An Employer of Record (EOR) is a company that legally employs a worker in their own country on behalf of another business. The worker does their job for you, but their employment contract, payroll and local compliance sit with the EOR.
For a UK company, an EOR is the quickest lawful way to hire a full-time employee in a country where you have no company of your own. You avoid incorporating abroad, opening a foreign bank account and learning another country's employment and tax rules.
How an Employer of Record works
There are three parties: your business (the client), the employee, and the EOR. The arrangement works like this:
- You choose the person. You recruit the candidate yourself or ask the EOR to find one, and agree the role and salary.
- The EOR employs them. The employee signs a local employment contract with the EOR's employing entity in their country. The EOR registers them with the tax and social security authorities.
- You direct the work. The employee reports to your managers, uses your tools and works on your projects, exactly like any other team member.
- The EOR runs payroll and HR. Each month the EOR pays the salary, withholds income tax, pays employer contributions, tracks leave and issues payslips.
- You pay one invoice. The EOR bills you for salary, statutory costs and its service fee, usually in your own currency.
What an EOR is responsible for
- A locally compliant employment contract, including confidentiality and intellectual property clauses
- Registering the employee with local authorities
- Monthly payroll, tax withholding and statutory filings
- Employer social security and other mandatory contributions
- Statutory leave, public holidays and employment letters
- Lawful termination and final settlement when employment ends
Your business remains responsible for managing performance, setting objectives and deciding who to hire or let go. The EOR makes sure each of those decisions is carried out in line with local law.
Employer of Record vs PEO
A Professional Employer Organisation (PEO) shares employer responsibilities with a company that already has its own local entity. An EOR is used when you have no entity in that country at all, so the EOR becomes the sole legal employer. For a UK business making its first hires abroad, an EOR is usually the relevant option.
When UK companies use an EOR
- A first overseas hire, such as a developer, accountant or support specialist, where opening a company would be out of proportion.
- Building an offshore team in a lower-cost market such as Pakistan, with proper employment rather than freelancers.
- Converting long-term contractors into employees to reduce misclassification risk.
- Testing a market before deciding whether to incorporate.
How much does an EOR cost?
EOR pricing normally has two parts. The first is a service fee, often a flat monthly amount per employee. The second is the employee's gross salary plus mandatory employer contributions, which a good provider passes through at cost and shows line by line. Ask any provider for a written quote for the specific country, role and salary before you make an offer, so the full monthly cost is known in advance.
Is using an EOR legal?
Yes. EOR is a recognised way of employing people in countries where the client has no presence, provided the EOR holds a properly registered employing entity in that country and complies with local employment and tax law. Check that your provider employs people through a real local entity and can show you a sample contract.
What to check before choosing a provider
- Whether they employ through their own registered entity in the country
- A sample employment contract with IP and confidentiality clauses
- A clear breakdown of fees and statutory costs
- How data is protected, including UK GDPR safeguards for international transfers
- Who your point of contact is and how quickly they respond
Read more about our Employer of Record service, or book a free consultation.
Frequently asked questions
What does an Employer of Record do?
An Employer of Record legally employs a worker in their country on your behalf. It issues the local contract, runs payroll, withholds tax, pays employer contributions and handles HR administration, while you manage the employee's day-to-day work.
Who does the employee work for under an EOR?
Day to day, the employee works for your business, following your processes and reporting to your managers. Legally, they are employed by the EOR's local entity.
Who owns the work an EOR employee produces?
Your business, provided the employment contract includes intellectual property assignment and confidentiality clauses. Ask your EOR to confirm this in the contract.
Can I move an EOR employee to my own company later?
Usually yes. When you open your own entity in that country, the employee can transfer to your payroll. Check whether your provider charges an exit or transfer fee.