What is an Employer of Record (EOR)?
EOR stands for Employer of Record. It is a company that legally employs your team member on its own local entity, so you can hire someone in a country where your business is not registered. The EOR signs the employment contract, runs payroll, withholds tax, handles statutory benefits and carries the employment liability. You direct the work.
What an Employer of Record is responsible for
The split is consistent across providers and countries: the EOR owns everything that makes the employment lawful, and you own everything about the job itself.
The employment contract
The EOR: Drafted and signed by the EOR, on its entity, under local law and in the local language where required.
You: You define the role, the salary and the terms you want offered.
Payroll, tax and benefits
The EOR: Salary payment, income-tax withholding, statutory social-security registration and contributions, and mandated benefits.
You: You pay the EOR a single invoice covering salary plus its fee.
Employment liability
The EOR: Termination process, notice, severance and any labour-authority dispute sit with the EOR as legal employer.
You: You decide whether the working relationship continues.
When you need one
An EOR solves exactly one problem: employing someone lawfully in a country where you are not incorporated. If you already have an entity there, you probably do not need one.
- You want to hire in a country where you have no legal entity, and do not want to spend months incorporating first.
- You want to test a market with one or two hires before committing to a subsidiary.
- You have a long-term contractor who is functionally an employee, and want to correct the classification without opening an entity.
- You are hiring a small distributed team across several countries and do not want an entity in each.
- You need someone working and compliant in days rather than months.
EOR, PEO, or your own entity?
A PEO co-employs alongside you and requires you to already have a local entity. An EOR does not. The deciding question is whether you are incorporated in the country where you are hiring.
Compare EOR and PEOEmployer of Record in Indonesia
We operate our own Indonesian entity, so an Indonesian hire is employed directly by us rather than passed to a local partner. That covers the contract, BPJS Kesehatan and BPJS Ketenagakerjaan registration, PPh 21 withholding, the statutory religious-holiday allowance, and termination handled under Indonesian employment law.
The fee is $300 per employee per month, all-inclusive, and onboarding runs 24 to 48 hours from offer acceptance. Outside Indonesia we place employment through a vetted global EOR partner network covering 100+ countries.
Employer of Record: common questions
Straight answers to what people ask about the model.
EOR stands for Employer of Record. It is a company that becomes the legal employer of a worker on behalf of another business, so that business can hire someone in a country where it has no legal entity of its own.
An Employer of Record is a third party that legally employs your team member on its own local entity. It signs the employment contract, runs payroll, withholds income tax, registers the employee for statutory social security, provides mandated benefits, and carries the employment liability. You direct the person’s day-to-day work exactly as you would any other member of your team.
In an HR context, EOR describes an outsourced employment arrangement: the provider is the employer on paper for compliance, payroll and statutory purposes, while the client company manages the work itself. HR teams use it to hire in a country before, or instead of, establishing a local entity there.
A staffing agency finds and supplies people, usually for a temporary assignment, and typically sources the candidate itself. An EOR employs a person you have already chosen and manages the legal employment relationship indefinitely. The two are often bundled — we do both — but they are separate functions and can be bought separately.
Yes. The arrangement is a standard commercial contract between your company and the EOR, plus a normal employment contract between the EOR and the employee under local law. What it does not do is legalise a misclassified contractor: if someone works fixed hours under your direction, they are an employee, and an EOR is one compliant way to employ them.
Providers charge either a flat fee per employee per month or a percentage of salary. RainTech charges $300 per employee per month in Indonesia, all-inclusive of compliance, payroll, benefits and tax. On top of the fee you pay the employee’s salary and the statutory employer contributions, which are set by law rather than by the provider.
When you want to hire someone in a country where you have no entity, when you want to test a market before committing to incorporation, when you need one or two people rather than a subsidiary’s worth, or when you want to convert a long-term contractor to an employee without setting up locally. Once headcount is high enough that a local entity is cheaper than the per-employee fee, incorporating usually wins.
An EOR is the sole legal employer and uses its own entity, so you do not need one. A PEO co-employs alongside you, which means you must already be incorporated in that country. The test is whether you have a local entity: no entity means an EOR is the only model that applies.
More on how the model works in practice
All Employer of Record articles