Hiring people in another country sounds exciting, but it can also feel like you’re trying to solve a Rubik’s Cube blindfolded. Every country has its own maze of labour laws, tax rules, and paperwork that can make your head spin. If you’ve ever tried to figure out payroll in a place you’ve never even visited, you know what I mean.

That’s where the idea of an Employer of Record (or EOR, if you’re into acronyms) comes in. Think of it as your backstage pass to global hiring, someone else handles the legal headaches, so you can focus on building your team. It’s not magic, but for first-time global employers, it can feel pretty close.

What Is an Employer of Record

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of another company. The EOR handles all employment paperwork, tax filings, and legal compliance while the client company directs the employee's daily work.

In this arrangement, the EOR becomes the official employer on paper. This means the EOR's name appears on employment contracts, tax documents, and payroll records. The client company still manages what the employee does each day.

Think of it as sharing responsibilities: the EOR handles the legal side of employment, while the client company handles the work side. This setup allows companies to hire workers in countries where they don't have a legal business entity.

The three parties in an EOR arrangement include:

  • The EOR: The legal employer responsible for compliance

  • The client company: Directs the employee's work

  • The employee: Works for the client but is legally employed by the EOR

This model is especially helpful for companies expanding globally for the first time. It removes the need to set up a local company in each new country where they want to hire talent.

What Does an EOR Do

An Employer of Record handles specific employment tasks that would otherwise require local expertise or a legal entity in the employee's country. The EOR takes care of the paperwork while the client company focuses on the actual work.

Payroll and Taxes

The EOR manages the entire payroll process for international employees. This includes:

  • Calculating wages: Processing regular pay according to local requirements

  • Tax withholding: Deducting the correct amount of income tax based on local laws

  • Filing reports: Submitting all required tax documents to government authorities

  • Currency conversion: Ensuring employees are paid in their local currency

For example, an EOR hiring in Canada would handle Canada Pension Plan contributions and provincial tax variations, while an EOR hiring in the United States would manage Social Security and Medicare withholdings.

Benefits Administration

EORs also manage employee benefits according to local requirements and customs:

  • Mandatory benefits: Providing legally required benefits like healthcare, paid leave, and retirement plans

  • Optional benefits: Administering additional benefits the client company chooses to offer

  • Local compliance: Ensuring benefits meet or exceed local standards

In Canada, this might include provincial health insurance contributions and vacation pay calculations. In the US, it could involve managing state-specific benefit requirements.

Legal Compliance

EORs ensure that employment practices follow local laws:

  • Contract creation: Drafting compliant employment agreements in the local language

  • Work authorization: Supporting visa or work permit processes when needed

  • Labour law compliance: Following local rules for working hours, termination, and other employment matters

This compliance function is particularly valuable when hiring in countries with complex labour laws or frequent regulatory changes.

Why Use an EOR for Global Hiring

Companies use Employers of Record for several practical reasons, especially when hiring internationally for the first time.

Speed to Market

Setting up a legal entity in a new country typically takes 3-6 months and requires significant paperwork, legal fees, and ongoing maintenance. An EOR allows companies to hire in days or weeks instead.

This speed advantage helps companies:

  • Respond to opportunities: Quickly hire talent when market conditions are favorable

  • Test new markets: Explore potential in a country before committing to a permanent presence

  • Onboard talent fast: Bring on key employees without lengthy delays

For example, a Canadian tech company could hire a software developer in Germany within two weeks using an EOR, compared to several months if establishing a German subsidiary.

Reduced Risk

EORs significantly lower the legal risks of international hiring:

  • Compliance expertise: EORs stay current with changing employment laws

  • Misclassification protection: Properly classifying workers as employees rather than contractors

  • Liability management: The EOR assumes legal responsibility for employment compliance

This risk reduction is especially valuable in countries with strict labour laws or complex regulatory environments.

Simpler Operations

Using an EOR streamlines global employment:

  • Centralized management: One platform to manage employees across multiple countries

  • Consistent processes: Standardized onboarding, payroll, and benefits administration

  • Reduced administrative burden: Less paperwork and fewer systems to manage

This operational simplicity allows companies to focus on growing their business rather than managing international compliance.

EOR vs Staffing Agency vs PEO

When hiring workers, companies have several service options. Each works differently and serves different purposes.

EOR Employer of Record

An EOR becomes the legal employer of record for workers in countries where the client company doesn't have a legal entity:

  • Full legal responsibility: The EOR handles all employment obligations

  • Global focus: Designed for international hiring across multiple countries

  • No local entity required: The client company doesn't need a registered business in the employee's country

The EOR model is ideal for companies hiring internationally without establishing foreign subsidiaries.

EOR vs Staffing Agency

Staffing agencies and EORs serve different purposes:

  • Employment duration: Staffing agencies typically focus on temporary placements; EORs support long-term employment

  • Services provided: Staffing agencies primarily recruit and place workers; EORs handle ongoing employment administration

  • Legal relationship: With staffing agencies, the agency may or may not be the legal employer; with EORs, the EOR is always the legal employer

A staffing agency helps find talent, while an EOR helps employ talent you've already identified in countries where you don't have a legal entity.

EOR vs PEO

Professional Employer Organizations (PEOs) differ from EORs in several important ways:

  • Co-employment: PEOs create a shared employment responsibility; EORs take full legal responsibility

  • Geographic focus: PEOs typically operate within a single country; EORs specialize in international employment

  • Entity requirements: PEOs require the client to have a local entity; EORs don't require a local entity

For example, a US company might use a PEO to outsource HR for its domestic employees while using an EOR to hire employees in other countries.

