Employer of Record guidebook
An Employer of Record (EOR) onboards and employs your people through its own local entity, and takes on every employer obligation. See how the arrangement works, when it fits, and what it costs against incorporating.
Why companies look at EOR
To pursue untapped opportunities, companies have an increasing ambition to expand their operations globally. Until recently, the only route popularly taken was to set up a legal entity in each country they wished to operate in.
Months of registration time, and sometimes even longer, before anyone can be hired.
Heavy cost of incorporating and managing operations.
Operational expenses like office space, country-specific contributions and benefits.
Increased risk, often an unnecessary investment for a business experimenting with a new market.
Employ through the EOR's local entity in countries where you don't have one.
All employer related obligations are taken up by the EOR.
A fraction of the cost: $9,000 average per employee, against $90,000.
Global expansion becomes much less complex, with setup in weeks.
Many organisations are now turning to EOR. But it still remains a confusing topic, and a clear picture of how the arrangement works is what lets you make a confident decision.
How EOR works
The EOR essentially becomes the legal employer of the employees your company intends to deploy, and performs a variety of activities and obligations on behalf of your organisation. Companies engage EOR partners to avoid months, and sometimes even longer, of setting up their own legal entities.
Say you want to hire in multiple Asian countries, but only have an entity presence in France. Instead of setting up an entity in each Asian country, you simply share who and where to hire, along with the remuneration details, with the EOR.
Has remote employees overseas without a local entity. Engages a global company to serve as EOR through its global employment entities.
Its employment entities onboard your employees in the respective countries. It:
Work remotely for the home company, while legally employed by the EOR.
Because it is the legal employer, the EOR carries the tasks that would otherwise need a local entity and a local team.
In countries where you don't have a legal entity, and issues important documentation like the offer letter and employment contract.
Unless specifically restricted by host country regulations, and takes care of immigration, work permits and other registrations needed to work in a country.
And manages the required social security contributions.
Some EOR providers also help with cultural and language training for your expatriate employees.
Cost comparison
Average per employee cost of setting up a local entity, compared with hiring through an EOR partner.
| Cost category | Entity setup | EOR |
|---|---|---|
| Human resource, recruitment and payroll | $27,000 | Nil |
| Finance and accounting | $25,000 | Nil |
| Compliance and legal consulting | $4,000 | Nil |
| Infrastructure cost | $24,000 | Nil |
| General operating expenses | $10,000 | Nil |
| EOR partner cost | None | $9,000 |
| Average per employee | $90,000 | $9,000 |
of your global expansion cost saved with EOR.
Figures are the average per employee comparison published in the guidebook. Actual costs depend on the country, headcount and scope.
Areas of support
The areas that accelerate your international expansion, including two where Expat Orbit goes further than most EOR partners.
While the employees work for you, the EOR is the legal employer, taking responsibility for sponsoring your employees' visa applications.
Requirements for visas and work permits depend greatly on country specific rules and your employee's nationality, so careful consideration of them is essential. With the EOR's local expertise, you get accurate information on time and avoid administrative delays.
Read our India Visa and Immigration GuideTo ensure compliance with local authorities, agreements between the EOR partner, the employees and your organisation must be carefully drafted.
Employment contracts should take into account:
Most things, such as working hours, paid leave, national holidays and termination rules, differ from country to country.
Where employees need a regular office environment to carry out their job functions, your EOR partner may be able to support you with office space and technical infrastructure.
With their know-how of local markets, they can negotiate and offer a suitable office space for your employees.
Settling in challenges cause expatriate employees to leave mid-term, which results in significant cost leakages for businesses.
To tackle this problem head-on, on your request we arrange for:
While most EOR partners cover the areas above, our team of global mobility professionals and labour law experts can also assist you with:
The guidebook puts the arrangement diagram, support areas, use cases and full cost breakdown in one document you can circulate before the decision meeting.
Common questions
Yes. EOR is legal unless there are local restrictions in the country of overseas employment. Two examples of such constraints:
Apart from such local constraints, engaging an EOR is completely legal. As it is their core business, EORs deploy dedicated legal, payroll and compliance teams, so hiring through an EOR eliminates a large amount of legal and regulatory concern compared with hiring independently.
A well-structured EOR arrangement, supported by robust documentation, may help reduce PE risk in the host country. However, other parameters also need to be considered, so PE risk cannot be completely mitigated with an EOR arrangement alone.
To prevent co-employment concerns, an EOR steps in as the legal employer and assumes all employer related obligations under local regulations. This lets you expand into new geographies and hire foreign workers while lowering the chance of permanent establishment problems. Where establishing an entity is time consuming and expensive, an EOR offers a balanced solution to your global employment and expansion goals.
A Professional Employer Organisation (PEO) handles payroll, tax withholding/PAYE, human resources and other compliance for businesses that prefer to outsource these operations. It supports both employees and employers, and improves management and compliance quality.
An EOR provides the same services, but also serves as the legal employer of the employees in geographies where the home company has no local entity or presence.
Businesses can also explore smart outsourcing by engaging an international team with global experience, which Expat Orbit's Virtual Employee (VE) support caters to.
The client entity outsources specific tasks, jobs and functions to Expat Orbit. As a contract for service, Expat Orbit handles the execution and recruits employees with the relevant competence, exposure and experience, in close collaboration with the client. Operating remotely, Virtual Employees work exclusively for the client entity on the assigned activities.
