An Employer of Record is a company that legally employs your workers in a country where you have no legal entity.
The EOR holds the employment contract. It runs payroll, withholds tax, files with local authorities, and carries the employer liability. You choose the person, direct the work, and manage performance.
That’s the whole model in three sentences.
The rest of this guide covers how it works in practice, what it costs, where it fits, and when you should do something else instead.
What is an Employer of Record?
An Employer of Record becomes the legal employer of your workers in a market where you have no legal entity. Some people call it a global employment organization, or GEO. EOR is now the standard term.
Most explanations stop there. They miss something important.
Two separate relationships exist at once.
The first is between the employee and the EOR. That’s a real employment contract, written under the labor law of the country where the person works. It carries statutory benefits, notice periods, and termination protections. To the local tax authority and labor ministry, the EOR is the employer.
The second is between you and the EOR. That’s a service agreement. You say who to hire, what to pay them, and what the role involves. The EOR delivers the employment.
Day to day, nothing changes about managing the person. They join your meetings. They use your systems. They report to your manager and work on your roadmap.
What changes is who files the tax return, and whose name sits on the contract.
What does an Employer of Record do?
The EOR takes the legal and administrative side. You keep everything to do with the work.
| The EOR holds | You keep |
|---|---|
| The employment contract | The hiring decision |
| Payroll processing and payment | Salary and benefits budget |
| Income tax withholding and filing | Day-to-day direction of the work |
| Statutory contributions and returns | Performance management |
| Benefits enrollment and administration | Promotion and pay decisions |
| Employment law compliance | Team structure and reporting lines |
| Statutory record keeping | The decision to end employment |
| Onboarding and authority registration | Tools, systems, and access |
| Offboarding, notice, and final settlement | Company culture and training |
The split matters when something goes wrong.
If a tax filing is late, that’s the EOR’s problem and the EOR’s penalty. If someone underperforms, that’s yours to manage. The EOR doesn’t get involved in whether your employee does good work. You don’t get involved in which form goes to which authority.
One boundary is worth saying plainly. An EOR doesn’t recruit. It employs a person you’ve already chosen. If you haven’t found anyone yet, an EOR can’t help you.
How does an Employer of Record work, step by step?
The sequence is the same in every market. Only the timings shift, depending on how fast local authorities process registrations.
Step 1. You select the candidate. You run your own hiring process. The EOR isn’t involved and doesn’t need to be.
Step 2. You get a cost quote. Give the EOR the role, the country, and the gross salary. They send back the full employment cost: gross pay, employer contributions, and their fee. This takes a day or two. Ask for the breakdown, not a single number.
Step 3. The contract is drafted. The EOR writes an employment agreement under local law with your terms inside it. Working hours, probation, notice, leave, and benefits all follow that country’s legal floor. Any clauses you need, like intellectual property assignment, go in at this stage.
Step 4. The employee signs and gets registered. The EOR registers them with the tax authority, the retirement or social security fund, and any other body that market requires. Benefits enrollment happens alongside. This step sets your real start date.
Step 5. The employee starts. They begin work under your direction on the agreed date.
Step 6. Payroll runs monthly. Gross to net is calculated. Tax is withheld. Contributions are paid. Salary lands in local currency. The employee gets a compliant payslip. You get a payroll register and one invoice.
After that the monthly cycle repeats. The EOR handles whatever comes up: salary changes, benefit changes, leave, regulatory updates, and eventually offboarding.
What are the benefits of using an Employer of Record?
Speed. Hiring through an EOR takes days. Registering a company takes three to six months before you can legally pay anyone. If your candidate has other offers, that gap decides whether you get them.
Capital you don’t spend. Entity setup runs $5,000 to $10,000. That covers incorporation, legal drafting, a registered office, share capital, and local advisory. An EOR removes all of it. You pay a monthly fee per person instead of a fixed cost before your first hire.
Liability that sits elsewhere. The EOR is the legal employer. The employment obligations and the penalties attached to them belong to them. That’s the structural difference between using an EOR and outsourcing your payroll admin while keeping the risk.
Access without commitment. Hire one person in a market. See how it goes. Decide later whether to build out. Testing a market with one employee is a small decision. Incorporating first is not.
Less admin. Your HR and finance teams never learn a new country’s payroll rules, filing calendar, or benefits system. That work leaves their desk permanently.
A clean exit. If the market doesn’t work, you end the arrangement with notice and a final settlement. No deregistration. No dormant company. No trailing filing obligations.
