An Employer of Record, commonly abbreviated as EOR, is a third-party organisation that becomes the legal employer of workers on behalf of another company. When a business wants to hire someone in a country where it does not have a legal entity, or when it wants to engage workers without taking on the full employment risk directly, it engages an EOR to handle the formal employment relationship.
In practice, the arrangement works as follows: the client company identifies a candidate it wants to hire and agrees the role, compensation, and working arrangements with them. The EOR then enters into the employment contract with the worker, putting itself on record as the legal employer in the worker's jurisdiction. The EOR handles payroll processing, tax withholding and remittance, compliance with local labour law, and statutory benefits. The client company retains full day-to-day management and direction of the worker's activities, but the legal employment relationship sits with the EOR.
EOR solutions have become essential infrastructure for companies operating in the remote-first and globally distributed work environment. Without an EOR, hiring a single software engineer in the Netherlands requires the company to establish a Dutch legal entity, register with Dutch tax authorities, and hire local HR and payroll expertise. With an EOR provider such as Deel, Remote.com, or Papaya Global, the same hire can be completed in days. The EOR already has the legal infrastructure in place and simply adds the new worker to their existing employer-of-record operation in that country.
There are important limitations to the EOR model. EOR fees are per-employee and can be substantial: typical rates range from $500 to $2,000 per employee per month, making EOR arrangements most cost-effective for small international teams. As headcount in a given market grows, the economics shift in favour of establishing a local entity. EORs are also not appropriate for genuine independent contractors; misclassifying a contractor through an EOR arrangement can create legal liability in jurisdictions with strict worker classification rules. Published in March 2025, this definition reflects current global employment practice.
Key Points: Employer of Record (EOR)
- Legal employer function: The EOR becomes the worker's legal employer, handling all statutory obligations including payroll, taxes, and employment contracts in the worker's jurisdiction.
- No local entity required: Companies can hire in new countries without the time and cost of establishing a local legal entity, which typically takes months and significant legal investment.
- Day-to-day management stays with the client: The client company directs the worker's activities, sets their goals, and manages their performance; the EOR handles only the legal and administrative employer obligations.
- Cost-effective at small scale: EOR fees per employee are high relative to running your own entity, so companies typically transition to local entities once headcount in a market justifies the investment.
- Major providers include Deel and Remote.com: Well-known global EOR platforms integrate with ATS and HR systems to streamline the transition from candidate to employed worker.
How Employer of Record Works in Treegarden
Employer of Record in Treegarden
Treegarden's ATS handles the full candidate journey up to the point of offer: sourcing, screening, interviewing, and offer generation. When an accepted offer involves an international hire or a contractor that will be engaged through an EOR, the candidate's profile and offer details can be exported or integrated with leading EOR platforms to initiate the onboarding process without data re-entry. Treegarden's HR module records the resulting employee or contractor record regardless of which employment model is used, maintaining a single source of truth for all workforce members across geographies and engagement types.
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Related HR Glossary Terms
Frequently Asked Questions About Employer of Record
An Employer of Record (EOR) becomes the legal employer of record for workers in a jurisdiction where the client company does not have a legal entity. The EOR bears the employment risk and handles all statutory obligations independently. A Professional Employer Organisation (PEO) operates as a co-employer: the client company and the PEO share employment responsibilities, and the PEO typically requires the client to have its own registered entity in the jurisdiction. EORs are the right solution for international expansion without entity setup; PEOs are typically used when the client already has a presence but wants to outsource HR administration.
Companies use EORs primarily for two reasons: to hire internationally without establishing a legal entity in each country, and to engage workers in a legally compliant way in jurisdictions where the company lacks the expertise or infrastructure to manage employment law directly. Setting up a legal entity in a new country takes months and significant legal cost. An EOR allows a company to hire a single employee in Germany, Brazil, or Singapore within days, with the EOR handling local payroll, tax, and labour law compliance from day one.
EOR arrangements are well-suited for hiring a small number of employees in a new market. They become costly at scale: EOR fees per employee are typically higher than the cost of running your own payroll once you have enough headcount to justify a local entity. There are also control limitations: because the EOR is the legal employer, certain HR actions, such as terminations, must go through the EOR and comply with local employment law. Companies with large international workforces typically transition to local entities once the headcount in a market justifies the investment.
The major global EOR providers include Deel, Remote.com, Papaya Global, Oyster HR, and Velocity Global. They differ in the number of countries covered, the quality of their local expertise, pricing structures, and the range of additional services they offer. Many ATS and HR platforms integrate with EOR providers so that once a candidate is hired through the ATS, they can be onboarded via the EOR without duplicating data entry across systems.