbrella, significantly reducing the administrative burdens of HR, payroll, and legal compliance.

The financial advantages gained by using EOR services instead of setting up a local entity or managing international hires directly are:

• Reduced Overhead Costs: No need for physical office space, utilities, and local infrastructure.
• Lower Administrative Costs: The EOR handles payroll, taxes, and compliance, reducing the need for additional HR staff.
• Economies of Scale: EORs often have established processes and relationships, which can lead to cost savings in hiring and managing employees.
• Avoidance of Legal Fees: EORs ensure compliance with local laws, minimizing the risk of costly legal issues.

Client Testimonial

6. Simplified HR Operations

As your business expands globally, the complexities of managing HR operations across different jurisdictions also increase. EOR services streamline the management of these responsibilities, minimizing the administrative burden and allowing your business to focus more on growth and less on operational logistics.

7. Attract a Wider Global Hiring Pool

EORs enable businesses to access niche or specialist skills that may be difficult to find in their home country, at a lower salary cost and zero legal burden. Attracting a wider global talent pool is the most significant strategic advantage offered by Employer of Record (EOR) services. By partnering with an EOR, companies can overcome traditional barriers to international hiring and focus on securing the best talent available worldwide.

Checklist: Does Your Company Need EOR Services?

How to Choose the Right EOR Partner?

Not all EOR services offer the same benefits. The best way to ensure you’re selecting the right partner is to first understand what you need and what you’re looking for, and then see if they match those requirements.

Generally, these are some of the relevant aspects to look for in EOR providers:

1. The Cost

Look for an Employer of Record (EOR) that offers transparency in its pricing structure. While some EORs may not list their prices directly on their website, this presents an opportunity for you to reach out directly. During your communication, ensure that they provide a clear breakdown of their fees to avoid any unexpected charges in the future.

2. Consider the Locations 

Does the EOR provider operate in the countries where you intend to hire? It’s crucial to verify that the EOR has a presence in the specific regions you’re targeting for your recruitment efforts. If not, you might find yourself needing to engage with multiple EOR providers, which can be both costly and inefficient.

3. Customer Support 

Partner with organizations that prioritize attentive responses to both your team’s and your employees’ needs. Your EOR partner plays a fundamental role in engaging with your current employees and integrating new hires on your behalf. To evaluate this, make sure to check out the company’s case studies, reviews, and what others have to say about their services. 

4. Precision in Employer Burden Costs

Look for a provider that offers precise calculations of employer burden costs. Accurate payroll computation extends beyond basic salaries to include various social contributions like health insurance, social security, and paid time off. These costs vary significantly across different markets, and it’s the responsibility of your EOR partner to present you with precise estimations of these expenses.

Top 3 Best EOR Services

If you still need guidance on which EOR services are better for your business, here is a selection of the best EOR services for your company’s needs. The Top 3 Best EOR services include DistantJob, which handles not only EOR, but also screens and vets global talent; GoGlobal, an EOR that can hire and vet people internationally, and Oyster, a well-known global employment platform.

1. DistantJob

DistantJob is a Canadian remote headhunting agency specializing in full-time IT and software talent worldwide. The agency focuses on helping North American companies hire elite developers and tech professionals from nearshore and offshore regions. DistantJob provides a full and comprehensive EOR service in addition to hiring, screening, vetting, and interviewing software developers, bringing you the best talent at a lower cost.

2. GoGlobal

GoGlobal is mainly an Employer of Record service that also provides recruitment support. They help companies to hire global remote employees in over 180 countries without setting up local entities. They handle the heavy lifting of local compliance, payroll, and benefits.

3. Oyster

Oyster is a global employment platform for companies of all sizes, from startups to large enterprises. It addresses the complexity of global hiring by serving as an Employer of Record (EOR), handling legal compliance, payroll, and benefits. Oyster’s unique advantage lies in its user-friendly, self-service platform and its mission-driven approach, which focuses on empowering a globally distributed workforce.

Conclusion

Employer of Record is the perfect solution for you if you’re hiring remotely. These services eliminate the complexity of international hiring by handling compliance, payroll, and HR management. 

Instead of spending months setting up legal entities and navigating foreign labor laws, you can hire top global talent in days, not months. And if you’re looking for an EOR provider, you are in the right place.

We understand the complexity of hiring talented software developers. It goes beyond headhunting, sourcing, and evaluating. It also involves taking care of all the legal and administrative aspects. This is why we offer an all-in-one recruitment and EOR solution for companies looking to expand their team with the best technical talent worldwide.

What’s in it for you?

From defining job requirements to finalizing paperwork, we take care of everything. We charge no initial fees; you only pay when you hire. Plus, we handle contract management and payments, allowing you to focus on your core business.

Interested? Let’s talk. 

Sharon Koifman

Sharon Koifman is the Founder and President of DistantJob, a leading remote recruitment agency specializing in sourcing top remote developers for US businesses. With over a decade of experience, Sharon is a recognized authority in remote workforce management, and his innovative strategies have made DistantJob a trusted partner for companies worldwide. Sharon's commitment to excellence in remote work extends beyond recruitment; he is a prolific author and speaker, sharing his insights on building and managing effective distributed teams. His thought leadership helps organizations navigate the evolving landscape of remote work.