How much does an Employer of Record cost?
Total cost has three parts. Most confusion comes from looking only at the third.
1. Gross salary. What you agree to pay the employee. This is the biggest number by far. It’s the same whether you use an EOR or hire directly.
2. Employer contributions. What the law makes an employer pay on top of salary. Retirement or provident fund, social security, mandatory bonuses, gratuity, leave encashment, and in some markets insurance levies. In the markets covered here this adds 10% to 20% of gross salary. People forget this line, and it’s payable however you employ someone.
3. The EOR fee. A monthly charge per employee. Fees start at $99 and go up to $699. Meteors charges $99.
Ask every provider for all three in one itemized quote before you commit. A provider who quotes only their own fee is showing you a fraction of the picture.
Fee structures to watch for
- Security deposits. Some providers hold one or two months of salary. That’s your working capital sitting with them.
- Foreign exchange margins. You fund in one currency and the employee is paid in another. If nobody tells you the rate applied, the gap is a hidden cost.
- Offboarding charges. Some contracts bill separately when an employee leaves. That arrives when you’re least inclined to argue.
- Per-filing add-ons. Year-end returns or amended filings charged on top of the monthly fee.
- Minimum terms and headcount floors. Contracts that require a minimum number of employees or a minimum length.
None of these are unreasonable on their own. All of them belong in the quote, not on the first invoice.
Compared with setting up an entity
An entity costs $5,000 to $10,000 to set up. It takes three to six months before you can legally employ anyone. Then it carries ongoing costs: accounting, audit, annual filings, and usually a local director or company secretary.
The arithmetic tips toward an entity once headcount in one market grows large enough that per-employee fees exceed the fixed cost of running a company. Where that line sits depends on the market and your fee.
Any provider unwilling to tell you when an entity is cheaper isn’t giving you a straight answer.
EOR vs entity vs contractor vs PEO
| EOR | Own entity | Contractor | PEO | |
|---|---|---|---|---|
| Time to first hire | 1 to 3 days | 3 to 6 months | Days | Days, if entity exists |
| Upfront cost | None | $5,000 to $10,000 | None | None |
| Ongoing cost | Monthly per employee | Accounting, audit, filings | Invoice per engagement | Monthly per employee |
| Legal employer | The EOR | You | Nobody, they’re self-employed | You, shared |
| Employment liability | The EOR | You | You, if misclassified | You |
| Statutory benefits | Full | Full | None | Full |
| Needs a local entity | No | It is one | No | Yes |
| Exit | Notice and settlement | Deregistration, months | End the contract | Notice and settlement |
| Best for | 1 to 20 people per market | Large permanent teams | Short independent projects | Companies that already have an entity |
How to choose
Start with one question. Do you already have a legal entity in that country?
If yes, you don’t need an EOR. A PEO or in-house payroll makes more sense.
If no, ask a second question. Is this work genuinely independent? That means it’s defined by deliverables rather than hours, and the person is free to work for others.
If yes, a contractor arrangement is legitimate.
If no, they’re an employee. You set their hours, you give them your systems, they report to your manager. Most countries treat that as employment whatever the contract says.
So they’re an employee and you have no entity. Now the choice is an EOR or incorporating. How many people, in how many markets, for how long?
A handful of people, several markets, or an uncertain horizon points to an EOR. A large team in one market, committed for years, points to incorporating.
What an Employer of Record is not
Several models get confused with EOR. The differences are clean once you see them.
EOR vs staffing agency
A staffing agency finds and supplies workers from their own bench, usually temporary. Their product is the candidate.
An EOR employs a person you already chose. Their product is the legal employment. If you don’t have someone in mind, an EOR has nothing to sell you.
Use a staffing agency when you need someone for three months and don’t mind who. Use an EOR when you’ve found the engineer you want and they live somewhere you’re not registered.
EOR vs staffing agency takes this further, into the markup hidden inside an agency bill and what it costs to keep someone permanently.
EOR vs recruitment agency
Recruiters find and place candidates. They take a placement fee and step out once the hire is made.
An EOR steps in at exactly that point and stays for the life of the employment.
They’re sequential, not alternatives. Plenty of companies use a recruiter to find the person and an EOR to employ them.
EOR vs BPO or outsourcing provider
A BPO owns the work and the outcome. You buy a function. Their staff, their managers, and their process deliver it. You don’t choose who works on your account and you don’t direct them.
