Employer of Record
A third-party company that legally employs workers on behalf of another business, managing payroll, taxes, and compliance across jurisdictions.
FAQs
What is the difference between an EOR and a PEO?
A Professional Employer Organization (PEO) co-employs workers alongside the client company, which must already have a legal entity in that jurisdiction. An Employer of Record is the sole legal employer and is used when the client has no entity in that location. EOR enables hiring anywhere without a local subsidiary; PEO requires one.
Is using an EOR compliant for long-term employment?
EOR is fully compliant for long-term employment in most jurisdictions. However, some countries have regulations around how long a worker can be employed through a third party (e.g., certain South American countries require entity establishment after 12 months). Reputable EOR providers keep clients informed of jurisdiction-specific limits.
When should a company switch from EOR to establishing a local entity?
Most EOR providers recommend considering entity establishment when you have 10–15+ employees in a single country, as the per-employee EOR cost exceeds entity maintenance costs at that scale. Also consider switching if you need local banking, contracts with government entities, or are required to have a local entity by a major client.
Related Terms
Payroll Tax
Taxes levied on wages and salaries, split between employee withholding and employer contributions, funding social programs like Social Security and Medicare.
W-2 Employee
A traditional full-time or part-time employee whose taxes are withheld by the employer, documented annually on IRS Form W-2.
Benefits Administration
The management of employee benefits programs including health insurance, retirement plans, PTO, and other compensation components.
