Last reviewed: October 2026
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So what is an employer of record? It is a third-party company that becomes the legal employer of your worker in a country where you have no entity, while you keep directing the day-to-day work. It signs the local contract, runs payroll, withholds taxes, and carries employer liability, which is why many founders making a first hire abroad start with an EOR such as Deel.
This guide explains how the model works, how it differs from a PEO and from hiring contractors, what it costs in 2026, and what the contract should say. Prices below are published list prices as of October 2026 and exclude salary and statutory costs.
What is an employer of record, and how does it work?
An employer of record (EOR) is the organization named as the employer on the contract, in tax filings, and in any employment dispute. Your company stays the practical employer: you decide who to hire, set the role and pay, and manage performance. That split between legal employer and practical employer is the whole product.
The EOR registers with local tax and social security authorities and pays the worker through its own payroll. Legal treatment varies by jurisdiction, so the exact liability split depends on local law and on the contract you sign.
Who does what
- You: choose the hire, set the role and compensation, and manage the work and performance.
- The EOR: signs the employment contract, runs payroll, withholds and remits taxes, administers statutory benefits, and handles local labor-law compliance.
- The employee: works for you in practice, but is employed by the EOR on paper.
Why founders use one
The alternative is your own legal entity abroad. That typically means incorporation, a local payroll registration, and months of lead time before the first hire can start.
An EOR lets you hire in a country where you have no entity. The first employee can be on payroll while you find out whether the market justifies building one.
EOR vs PEO vs contractor vs your own entity
There are four ways to put someone to work abroad. They differ on who the legal employer is and whether you need a local entity.
| Option | Legal employer | Local entity needed? |
|---|---|---|
| EOR | The EOR alone | No |
| PEO | Shared with you | Yes |
| Contractor | None (self-employed) | No |
| Your own entity | You | Yes, you build it |
A PEO is the option most often confused with an EOR. A PEO co-employs your staff, so responsibilities are shared, you usually need an existing entity, and the model is generally limited to U.S.-based employment. In the U.S., the IRS runs a voluntary certification program for PEOs, and it explains that an agreement with a certified PEO affects the employment tax liabilities of both the PEO and its customers. The IRS also publishes a list so you can verify a provider’s status.
Contractors look cheaper. Deel lists contractor management from $49 per contractor per month against $599 for EOR. But the lower fee does not change your legal exposure: if the worker is really an employee under local law, the misclassification problem is yours.
Deel also sells a separate Contractor of Record product from $325 per contractor per month, where the provider takes on classification liability. That is a different service from an EOR, because the worker is still not an employee.
When an EOR makes sense, and when it does not
The question after ‘what is an employer of record?’ is whether you need one. Use an EOR when:
- It is your first or second hire in a country.
- You want to test a market before committing to an entity.
- The person is a full-time worker you direct like any employee, not an independent business.
Skip it, or switch away from it, when:
- The worker is genuinely independent. Use contractor management and document the arrangement.
- You already own an entity there. A payroll-only product is cheaper: Deel and Remote both list global payroll from $29 per employee per month for companies that own the entity.
- Headcount in one country keeps growing. RemotePeople, which sells EOR, says that past roughly twenty people in one country your own entity usually wins. That is a vendor view, so run your own numbers.
What does an employer of record cost?
What is an employer of record going to cost you? The headline fee is a flat monthly charge per employee, on top of salary and whatever the country requires employers to contribute. Published EOR list prices:
| Platform | EOR fee | Condition |
|---|---|---|
| Deel | From $599 per employee/month | Plans run month to month |
| Remote | From $599 per employee/month | Annual contract pricing |
| Oyster | From $699 per employee/month | Refundable deposit required |
| Rippling | Quote only | Platform fee also required |
| RemotePeople | From $199 per employee/month | Vendor-published, no minimum term |
Rippling sells EOR on top of its core platform, which its FAQ says starts at $8 per employee per month plus a monthly base fee. The base fee amount and the EOR rate are undisclosed publicly. Third-party reviews cite an EOR starting price of $499 per employee per month, but that is unconfirmed, so ask for the base fee in writing with your quote.
