Employer of Record

An Employer of Record (EOR) is a third-party company that legally employs workers on a client's behalf in jurisdictions where the client has no entity. The EOR handles payroll, benefits administration, tax withholding, employment compliance, and statutory requirements while the client retains day-to-day management of the worker's tasks and projects. EORs are used most often by startups hiring international talent without forming entities in each country, and it is the legal mechanism that lets a Delaware C-corp hire engineers in Brazil, Germany, India, and Australia without forming subsidiaries in any of those countries.

The mechanic: the client company identifies and selects the candidate; the EOR signs the employment contract directly with the employee under their entity in the worker's country; the client pays the EOR a markup over the worker's salary (typically 5 to 15 percent or a fixed monthly fee per employee, usually $300 to $1,000/month) plus the worker's actual salary, benefits, and taxes; the EOR handles payroll, statutory benefits, tax withholding, employment-law compliance, and termination procedures per local law. The major EOR platforms in 2025: Deel (the category-defining platform with global coverage; >150 countries), Remote (similar coverage, EOR + contractor management), Velocity Global, Globalization Partners (G-P), Oyster (focused on remote-first companies), Rippling EOR (integrated with the broader Rippling HR platform), and Justworks Hire (US-focused). The use cases: hiring international talent without entity formation (the original use case), hiring in US states where the company doesn't have entities (some EORs handle US multi-state), trying out a new market before forming a local entity, and providing global benefits parity for distributed teams. The strategic decision: when a company has 5+ employees in any single country, forming a local subsidiary usually becomes more cost-effective than continued EOR usage, because the EOR markup adds up. Most startups use EORs for years 1 through 3 of international expansion, then transition to local entities as headcount grows.

What founders get wrong: Using contractor (1099) classifications for international workers to avoid the complexity of EOR setup, then discovering that most countries treat full-time exclusive workers as employees regardless of how they're classified, with significant misclassification penalties. EOR is the safe path; international contractor classifications work only for truly project-based independent work, not for full-time team members.

Related: Incorporation · Foreign Qualification · Business License

FAQ

What is an Employer of Record?
A third-party company that legally employs workers on a client company's behalf in jurisdictions where the client doesn't have its own legal entity. Handles payroll, benefits, taxes, and employment compliance while the client manages day-to-day work. Used most often by startups hiring international talent without forming entities in each country.

What are the major EOR platforms?
Deel (the category-defining platform with global coverage), Remote, Velocity Global, Globalization Partners (G-P), Oyster (focused on remote-first companies), Rippling EOR (integrated with Rippling HR), and Justworks Hire (US-focused). Most charge a markup of 5-15% over salary or a fixed monthly fee of $300-$1,000 per employee.

When should I use an EOR vs forming a local entity?
Use an EOR for: years 1-3 of international expansion, trying out a new market before committing, scenarios with 1-4 employees in a country. Form a local entity when: you have 5+ employees in one country (EOR fees start to exceed entity-formation costs), you want full control over employment terms, or you need to meet specific local-investment requirements.