An employer of record (EOR) is a company that becomes the legal employer of your workers in a country where you have no legal entity, while those people continue to report to you and do their work for you day to day. It exists for one purpose: to let you employ someone in a market without incorporating there.
The EOR holds the employment contract, runs local payroll, withholds and files taxes, and carries the compliance obligation. You keep the work, the direction, and the relationship.
Two roles that normally sit in one company get separated. The EOR is the legal employer: the name on the contract, on the payslip, and on the filings with local authorities. You remain the practical employer: you set the work, manage performance, and decide on promotions and exits.
Day to day management, the work itself, tools and equipment, performance reviews, and the decision to hire or let go. An EOR does not manage your team. It makes employing them legal.
| Model | Who is the legal employer | Entity needed | Best for |
|---|---|---|---|
| Employer of record | The EOR | No | Full employment in a market you are testing or entering |
| Contractor of record | Nobody employs them, but a provider carries classification responsibility | No | Contractor relationships you want handled properly |
| Independent contractor, engaged directly | Nobody, the person is self-employed | No | Project work with genuine independence |
| PEO (co-employment) | Shared with you | Yes, usually | Domestic teams where you already have an entity |
| Own local entity | You | Yes | Sustained headcount in one market |
The distinction that costs companies the most money is between employment and contracting. A worker treated like an employee but paid as a contractor is misclassified, and reclassification brings back pay, benefits, contributions, and penalties. If the work is ongoing, supervised, and exclusive, it is employment, whatever the contract says.
Employer of record is the correct term. "Employee of record" is a common variant, and people using it almost always mean the same thing: the third party that legally employs your workers. The employee is the person doing the work. The employer of record is the company that employs them on paper.
If you have sustained headcount in one market, an entity is usually cheaper per head. If the work is genuinely independent and project-based, a contractor arrangement is simpler and costs less. An EOR sits between those two and is worth its fee precisely in that middle.
Pricing is normally a flat monthly fee per employee, or a percentage of salary, on top of the salary and the local employer contributions. Those contributions are not a detail: in many countries they add a substantial percentage to the gross salary, and they are payable whichever model you use.
When comparing quotes, ask for the fee, the employer contributions for that country, the deposit or advance required, and the notice and severance treatment on exit. A quote that only shows the monthly fee is showing you the smallest number.
EOR stands for employer of record: the company that is the legal employer of a worker on behalf of another organisation, handling contract, payroll, taxes, and compliance while the worker does their job for the client company.
An EOR employee is a person employed on paper by the employer of record and working day to day for the client company. They are a full employee with local statutory rights, not a contractor.
An EOR becomes the sole legal employer and does not require you to have a local entity. A PEO shares employer responsibilities with you in a co-employment arrangement and generally does require you to have one.
An EOR employs the person. A contractor of record does not: the person stays an independent contractor, and the provider takes on the contracts, the payments, and the classification responsibility. The right one depends on whether the relationship is genuinely employment or genuinely contracting.
No. That is the entire point of the model: the EOR already has the legal presence, so you can employ someone in that country without incorporating.
The EOR withholds and files local income tax and social contributions for the employee. For your company the main consideration is whether the arrangement creates a permanent establishment in that country, which depends on the nature of the activity rather than on the EOR itself.
No. Outsourcing hands the work to another company. An EOR does not touch the work: the person still works for you, under your direction. Only the employment paperwork moves.
Ontop is the Global Workforce Engine: financial infrastructure for the global workforce. Ontop does not provide employer of record services. What it does is the contractor side: contractor of record, global contractor payroll, and financial services for the worker, who receives and holds their income in an account they control.
That distinction matters when you are choosing a model rather than a vendor. If the relationship is genuinely contracting, the alternative to an EOR for contractors explains when that route fits, and global contractor payroll covers the payment side. If the relationship is genuinely employment, you need an EOR provider, and no contractor arrangement is a substitute for one.
Practical reads on hiring, paying and managing talent across 150+ countries.
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