What Is an Employer of Record (EOR)? Plain-English Guide
How EORs work, what they cost, how they differ from PEOs and contractor management, and when you actually need one.
Last updated: August 2026 • 9 min read
You've found the perfect candidate — in Portugal. Your company is in the US (or the UK, or Australia), and you have no Portuguese entity, no Portuguese payroll, and no idea what Portuguese labor law requires. You have three choices: spend months and real money setting up a local subsidiary, engage them as a contractor and hope no one calls it misclassification, or use an Employer of Record. This guide explains the third option.
The Definition
An Employer of Record (EOR) is a company that legally employs workers on your behalf in countries (or states) where you don't have a legal entity. The EOR is the employer on paper: it signs a locally compliant employment contract, runs payroll, withholds income tax, pays social contributions, and administers statutory benefits. You remain the employer in practice: you interview, choose, manage, and can end the engagement. The employee works for you day-to-day exactly like any other team member.
How It Works
- You find the candidate and agree on the role and gross salary. (The EOR doesn't recruit — that part is on you. Sourcing is what job boards like RemoteOnly.io are for.)
- The EOR employs them through its registered local entity, issuing an employment contract that complies with local law — probation period, notice period, working hours, leave entitlements, and any mandatory extras like a 13th-month salary.
- Each month you pay one invoice: gross salary + employer taxes and statutory benefits + the EOR's platform fee. The EOR pays the employee locally in their currency, files the taxes, and handles the paperwork.
- You manage the work. Goals, reviews, raises, and, if it comes to it, termination decisions are yours — the EOR executes them compliantly (notice, severance, process).
Onboarding through an established EOR typically takes days. Setting up your own foreign subsidiary typically takes months. That speed difference is most of the pitch.
When You Need One (and When You Don't)
An EOR is the right tool when:
- You're hiring full-time employees in a country where you have no entity — especially your first 1–5 hires there.
- You want to convert a long-term contractor to proper employment before misclassification becomes a problem.
- You're testing a market and don't want to commit to an entity you may need to unwind.
- A departing employee is relocating abroad and you want to keep them.
You don't need one when:
- The work is genuinely project-based and independent — a proper contractor agreement (and a contractor-management platform) is enough.
- You already own an entity in the country — you need payroll software or a PEO, not an EOR.
- You're planning 10+ long-term hires in one country — at that scale, opening your own entity usually costs less. Many companies start on an EOR and migrate later.
What It Costs
In 2026, published list prices from the major global EOR platforms cluster tightly:
- Deel: EOR from $599 per employee/month, covering 130+ countries.
- Remote.com: $699 per employee/month (less on annual billing), 90+ countries via fully owned entities.
- Oyster: $699 per employee/month (annual discounts available), 120+ countries.
The fee is only part of the invoice. Employer taxes and statutory benefits typically add 10–35% on top of gross salary depending on the country — that cost exists with or without an EOR; the EOR just makes it visible on one invoice. Also ask any provider about security deposits (sometimes around one month of employment cost), currency-conversion spreads, and surcharges in complex countries.
We compare the three providers in detail — pricing, coverage, entity models, and which fits which company — in our Deel vs Remote.com vs Oyster comparison.
EOR vs PEO vs Contractor Management
| EOR | PEO | Contractor management | |
|---|---|---|---|
| Who is the legal employer? | The EOR | You (co-employment with the PEO) | No one — the worker is self-employed |
| Do you need a local entity? | No | Yes | No |
| Best for | Employing abroad without an entity | Outsourcing HR/payroll where you already operate | Genuinely independent, project-based work |
| Typical cost | ~$599–699/employee/month | Lower per-employee fee (e.g., Deel's US PEO at $125/employee/month) | ~$29–49/contractor/month |
| Key risk | Cost at scale; country-specific limits | You still carry employer liability | Misclassification |
The misclassification point deserves emphasis: if a contractor works fixed hours, exclusively for you, under your direction, they're likely an employee in the eyes of local authorities — and the back taxes and penalties land on you, not them. When in doubt, employ properly through an EOR, or use a Contractor-of-Record service that assumes classification risk. Our complete guide to hiring remote employees covers how to make this call for each role.
Frequently Asked Questions
What is an Employer of Record (EOR)?
An Employer of Record is a company that legally employs workers on behalf of another business. The EOR handles the local employment contract, payroll, tax withholding, and statutory benefits in the worker's country, while the client company directs the person's day-to-day work. It lets a business employ someone in a country where it has no legal entity.
How much does an EOR cost in 2026?
Published list prices from the major providers run roughly $599 to $699 per employee per month — Deel lists EOR from $599/month, while Remote.com and Oyster list $699/month with discounts for annual billing. On top of the platform fee you pay the employee's gross salary plus employer taxes and statutory benefits, which typically add 10-35% of salary depending on the country.
What is the difference between an EOR and a PEO?
An EOR becomes the sole legal employer, so you need no local entity. A PEO (Professional Employer Organization) is a co-employment arrangement: you must already own a legal entity in the country, and the PEO shares HR and payroll duties with you. Use an EOR to hire where you have no entity; use a PEO to outsource HR where you do.
Is using an EOR legal?
Yes. EORs are a legal and widely used employment structure in most countries, and the major providers operate through registered local entities that comply with each country's labor laws. A few countries restrict or regulate third-party employment arrangements or limit how long a worker can be EOR-employed, so reputable providers will flag country-specific limits before you hire.
When should a company switch from an EOR to its own entity?
A common rule of thumb is around 5-15 employees in a single country, depending on that country's entity setup and running costs. Below that headcount, EOR fees are usually cheaper than maintaining a subsidiary; above it, the fixed cost of your own entity amortizes and gives you more control.
Which are the main EOR providers?
The three most commonly shortlisted global EOR platforms are Deel (EOR in 130+ countries), Remote.com (90+ countries, fully owned entities), and Oyster (120+ countries). Other players include Rippling, Papaya Global, Globalization Partners (G-P), and Velocity Global.
First find the person — then worry about the paperwork.
An EOR solves employment, not sourcing. Post your role on RemoteOnly.io via our employer page to reach remote-first candidates worldwide.
Last updated: August 4, 2026. This article is general information, not legal or tax advice. Pricing figures are providers' published list rates at the time of writing and change frequently. Some links on this page may be affiliate links, which never affects our assessment or your price.