With an EOR you own the work. You picked the person. You set their priorities. They report to you. The employees are yours in every practical way except whose name is on the contract.
Pick a BPO when you want an outcome. Pick an EOR when you want a team.
EOR vs BPO puts the published rates side by side and sets out what each price leaves out.
EOR vs umbrella company
An umbrella company employs contractors who work through recruitment agencies. The assignments are short and the arrangement is temporary by design. Coverage is minimal.
An EOR provides permanent employment with full statutory benefits.
EOR vs AOR (Agent of Record)
An Agent of Record does for contractors what an EOR does for employees. They handle classification checks, contracting, and payment for independent workers. They don’t become the employer, because a contractor has no employer.
Different worker type, similar job. Some providers offer both and the terms get used loosely, so confirm which one you’re buying.
When should you use an Employer of Record?
You’re testing a new market. You want to know if a market works before you commit capital. One or two people, a year of real data, then decide. Incorporating first means committing before you have evidence.
You’ve found someone you can’t otherwise hire. Your candidate lives in a country where you have no presence. An EOR turns that from impossible into a short process.
Your entity is still being set up. Registration takes months. Your candidate won’t wait. Employ them through an EOR now and move them across when the entity is ready.
You need to convert contractors. People engaged as contractors who work set hours, use your systems, and report to your managers are usually employees under local law. An EOR converts them properly without disrupting the work.
Someone valuable is relocating. An employee moves country for personal reasons. Without an EOR you lose them. With one, they keep their job and you keep the person.
You’ve acquired a company with people in markets you don’t operate in. An EOR holds those employees compliantly while you work out the integration.
When is an Employer of Record the wrong choice?
Most guides skip this. It matters more than half the sections above it.
You’re building a large permanent team in one market. Past a certain headcount, per-employee fees cost more than running your own company. Where that threshold sits depends on the market and the fee. Any honest provider will tell you roughly where.
You need a genuinely short engagement. Three weeks of specialist work from someone with other clients and their own schedule is a contractor arrangement. Employing them creates obligations neither side wants.
The role needs a license the EOR can’t hold. Some regulated work requires the employing company to hold a specific license. Financial services, certain medical roles, and some legal work fall here. An EOR can’t employ someone to do work it isn’t licensed for.
You need the entity for other reasons. Signing local contracts, holding assets, importing goods, or bidding for government work all need a registered company. Employment is only part of your problem, and an EOR solves only that part.
The market restricts the arrangement. A few jurisdictions limit third-party employment or require specific licensing. Any provider operating there should explain the position without being asked twice.
Your commercial roles carry contracting authority. This one needs its own section.
Does an Employer of Record create permanent establishment risk?
Permanent establishment, or PE, means having enough presence in a country that its tax authority treats you as running a taxable business there. Cross the threshold and your company can owe corporate tax in that market, plus penalties and back filings.
An EOR reduces PE exposure compared with running your own operation, because the employment sits with a separate legal entity. It doesn’t remove the risk. Providers who imply otherwise are overstating their position.
What creates the risk is what the person does, not how they’re employed.
Most tax treaties turn on one thing: does the person habitually exercise authority to conclude contracts on your behalf? A support engineer almost never does. An accountant almost never does. A salesperson negotiating terms and closing deals in-market is exactly the profile that does.
Other things weigh in too. Whether the person has a fixed place of business linked to your company. How long the arrangement has run. Whether they present themselves publicly as representing you. Whether a tax treaty exists between the two countries.
What to do about it.
Define the role scope before you draft the offer, not after. Be clear about whether the person can negotiate or sign on your behalf. If they genuinely need commercial authority, structure that deliberately.
Bring your tax advisor in early for any commercial hire. The threshold and the consequences differ by market and by treaty.
A provider who says PE is a non-issue hasn’t understood the question. A provider who reviews role scope before you make the offer is doing the job properly.
This section is general information, not tax advice. Take advice on your own circumstances before making commercial hires abroad.
What’s inside an Employer of Record employment contract?
The contract is where an EOR arrangement either protects you or quietly doesn’t. Most guides never mention it.
Statutory terms. Working hours, overtime, rest periods, probation limits, notice periods, leave, and termination grounds. These follow the country’s labor law and can’t go below the legal floor.
Pay and benefits. Salary, pay frequency, variable pay, and the benefits package. Bonus and commission need care, because local tax treatment often differs from base salary.
Intellectual property assignment. This clause matters most and gets missed most.
