What is an employer of record (EOR)?

An employer of record (EOR) is an organisation that is legally responsible for employment matters on behalf of an employer. The employees perform their work for the business, while the EOR handles the administrative and legal responsibilities associated with employing them. 

These responsibilities can include:

• Payroll and tax withholding

• Unemployment insurance

• Employee benefits

• Workers’ compensation insurance

• Compliance with laws and regulations

An EOR simplifies the process of hiring internationally by acting as your legal partner. These platforms ensure transparency and compliance, to allow you to focus on growing your business.

An EOR can help businesses hire people from other countries. When a company uses an EOR, there is a three-sided contract signed by the business, the employee, and the EOR:

1. The business and the employee maintain a direct relationship. The business is responsible for assigning their work tasks, managing performance, and anything else that relates to the work itself.

2. The EOR is the legal employer of the employee. The EOR handles administrative and legal responsibilities, including payroll, taxes, benefits, and compliance. Global EORs may also handle other aspects of employment, like visas and taxation issues in the host country.

3. The employee is responsible for completing their role for the business, as outlined in their job description.

Hire and manage global talent — without barriers

Easily hire, pay and manage global employees without setting up your own local entities. Let Remote’s local experts handle payroll, benefits, compliance and more.

Find out more

An employer of record can offer many benefits. An EOR is useful for businesses who don’t have the time or resources to handle the complicated paperwork and compliance requirements involved in establishing a local presence in every country they want to hire in.

The main benefits include:

• Access to global talent: Source and hire the most qualified and talented individuals around the world, as long as they're based in a country that your EOR provider operates in.

• Quicker onboarding: Onboard new hires within days, instead of waiting weeks to complete paperwork.

• Cost savings: Eliminate the costs associated with establishing a local entity.

• Easier local compliance: Know that compliance requirements are being met by the EOR, so you don't need to worry about navigating complex international laws.

• Fewer risks: Reduce the risk of hiring internationally as the EOR handles payroll and tax liabilities for employees.

EORs give businesses a streamlined and compliant way to hire internationally, without the complexities of establishing a local presence.

Using an EOR makes sense for many organisations, but it's not the right fit for every business. There are some drawbacks to using an EOR service — especially if you plan to establish a large or long-term presence in a location, or if you have concerns about control or culture.

The main drawbacks of using an EOR include:

• Less control and flexibility: Employers have reduced influence in areas like employment contracts, HR policies, and compensation packages, as these are managed by the EOR.

• Rising long-term costs: EORs charge a fee per employee every month, and these costs can work out more expensive in the long-term than creating your own local presence — especially if you hire a lot of employees in one location.

• Lower influence on culture: Although the work assignments come from the employer, it's the EOR that handles contracts, policies, and processes. As a result, there's a weaker tie between the employee and the business' culture and employer brand.

• Internal structure changes: Outsourcing to an EOR reduces the workload of your in-house HR team, but it may also lead to changes in your structure, roles, and internal processes. If that's the case, effective change management is essential.

• Pressure to find the right EOR: Choosing an EOR based solely on price or sales tactics can lead to poor communication, delays, and a lack of trust later on — all of which negatively impact the employee experience.

For most mid-sized organisations, the benefits of an EOR outweigh the drawbacks — as long as you choose the right provider, establish clear communication channels, and continue to find ways to make your international employees feel like an integral part of your team.

Bringing an EOR service onboard can support your growth goals and allow you to confidently hire internationally. When deciding whether your organisation should work with an EOR, consider the following:

• Do you plan to explore new markets?

• How do you plan to acquire and retain talent?

• Do you hire contractors too, or only employees?

• Do you have in-house resources for international employment law compliance?

• How much control are you willing to give up?

• Do you have other multi-country providers that can handle the compliance challenges?

• Where do you need coverage (i.e. in which markets do you need to hire employees)?

Your answers to these questions will help you evaluate whether an EOR is the right choice for your business at this stage or not. If an EOR doesn't feel like the best match, consider alternatives: like a professional employer organisation (PEO).

A professional employer organisation (PEO) is another type of third-party employee management service. A PEO acts as a partner to the business to take care of local HR, compliance, and payroll. The relationship with a PEO is known as a 'co-employment' model: the PEO acts as the legal employer of record, but the business retains operational control and some legal responsibilities.

An EOR and PEO both allow businesses to hire in other countries, but they function differently. The main differences between an EOR and PEO at a glance:

Compare the differences in more depth:

• Responsibilities: Businesses who work with a PEO have a “co-employment relationship”, meaning the responsibilities are shared. This differs from an EOR, which is the full legal employer.

• Contracts: Because of this co-employment relationship, employment contracts are between the business and its employees, while the PEO has a separate client service agreement.  

• Registration: With a PEO, the business client must still establish a presence in each place where it has employees. With an EOR, however, the company can have workers anywhere the EOR has a presence, since they are not responsible for co-employment.

• Insurance: Businesses typically have to have coverage under the PEO’s insurance policy, which might mean needing additional coverage or taking out an employment insurance policy. An EOR carries its own insurance policies (unemployment, disability, workers compensation, etc.) under which the employees are covered.

In order to be able to use a PEO, companies needs their own branch in their selected country. This makes the customer an employee and responsible for compliance with local labour laws. Liability and risks are shared in the PEO model. 

An employer of record is a third-party provider that takes on the legal responsibilities for employees that you hire in other markets. HR software enables organisations to manage HR operations and meet compliance requirements for employees.

All businesses benefit from using HR software for more effective and efficient operations, but not every organisation needs an EOR. An EOR is only beneficial if you plan to hire in countries where you don't already have a local presence, or if you want to transfer your employer responsibilities to a third-party organisation.

Compare 8 of the best employer of record providers for UK businesses to find the right match for your needs:

An employer of record service simplifies global expansion plans, but you'll still need HR software to manage other operations — especially if you hire employees directly in your local market.

Personio is an intelligent HR platform built for growing organisations, and you have the option to add an EOR service (powered by Remote). Personio EOR users benefit from all the features and functionality of the platform's HR, hiring, and preliminary payroll capabilities, plus a seamless way to hire internationally thanks to Remote's embedded EOR service.

Book a demo to see Personio EOR in action and discover why 16,000+ businesses choose Personio as their HR software.

No, in most cases using an employer of record (EOR) service doesn’t replace the need for effective HR systems. Some EOR providers offer a built-in human resources information system (HRIS), while others integrate with the HR software you already use. Some HR software providers offer an integrated EOR service — like Personio’s EOR powered by Remote.

Consider using an EOR when you want to hire employees in different countries, without the expense and complexities of setting up a local entity. EOR services allow you to expand rapidly, hire talent in other locations quickly, and stay compliant with local HR and payroll requirements.

Most EOR services cost in the region of £500 to £600 per employee per month, but there are some providers with more affordable plans and some which cost more but include more features, support, or functionality. Note that this figure only covers the cost of using the EOR service — extra fees may apply.

The best EOR is the one that aligns with your requirements including countries served, budget, speed of onboarding, and features or add-ons. For the widest country coverage, consider Pebl or Teamed. For combined workforce management, try Rippling or Deel. For a more streamlined way to manage HR and EOR in one platform, consider Personio’s EOR powered by Remote.

Personio doesn’t act as the legal entity as an employer of record. Instead, Personio’s EOR service is powered by Remote. Businesses who use Personio’s EOR benefit from the ability to hire globally quickly and easily with Remote and the efficiency and HR intelligence of Personio, thanks to the seamless partnership between the two tools.