Back to glossary
Glossary

Employer of Record (EOR)

An Employer of Record (EOR) is a third-party organization that serves as the legal employer of a worker on behalf of a client company. The EOR handles payroll, tax withholding, mandatory benefits, and local compliance; the client directs the day-to-day work. EOR arrangements are the standard way to hire internationally without setting up a local legal entity.

How EOR works in practice

  1. You identify a candidate in the country where you want to hire.
  2. The EOR drafts an employment contract under local law and signs it with the worker.
  3. The EOR runs monthly payroll, withholds local taxes, pays mandatory benefits (health, pension, statutory leave).
  4. You pay the EOR monthly for wages plus their markup or SaaS fee.
  5. You direct the worker's day-to-day output just like an employee.

When to use EOR vs alternatives

  • Use EOR when you want to hire someone in a country where you have no legal entity and setting one up is disproportionate.
  • Use a direct contractor when the engagement is short-term and the worker is genuinely independent.
  • Register a local entity when you have 5+ workers in one country and plan to stay long-term.
Last reviewed April 17, 2026 by Benjamin Jack, Founder, HQ Simple.

Ready to engage your workforce?

Start with the free ATS. Grow into contractor management, VMS, and International EOR without changing systems.