The math scales fast. At Deel’s $599 list price, one hire costs $7,188 a year in fees and ten hires cost $71,880. At $699, ten hires cost $83,880.
Costs the fee does not cover
- Salary and employer contributions: set by each country, not by the vendor.
- Deposits: some providers require a refundable deposit per hire.
- Currency conversion: check the FX margin on payroll funding.
- Local extras: 13th-month pay where the country requires it.
- Add-ons: visa support and supplemental benefits are often priced separately.
One third-party model shows the proportions. Employ Borderless estimated five hires in Germany at $60,000 each through Oyster’s starting fee at about $404,534 in year one: $300,000 in salaries, $62,594 in employer contributions, and $41,940 in fees. The fee was roughly a tenth of the total, and statutory costs will differ in every country, so model each one.
What the EOR contract should say
A sales page tells you what is an employer of record in theory. The contract tells you what yours actually promises. Get written answers on these points before you sign:
- Employing entity: is your worker employed by the provider’s own subsidiary or a local partner?
- Fee scope: what does ‘starting at’ exclude, and when can the fee change?
- Deposit: how much, where it is held, and how fast it is refunded.
- Exit costs: who funds notice and severance, and at what markup.
- Liability: what the provider indemnifies, and any caps on it.
- Term and cancellation: minimum term, notice period, and per-seat reuse.
- Entity transition: the process and fee for moving workers to your own entity later.
- IP and data: invention assignment, confidentiality, and how personal data is handled.
Disclosure varies a lot. A third-party review checked on October 16, 2026 found that Rippling publishes no EOR country count and no minimum term or notice terms, so treat those as undisclosed and ask. Third-party reviews put its EOR coverage at roughly 80 to 85 countries.
Risks an EOR does not remove
- Misclassification: an EOR employs the person on its paper. It does not fix a contractor you manage like an employee.
- Tax presence: a worker abroad can raise corporate tax questions for your company. Ask a local tax adviser, not the EOR’s sales team.
- Provider quality: a partner entity can mean a different service level than an owned one. Ask which applies in your country.
- Local law: notice, severance, and probation rules differ widely. The EOR administers them, but you fund them.
- Lock-in: moving to your own entity takes coordination and can carry fees. Check this before signing.
Best employer of record platforms to shortlist
Now that you know what is an employer of record and what it costs, shortlist two or three providers and get written quotes. We grade platforms on our Suite Score rubric. This guide assigns no scores, so treat the list below as a starting shortlist.
Deel: the default shortlist entry
Deel puts EOR, contractor management, Contractor of Record, and global payroll under one vendor. EOR starts at $599 per employee per month on plans that run month to month. It is the strongest fit if you expect to mix contractors and employees.
Rippling: best if you already run it
Rippling suits companies that already use its HR and IT platform and want EOR in the same system. Budget for quote-based pricing and a required platform fee.
Remote: published pricing
Remote lists EOR from $599 per employee per month on annual contracts and says it covers 90+ countries. It suits buyers who want a published price and a longer commitment.
RemotePeople: lowest published fee
RemotePeople publishes EOR from $199 per employee per month with no minimum term. It claims 150+ countries plus ISO 27001 and SOC 2 Type II certification. Those are vendor claims, so request the audit report before you rely on them.
Frequently asked questions
What is an employer of record in simple terms?
It is a company that legally employs your worker on your behalf. It signs the contract, pays the worker, and files local taxes, while you manage the work.
Is an EOR the same as a PEO?
No. An EOR is the sole legal employer and does not require you to have a local entity. A PEO co-employs your staff, usually requires an existing entity, and is generally limited to U.S.-based employment.
How much does an EOR cost per employee?
Published list prices run from $199 to $699 per employee per month, depending on the provider. Salary, employer contributions, deposits, and FX costs are extra.
Can I use an EOR for contractors?
No. An EOR employs people, so the worker becomes an employee. Contractors need contractor management, or a Contractor of Record service if you want the provider to assume classification liability.
When should I open my own entity instead?
When headcount in one country keeps growing and the EOR fees add up. One vendor puts the crossover at roughly twenty people in a single country, but your break-even depends on local costs and quotes.