Work created by an employee doesn’t automatically belong to your company in every jurisdiction. And it certainly doesn’t belong to you rather than the EOR unless the contract says so. Companies usually find the gap during due diligence, a patent filing, or a dispute. Ask to see the IP clause before you sign anything.
Confidentiality and data handling. What the employee can access. How they handle it. What happens to it when they leave. Necessary for any role touching client data, financial information, or unreleased products.
Post-employment restrictions. Non-compete and non-solicitation terms, written to be enforceable in that country. Enforceability varies enormously. A clause copied from a US template often means nothing elsewhere.
Termination and settlement. Grounds, process, notice, severance formula, and final settlement. Worth reading before you need it.
Ask your provider for a sample contract for the market you’re hiring in. A provider who won’t share one is telling you something.
What benefits do employees receive through an Employer of Record?
Hiring managers ask this. Almost no guide answers it.
Someone employed through an EOR is a full employee, not a workaround. The package should show that.
Statutory benefits
These are set by law. They’re identical to what any locally employed person receives.
Depending on the market they include retirement or provident fund contributions, social security, health insurance where it’s mandated, gratuity or end-of-service payments, mandatory annual bonuses, paid annual leave, sick leave, public holidays, and maternity and paternity entitlements.
Neither you nor the EOR can reduce these. They’re a floor, not a negotiation.
Supplementary benefits
Everything above the statutory minimum. You decide these and you fund them.
- Private health insurance for the employee and dependants
- Life and accident cover
- Retirement contributions above the mandated rate
- Extra leave beyond the statutory allowance
- Transport, meal, or remote work allowances
- Learning budgets and equipment
In markets where public healthcare quality varies, private health cover for dependants often matters more to a candidate than a salary increase of similar cost.
Why this matters
Employees notice whether they’ve been given a real job or an arrangement.
A person on statutory minimums with no extra cover works it out quickly. They see colleagues elsewhere in the company treated differently. Then they leave.
Ask your provider what comparable employers in that market offer for that role. A provider who can’t answer isn’t close enough to the market to advise you on it.
How to evaluate an Employer of Record provider
Ten questions. The uncomfortable ones are deliberate.
- Do you own your entities in this market, or work through a local partner? Owned entities mean fewer parties between you and the employment. If they use a partner, ask who, and what happens if that relationship ends.
- Who reviews payroll before it’s released? Software applies the rules it was given. It doesn’t notice a rate that changed last week. Ask whether a qualified person signs off, and who.
- What are your service levels, and what happens when you miss one? A commitment with no consequence is a preference. Ask for the SLA and the remedy.
- Can I see a sample employment contract for this market? Read the IP, confidentiality, and termination clauses. A refusal is an answer.
- What’s the complete cost, itemized? Gross salary, contributions, and fee, separately. Then ask what else could appear on an invoice.
- Do you hold a deposit, and what’s your FX margin? Both are real costs and both often go undiscussed.
- How do you handle regulatory changes? Ask what happens when a tax rate changes mid-year, and how quickly it reaches payroll.
- Who do I actually speak to? A named account manager or a ticket queue. Ask what happens at six in the evening before a pay run.
- What’s your data retention and deletion policy? Where employee data sits, how long it’s held, and what happens when the arrangement ends.
- What happens if we want to move to our own entity? A good provider explains the transfer. A worrying one makes it sound difficult.
Warning signs of a bad Employer of Record
- Pricing they won’t put in writing. If the full cost only appears after you commit, expect more of the same.
- No clear answer on entity ownership. Vagueness here usually means several layers of subcontracting.
- No SLA, or an SLA with no remedy. Commitments that cost nothing to break.
- Liability left unclear. If the contract doesn’t say who carries what, assume it’s you.
- No named contact. A general inbox works fine until something goes wrong.
- Reluctance to share compliance documents. Filing receipts and payroll records should arrive on request, without a negotiation.
- Promises about government timelines. Nobody controls how fast an authority processes a registration. A provider who guarantees it is guessing.
- Silence on permanent establishment. A provider who treats PE as a non-issue either doesn’t understand it or would rather you didn’t.
Using an Employer of Record in South Asia
South Asia holds one of the largest professional talent pools available. It has real depth in software engineering, finance, customer operations, healthcare support, and sourcing. Costs run well below North America and Western Europe for equivalent skill, which is why so much of the world’s technology and services work sits there.
Talent has rarely been the obstacle. The employment structure has.
