An employee comes to you with a request: they want to move to another country, but they also want to keep their job.
For the company, there’s just one problem. You don’t have a legal entity there.
At first, it can sound like the only options are to deny the move, ask the employee to become a contractor, or establish a new entity just to keep one person employed.
There is another option.
In many countries, an Employer of Record (EOR) can employ the person locally on your behalf. That means the employee can continue working with your company while the EOR handles the local employment infrastructure you don’t have.
The important distinction is that changing the employee’s legal employer does not necessarily mean changing their role within your organization.
They can still report to the same manager, work with the same team, use the same systems and continue progressing within the business.
Here’s what employers should know before approving the move.
What happens when an employee moves to another country?
Once an employee begins working permanently from another country, you generally can’t assume their existing employment arrangement can simply continue unchanged.
Their new location can introduce a different set of requirements around employment law, payroll, tax withholding, social contributions, benefits and immigration. Employers also need to consider potential corporate tax implications depending on what the employee does and the authority they have within the business.
That means keeping them on their existing home-country payroll indefinitely may not be an appropriate solution.
The first questions HR should ask are:
- Where is the employee moving?
- Is the move temporary or permanent?
- Do they already have the legal right to work there?
- Does the company have an entity or payroll registration there?
- What responsibilities will they have from the new country?
- Will their compensation or benefits need to change?
If you already have an entity in the destination country, an internal transfer may be relatively straightforward.
If you don't, an EOR may provide another route.
How an EOR can help you retain an employee who moves abroad
An Employer of Record is a local organization that becomes the employee's legal employer in the destination country.
The EOR typically manages areas such as:
- The local employment agreement
- Payroll
- Tax withholding
- Statutory contributions
- Required employee benefits
- Employment administration
- Locally compliant onboarding and offboarding
Your company continues to manage the employee's actual work: their role, responsibilities, goals, team and day-to-day performance.
This structure is commonly used when companies need to employ someone in a country where they do not have their own entity. It can also be used when an existing employee relocates internationally.
In practical terms, the employee may have a new legal employer while remaining part of the same company operationally.
Will the employee still feel like an internal employee?
This is one of the biggest concerns companies — and employees — have about an EOR transfer.
The EOR becomes the legal employer, but that does not mean the employee needs to become an outsider inside your organization.
Your company can generally continue managing the parts of the employee experience that sit within your business.
For example, the employee could continue to:
- Report to the same manager
- Work with the same team
- Use their existing company email address
- Access Slack, Microsoft Teams or other internal tools
- Remain in company directories
- Participate in performance reviews
- Attend company meetings and events
- Be considered for promotions and expanded responsibilities
The exact setup depends on your internal HR and IT systems, but an EOR arrangement does not inherently require someone to be treated like an external contractor.
That's an important distinction.
Legal employment and organizational membership are not necessarily the same thing.
The EOR handles the legal employment relationship in the local country. Your company still determines how the person fits into the team.
Can the employee keep the same email, SSO and internal systems?
Usually, this is more of an internal systems question than an EOR question.
Moving someone to an EOR does not inherently require you to remove their company email or change how they access internal tools.
If your systems allow it, the employee can continue using the same:
- Slack or Teams account
- SSO
- CRM access
- Project management tools
- Internal databases
- Learning systems
- Performance management tools
The part that may require more planning is your HRIS.
Some HR platforms tie employees directly to a particular employing entity, payroll account or benefits configuration. HR may therefore need to change the employee's legal entity in the system, create a new employment record or integrate information coming from the EOR.
The employee experience can still remain relatively seamless even if the back-end employment structure changes.
What happens to promotions and pay raises?
Using an EOR should not prevent an employee from progressing within your company.
You still decide whether someone:
- Gets promoted
- Receives a salary increase
- Changes roles
- Moves teams
- Receives a bonus
- Takes on management responsibilities
The difference is that employment changes may need to be communicated to the EOR so they can be reflected in the employee's local contract and payroll.
For example, if you increase someone's salary from €70,000 to €80,000, the EOR needs to update payroll accordingly and may need to amend employment documentation depending on local requirements.
That adds an administrative step, but it does not mean the employee needs to sit outside your normal career progression framework.
Does the employee need a new employment contract?
Often, yes.
Moving an employee from one country to another isn't normally as simple as changing the address on their existing contract.