How to Choose an Employer of Record

Selecting the right EOR partner involves evaluating several key factors.

Coverage and Expertise

EORs vary in their global reach and local knowledge:

  • Geographic coverage: Some EORs operate in a handful of countries, while others cover 100+ countries

  • Local expertise: Knowledge of country-specific laws and practices

  • Industry experience: Familiarity with role-specific requirements in your sector

For companies hiring in Canada, look for an EOR with expertise in provincial variations in employment law. For US hiring, seek an EOR familiar with state-specific requirements.

Pricing Models

EOR pricing structures vary widely:

  • Percentage model: Fees calculated as a percentage of employee salary (typically 8-15%)

  • Flat fee model: Fixed monthly rate per employee (often $400-$1,000 CAD per month)

  • Additional costs: Setup fees, termination fees, or currency conversion charges

When comparing EOR providers, request a complete breakdown of all costs to avoid surprises.

Technology and Support

The EOR's platform and service model affects both employer and employee experience:

  • User interface: Easy-to-use systems for onboarding, document management, and payroll

  • Support availability: Access to help when needed, ideally in relevant time zones

  • Integration capabilities: Ability to connect with existing HR or payroll systems

Modern EORs increasingly use technology to streamline employment processes. For example, Borderless AI uses artificial intelligence to automate contract generation and compliance checks.

How Much Does an EOR Cost

EOR services typically cost between 8-15% of an employee's salary or a flat fee of $400-$1,000 CAD per employee per month. The exact amount depends on several factors:

  • Location: Costs vary by country due to different compliance requirements

  • Services included: Basic payroll vs. comprehensive employment support

  • Number of employees: Volume discounts may apply for multiple hires

  • Employment type: Full-time vs. part-time or fixed-term

Additional fees may include:

  • Setup fees: One-time charges to establish the employment relationship

  • Termination fees: Costs associated with ending employment

  • Special services: Visa sponsorship, equity management, or supplemental benefits

Compared to establishing a legal entity, which can cost $15,000-$50,000 CAD upfront plus ongoing maintenance, an EOR is typically more cost-effective for companies hiring a small number of employees in a country.

Employer of Record Services in Canada and USA

EOR services in North America navigate the specific employment regulations of Canada and the United States.

Employer of Record Canada

An EOR in Canada manages the unique aspects of Canadian employment:

  • Provincial variations: Employment laws differ across provinces, affecting minimum wage, overtime, and termination requirements

  • Healthcare coverage: Managing provincial health insurance programs

  • Tax obligations: Handling federal and provincial income tax, Canada Pension Plan, and Employment Insurance

Canadian EORs ensure compliance with both federal requirements and provincial variations. This is particularly important because labour laws in Quebec differ significantly from those in other provinces.

Employer of Record Services USA

EORs operating in the United States manage:

  • State-specific compliance: Employment laws vary by state, affecting minimum wage, paid leave, and other requirements

  • Tax withholding: Federal, state, and local tax obligations

  • Benefits requirements: Health insurance and other mandated benefits

US-based EORs navigate the complex patchwork of federal and state employment laws. This complexity makes EORs particularly valuable for companies hiring across multiple US states.

Scaling Across Borders With Confidence

An Employer of Record provides a flexible approach to international hiring. Companies can test new markets without committing to permanent legal entities. This allows for strategic growth with lower risk.

As a company grows in a specific country, it may eventually make sense to establish a local entity. An EOR can support this transition by maintaining employment compliance during the handover process.

Modern EORs use technology to simplify international employment. AI-powered platforms automate repetitive tasks like contract generation and compliance checks. This reduces administrative work and helps companies make informed decisions.

For example, Borderless AI combines artificial intelligence with global employment expertise. The platform handles employment tasks across 170+ countries, allowing companies to focus on their core business while expanding globally.

Companies can use an EOR to build international teams quickly and compliantly. This approach works for businesses of all sizes, from startups hiring their first international employee to enterprises expanding into new markets.

FAQs About Employer of Record

What is the difference between an EOR and a global PEO?

An Employer of Record (EOR) is the legal employer and takes full responsibility for employment compliance, while a global PEO operates under a co-employment model where the client company and PEO share employment responsibilities.

How quickly can an EOR help my company hire internationally?

Most EORs can onboard employees within 1-2 weeks, depending on the country and specific employment requirements.

Can an EOR hire contractors as well as employees?

Most EORs focus on employing full-time or part-time employees rather than contractors, as the legal framework and compliance requirements differ significantly between these worker types.

What happens if I want to convert an EOR employee to direct employment?

The client company can transition an EOR employee to direct employment by establishing a local entity, ending the EOR agreement, and creating a new employment contract directly with the worker.

How do EORs handle employee terminations across different countries?

EORs manage terminations according to local labour laws, including required notice periods, severance payments, and documentation, ensuring the process follows all legal requirements in the employee's country.

Are there any limitations to what an EOR can do?

An EOR cannot manage the employee's daily work, performance reviews, or company culture, and some countries restrict certain industries or roles from using EOR arrangements.

How do AI-powered EORs differ from traditional EOR services?

AI-powered EORs use automation to handle routine tasks like contract creation and compliance monitoring, while traditional EORs rely more on manual processes and human intervention for these functions.