As businesses embrace remote work and global talent, many need to hire employees in other countries. However, international employment creates significant complexity: foreign labor laws, tax compliance, benefits requirements, and legal entity establishment.
Employer of Record (EOR) services—often provided by or through PEOs—solve these challenges, enabling international hiring without establishing foreign subsidiaries.
What is an Employer of Record (EOR)?
An EOR is a company that becomes the legal employer of your international workers for compliance and administrative purposes while you maintain day-to-day control.
Similar to PEO co-employment, but for international workers:
- EOR is employer of record in the foreign country
- You direct work, manage performance, and control operations
- EOR handles payroll, taxes, benefits, and compliance in that country
- Worker performs work for your business
This structure enables hiring internationally without establishing legal entities abroad.
Why International Hiring Is Complex
Without an EOR, you must:
Establish Legal Entity:
- Register company in foreign country
- Navigate foreign corporate law
- Maintain ongoing compliance
- File foreign tax returns
- Costs: $5,000-$50,000+ and 3-12 months
Understand Labor Laws:
- Each country has unique employment regulations
- Termination requirements vary dramatically
- Mandatory benefits differ by country
- Statutory leave requirements
- Works councils or union relationships
Manage Payroll and Taxes:
- Foreign payroll tax systems
- Social contributions (similar to FICA)
- Income tax withholding
- Year-end tax reporting
- Currency management
Provide Local Benefits:
- Health insurance requirements
- Retirement/pension plans
- Statutory benefits (vacation, sick leave, maternity)
- Supplemental benefits common in that country
Navigate Compliance:
- Employment contracts (requirements vary)
- Data privacy regulations (GDPR, etc.)
- Immigration and work permits
- Local business licenses
For most businesses, this is overwhelming and expensive for 1-5 employees in a country.
How EOR Services Work
The EOR Structure:
You:
- Source and interview candidates
- Make hiring decisions
- Manage day-to-day work
- Provide work direction and assignments
- Conduct performance management
- Make compensation decisions
- Decide on terminations
The EOR:
- Becomes legal employer in foreign country
- Manages employment contracts
- Processes payroll in local currency
- Handles tax withholding and payments
- Provides local benefits package
- Ensures labor law compliance
- Manages HR administration
- Handles termination procedures legally
The Employee:
- Works for your company operationally
- Receives paycheck from EOR entity
- Gets benefits through EOR
- Has employment contract with EOR
- Performs work you assign
Popular EOR Providers
Dedicated EOR Companies:
- Deel: Fast-growing, tech-focused, 150+ countries
- Remote: Strong platform, comprehensive coverage
- Oyster: Modern interface, smaller country coverage
- Velocity Global: Established provider, enterprise focus
- Globalization Partners: Premium service, comprehensive
PEOs with EOR Partnerships:
- TriNet: Partners with international EOR providers
- ADP: Global presence, EOR capabilities in many countries
- Paychex: International services through partnerships
Large Consulting Firms:
- EY, PwC, Deloitte: Enterprise-focused global employment services
EOR Cost Structure
Typical Pricing Models:
Per-Employee-Per-Month:
- $300-$800 per employee per month
- Varies by country
- All-inclusive (payroll, compliance, administration)
- Benefits costs separate (actual costs)
Percentage of Salary:
- 8-15% of gross compensation
- Less common than PEPM
- Can be expensive for high earners
What’s Included:
- Local employment contract creation
- Payroll processing in local currency
- Tax withholding and filing
- Social contributions management
- Statutory benefits administration
- HR compliance support
- Employment law guidance
- Termination management
What’s Extra:
- Employee salary and bonuses (you pay this)
- Benefits costs (health insurance, etc.)
- Equipment and supplies
- Travel expenses
- Equity administration (sometimes)
Cost Example: Hiring in Germany
Hiring software engineer in Berlin, €70,000 salary:
EOR Fees:
- $600 PEPM × 12 = $7,200/year
Employee Compensation:
- Base salary: €70,000 ($75,000 USD)
- Employer social contributions (20%): €14,000 ($15,000)
- Statutory benefits: Included in social contributions
- Additional benefits: €3,000 ($3,200)
Total Annual Cost:
- EOR fees: $7,200
- Compensation and taxes: $93,200
- Total: ~$100,400
Alternative (establishing entity):
- Entity setup costs: $15,000+
- Ongoing compliance: $10,000+/year
- Local payroll service: $3,000/year
- Benefits broker: $2,000/year
- Legal and accounting: $5,000+/year
- Plus compensation: ~$128,200 first year, ~$113,200 ongoing
EOR saves ~$28,000 first year and ~$13,000 annually for one employee.
