HR & Tech Glossary

Learn meaning and definition of all important terminologies related to HR Tech and related topics. 

What is Employer of Record (EOR)?

Employer of Record also widely known as EOR is basically an entity that officially (legally) hires workers (full-time employees, freelancers, and contractors) on behalf of another company.

It takes complete responsibility of various employment-related matters including compliance, taxes, benefits, and payroll. Also, employer of record’s services are often used by businesses who want to hire top talents globally. 

Note: EOR can be situated either in the same country as the business they hire employees for or in a different country where the employment laws may be different.

But what is the purpose of EOR?

The role played by an EOR varies depending on the specific service and location. Here are some common tasks managed by an EOR:

  • Adhering to compliance with local employment regulations is the main responsibility of an EOR. They help organizations in meeting laws set by every country (from where the employee is hired), providing legally compliant employment contracts and managing legal matters.
  • EOR streamlines the onboarding process for the new workforce by handling employment agreements and setting up necessary procedures.
  • International payroll management is another important task handled by an EOR. They manage payroll and local taxes for both employees and employers, ensuring accurate and timely payments, with employees receiving payslips directly from the EOR.
  • Employer of record also manages compensation and benefits, although the specific offerings may vary. These benefits can encompass health insurance, leave policies, parental benefits, and more.
  • When it comes to contract terminations, the EOR manages the required procedures, handles all relevant details upon the termination of an employee’s contract.

Employer of Record Example

An employer of record situated in Spain can easily hire a workforce locally on behalf of an organization situated in the United States. The employees, freelancers, or contractors would work locally in Spain for the organization in the US. However, the EOR in Spain will hold the legal responsibilities of the employment. 

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