The new employment arrangement needs to reflect the laws of the country where the employee will be working.
Depending on the circumstances, the previous employment relationship may need to end and a new local employment relationship begin through the EOR.
That creates some important questions for HR.
For example:
What happens to the employee's original start date?
If someone has worked for you for five years, you probably don't want your internal systems suddenly treating them like a brand-new employee.
Companies should determine how prior service will be recognized and how that affects internal tenure as well as any statutory employment rights.
What happens to accrued vacation?
Depending on the countries and structure involved, unused leave might need to be paid out, transferred or otherwise addressed during the transition.
What happens to bonuses or commissions?
Outstanding variable compensation should be documented before the move.
What happens to benefits?
The employee may move from their previous benefits plan onto a locally compliant benefits package offered through the EOR.
These details should be worked through before the transfer date rather than after the employee has already moved.
Can we simply make the employee a contractor instead?
Sometimes companies consider converting a relocating employee into an independent contractor because it appears simpler.
But changing an employee's label does not necessarily change the reality of the working relationship.
If someone continues to work full time for the same company, reports to the same manager, performs the same role and operates like an employee, contractor classification may need to be reviewed carefully under local rules.
Contractors and employees are different legal relationships.
An EOR can allow the company to retain an employment relationship rather than forcing an existing employee into a contractor arrangement purely because they changed countries.
Can the employee pay the EOR fee themselves?
This is occasionally suggested when the relocation is employee-requested rather than company-requested.
An employee might say:
"Keep the total cost of employing me the same and deduct the EOR cost from my compensation."
From an internal budgeting perspective, the idea is understandable.
But employers should be careful about structuring an arrangement as simply deducting an EOR fee from someone's salary.
Salary, minimum wage, statutory benefits, payroll deductions and employment costs are regulated differently from country to country. The company and EOR should determine what compensation structure is permissible in the destination country.
A more practical approach may be to establish the company's maximum total employment budget and then calculate what gross salary can be supported within it after considering:
- Employer taxes
- Mandatory contributions
- Benefits
- EOR fees
- Insurance
- Other employment costs
That lets the company evaluate whether the relocation can remain cost-neutral without treating the EOR fee as an informal payroll deduction.
Does using an EOR remove every risk created by the move?
No.
An EOR solves an important part of the problem: creating a local employment structure.
But international relocation can raise other questions.
Right to work
The employee still needs the legal right to work in the destination country.
Citizenship, permanent residence or an appropriate visa may be required depending on the individual.
An EOR arrangement does not automatically provide work authorization.
Corporate tax and permanent establishment
The employee's activities may also create corporate tax considerations for the company.
For example, the risk may be different for a software engineer working remotely than for a country manager negotiating and signing contracts on behalf of the business.
Using an EOR does not automatically eliminate permanent establishment risk.
Regulated roles
Certain professions or activities may require licenses, registrations or other local approvals.
The availability and structure of EOR arrangements themselves can also vary by jurisdiction.
These issues should be reviewed before approving the move.
What should HR check before moving an employee to an EOR?
The smoothest relocations happen when the company treats the move as an employment transition rather than simply a payroll change.
Before approving it, clarify:
EOR vs. opening a local entity for one relocating employee
For one employee moving abroad, establishing an entire legal entity can be disproportionate.
Creating an entity may involve incorporation, banking, payroll registrations, accounting, tax filings and ongoing corporate administration.
An EOR already has employment infrastructure in the destination market and can therefore provide a way to employ eligible workers without the company establishing its own entity.
The calculation can change as headcount grows.
If you eventually have a substantial team in the same country and expect to operate there permanently, opening your own entity may become worth evaluating.
But for a single employee relocation, an EOR can give employers another option between "you can't move" and "we need to open a subsidiary."
The employee can change countries without changing their place in your company
An international move doesn't necessarily have to mean losing a good employee.
If someone wants to relocate to a country where you don't have an entity, the first question shouldn't automatically be whether they need to resign or become a contractor.
The better question is:
Can we create a compliant employment structure that lets them continue doing the same job from the new country?
An Employer of Record can often provide that infrastructure. The legal employer may change. Payroll may change. Benefits may change.
But the employee's manager, team, responsibilities, email address and career at your company don't necessarily have to. For employers trying to retain good people while supporting a more international workforce, that's the part that matters most.
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