Employer of Record (EOR)

A company that legally employs workers on behalf of another business, handling payroll and compliance.

An Employer of Record (EOR) is a company that serves as the legal employer for a worker, while the worker performs their day-to-day duties for a client company. The EOR handles payroll processing, tax withholding, employment contracts, benefits administration, and local labor law compliance — the full administrative and legal overhead of employment in a given jurisdiction.

EORs are most commonly used when companies want to hire in countries or states where they have no legal entity. Setting up a foreign subsidiary can take months and cost tens of thousands of dollars in legal, accounting, and registration fees. An EOR enables a company to onboard a worker compliantly in a matter of days, without establishing a local legal presence.

For workers, an EOR arrangement means your employment contract and payslip come from the EOR, not the company you actually work with day-to-day. Your benefits, employment protections, and termination rights are governed by the EOR's local entity and the laws of your jurisdiction. It's worth understanding exactly what applies before accepting an EOR-based role.

The market for EOR services has grown dramatically with the rise of distributed and remote work. What was once a niche enterprise product has become a mainstream hiring channel. Major providers — Deel, Remote, Rippling, Papaya Global, Velocity Global — have made it faster and cheaper to hire globally, enabling companies to access talent regardless of where their legal entities are located.

EOR vs. PEO: What's the Difference

These two models are frequently confused. A Professional Employer Organization (PEO) is a co-employment arrangement: the PEO and the client company share employment responsibilities, and the client must already have a legal entity in the jurisdiction where the worker is located. A PEO helps with HR administration and benefits but doesn't replace the need for a local entity. An Employer of Record takes on full legal employment responsibility — the client company needs no local entity at all. If you're hiring internationally without a local subsidiary, you need an EOR. If you're adding HR infrastructure to an existing entity, a PEO may be the right tool.

How EOR Is Changing Global Hiring

Before EOR services became mainstream, a company's ability to hire talent was largely constrained by where it had legal entities — typically headquarters plus a few major markets. Remote work and the growth of EOR platforms have decoupled hiring from geography in a fundamental way. A startup founded in New York can now hire engineers in Poland, designers in Brazil, and operations staff in the Philippines without establishing entities in any of those countries. This has significantly expanded the effective talent pool for companies and the effective job market for workers. For employees, EOR arrangements mean it's increasingly possible to work for companies headquartered in other countries — expanding your career options but also requiring you to understand how these arrangements affect your benefits, legal protections, and tax obligations.

EOR Benefits and Risks for Workers

Working under an EOR arrangement has both advantages and considerations. On the positive side: you get local, compliant employment — with statutory benefits and protections under your country's laws — while working for a company that may not otherwise be able to hire in your location. On the risk side: the EOR is your employer of record, but the client company is who you work with. If the client company ends the engagement with the EOR, your employment may end regardless of your performance. The EOR's processes for termination, dispute resolution, and benefits administration may differ from what you'd experience as a direct employee. Understanding the relationship between the client company and the EOR — and what happens to your employment if that relationship ends — is important before accepting an EOR-based role.

Key Questions to Ask If You're Working Under an EOR

  • Who signs my employment contract — the EOR or the client company?
  • What statutory benefits and protections am I entitled to under local law?
  • What happens to my employment if the client company ends its engagement with the EOR?
  • What is the termination notice period, and who is responsible for severance if applicable?
  • How are disputes handled — through the EOR's processes, the client company's, or separately?
  • What benefits does the EOR provide, and how do they compare to a direct employment arrangement?
  • Am I considered a direct employee of the client for any purposes (e.g., equity eligibility, access to internal systems)?

Example

A US startup wants to hire a developer in Germany without forming a German GmbH. They use an EOR like Deel or Remote to hire the developer legally in Germany within days, with German statutory employment protections and payroll.