Each country runs its own labor code, tax regime, and contribution system. Several apply rules that differ by state or province. Setting up an entity in every market you want to hire in is slow and expensive, and it commits you before you know whether the market works.
An EOR removes that step. You hire the person. Someone else holds the registrations.
Bangladesh has a deep pool of software engineers, finance professionals, and sourcing specialists, with particular strength in apparel and consumer goods supply chains. Employment follows the Labour Act 2006. Provident fund, gratuity, and festival bonus obligations differ from neighboring markets. Companies hiring there without a local entity work through an Employer of Record in Bangladesh to hold the registrations.
India offers the largest technical talent market in the region, across engineering, data, product, and finance. Employment rules operate at both national and state level, so obligations shift depending on where your employee sits. Provident fund, employee state insurance, professional tax, and gratuity all apply, with thresholds that change by state. An Employer of Record service in India absorbs that variation.
Pakistan has growing depth in software development, business process operations, and finance. Labor law is set by province rather than nationally, so requirements in Sindh differ from Punjab. Social security and old-age benefit contributions apply at provincial rates. That’s why most companies hiring there use EOR services in Pakistan instead of registering locally.
Across all three, contracts must be locally compliant, salaries paid in local currency, and filings submitted to the correct authority on schedule. Meteors covers all of it through a single Employer of Record service, at $99 per employee per month.
Frequently asked questions
Is using an Employer of Record legal?
Yes. Third-party employment is recognised in most countries and multinationals have used it for decades. A small number of jurisdictions place restrictions or licensing requirements on it, so confirm the position in the market you’re hiring in.
Who is the legal employer of my team?
The EOR. They hold the contract, file with the tax authority, and carry the statutory obligations. You keep full control over the work, performance management, and the decision to end the employment.
Can an EOR find candidates for me?
No. An EOR employs someone you’ve already chosen. If you need help sourcing candidates, that’s a recruitment agency, and many EORs can introduce you to one.
How fast can someone start?
Onboarding takes one to three days once the offer is signed, depending on how quickly local authorities process registrations. Ask for a realistic date for your specific market rather than a general estimate.
How does equity work for employees hired through an EOR?
Stock options and RSUs can usually be granted. The employee holds them against your company, not the EOR. Tax treatment varies by market and is often triggered at vesting or exercise. Confirm the treatment before you make the grant so nobody gets an unexpected bill.
Can I terminate an employee hired through an EOR?
Yes, subject to local law. You make the decision. The EOR executes it, handling notice, severance, statutory payouts, and final settlement. Grounds and required process differ a lot between countries.
What happens if I set up my own entity later?
Employees transfer to your entity through a structured handover. It covers contract novation, re-registration with authorities, benefits continuity, and preserved length of service. Many companies use an EOR specifically to establish a market before incorporating.
Does an EOR arrangement affect my employee’s rights?
No. They get the full statutory protections of an employee in that country, including notice periods, leave, severance rights, and social security. Their employment is real employment.
Can an EOR employ someone in a country where I already have an entity?
Yes, though it’s rarely cheaper. If you have an entity, employing directly usually costs less. One exception is holding employees in a state or region where your entity isn’t registered.
How is an EOR different from a PEO?
A PEO co-employs alongside you and needs you to have a legal entity in that country. An EOR becomes the sole legal employer and needs no entity from you. If you have no local company, a PEO isn’t available to you.
What happens if the EOR makes a compliance mistake?
As the legal employer, the EOR carries the obligation and the penalty. Read the liability allocation in your service agreement, since providers differ on where responsibility sits for instructions you passed on.
How many employees do I need to make an EOR worthwhile?
One. Most providers have no minimum, which is the point. A single hire in a market is exactly what an EOR exists for, because incorporating for one person makes no sense.
Hiring your first employee abroad
An Employer of Record turns hiring in a new country from a months-long project into a decision you make in a week. You keep the team, the work, and the relationship. Someone else keeps the filings.
The model doesn’t suit everyone. If you’re building a large permanent team in one market, run the numbers on incorporating. If the work is genuinely independent, a contractor arrangement may fit better. Any provider worth using will tell you that before taking your money.
If an EOR does fit, the ten questions above will sort the providers worth talking to from the ones that aren’t.
Meteors provides Employer of Record services across Bangladesh, India, and Pakistan at $99 per employee per month. Contact us with the markets you’re considering and we’ll send the full cost breakdown within 24 hours.