Countries Where EOR Makes Sense
Popular for Remote Work:
- Western Europe: UK, Germany, France, Spain, Netherlands, Portugal
- Eastern Europe: Poland, Czech Republic, Romania
- Latin America: Mexico, Brazil, Argentina, Colombia
- Asia: Singapore, India, Philippines, Vietnam
- Canada and Australia
EOR Coverage: Leading providers operate in 100-150+ countries, enabling hiring almost anywhere.
When to Use EOR vs Establish Entity
Use EOR When:
- Hiring 1-10 employees in a country
- Testing a new market
- Need to hire quickly
- Want to avoid entity establishment complexity
- Hiring remote workers in multiple countries
- Uncertain about long-term presence
Establish Entity When:
- Hiring 20+ employees in one country
- Permanent, significant presence planned
- Need local legal entity for other business reasons
- Very long-term commitment to market
- Country-specific business operations required
For most small-to-mid businesses, EOR makes more sense financially until significant local headcount.
Legal and Compliance Considerations
Employment Contracts: EOR provides compliant local employment contracts meeting all statutory requirements.
Probation Periods: Many countries mandate or allow probation periods (1-6 months typical). EOR manages these correctly.
Termination Protections: Many countries have strict termination requirements:
- Notice periods (1-3 months common in Europe)
- Severance requirements
- Justification requirements
- Works council consultation
EORs handle terminations legally, protecting you from lawsuits.
Data Privacy: GDPR (Europe), LGPD (Brazil), and other regulations apply. EORs ensure compliant data handling.
Immigration: EOR doesn’t handle visas/work permits. Employees must have right to work in their country.
Benefits and Statutory Requirements
Countries mandate various benefits:
Vacation: 20-30 days annually (many countries) Sick Leave: Paid sick leave required (varies) Parental Leave:Maternity/paternity leave (weeks to months) Health Insurance: Sometimes required, sometimes customary Pension:Employer contributions to state or private pensions 13th/14th Month Salaries: Common in some countries Severance:Required in many countries upon termination
EORs ensure compliance with all local requirements.
Integration with US PEO Services
If you use a US PEO:
- Domestic employees managed by PEO
- International employees managed by EOR
- Two separate arrangements coordinated
- Both provide comprehensive support in their domains
Some PEOs offer or partner for EOR:
- Simplified to work with one provider
- Better integration between systems
- Unified reporting
- Single point of contact
Technology and Platforms
Modern EOR platforms provide:
- Employee onboarding workflows
- Contract generation and e-signature
- Payroll processing and tax filing
- Benefits enrollment
- Time-off management
- Expense reimbursement
- Compliance documentation
- Reporting and analytics
Good platforms make international hiring feel similar to domestic.
Common EOR Challenges
Currency Fluctuations: Paying employees in foreign currency creates exchange rate risk. Some EORs help hedge this.
Time Zone Differences: Support availability during your business hours vs employee’s location.
Cultural Differences: Different work expectations, communication styles, holiday schedules.
Equity Compensation: Stock options for international employees create tax complexity. Specialized advice needed.
Equipment and Tools: Providing laptops, phones, etc. to international employees requires planning for shipping, customs, etc.
Questions to Ask EOR Providers
- Which countries do you operate in?
- Do you have local entities in those countries?
- What’s your pricing structure?
- What’s included vs extra cost?
- How quickly can you onboard new employees?
- What benefits do you provide in [specific country]?
- How do you handle terminations in [country]?
- What employment contracts do you use?
- How does payroll processing work?
- What happens if employment law changes?
- What technology platform do you provide?
- Can you integrate with our existing systems?
The Remote Work Revolution
EOR services enable:
- Hiring the best talent globally
- Building distributed teams across time zones
- Accessing specialized skills unavailable locally
- Creating 24/7 operations through global presence
- Reducing compensation costs in expensive markets
- Testing new markets before major investment
For many modern businesses, EOR is essential infrastructure for global operations.
The Bottom Line on EOR Services
For businesses needing to hire internationally:
- EOR services dramatically simplify global employment
- Costs are reasonable ($300-$800 PEPM plus compensation)
- Faster and cheaper than establishing foreign entities
- Reduced legal and compliance risk
- Enables hiring in dozens of countries quickly
As remote work continues expanding globally, EOR services are becoming standard for international team building.
Ready to hire internationally or need guidance on global employment? Contact PEO Consulting Partners. We work with leading EOR providers and can help you evaluate options, understand costs, and start hiring globally—at no cost to you.