What an EOR is
An Employer of Record is a third-party that becomes the legal employer for workers on behalf of a client company. The EOR handles local payroll, contracts, taxes, benefits, and statutory filings while the client directs day-to-day work. This model is used in one country or across multiple countries to add or retain talent quickly without opening a local entity.
EOR vs PEO
A Professional Employer Organization (PEO) is typically a co-employment model that supports HR in places where you already have a legal entity. An EOR is the legal employer. The difference matters for compliance, liability, and speed.
When an EOR makes sense
- You must hire or retain people in a country where you do not have a registered entity
- You need continuity during policy shocks that affect work visas or cross-border mobility
- You want predictable costs and fast setup while you evaluate long-term market entry
How an EOR works
A credible EOR will:
- Draft compliant local employment contracts and onboard employees under its local entity
- Run payroll, withhold taxes, and remit social contributions
- Administer statutory benefits and leave, keep records, and manage separations
- Issue payslips and end-of-service documents, and file required returns
Compliance pillars to check
1) Social security and payroll filings
Country obligations vary. For India, employers typically register for Provident Fund with the EPFO and, where applicable, Employees’ State Insurance with ESIC, then file and pay monthly. Review official portals for coverage thresholds and registration procedures.
2) Separation pay and gratuity
In India, the Payment of Gratuity Act, 1972 applies to establishments employing 10 or more persons and sets statutory entitlements at separation. Confirm applicability and rules.
3) Data protection
An EOR processes employee personal data. In the EU and UK you must set clear controller and processor roles and have Article 28 contracts in place. In India, align with the Digital Personal Data Protection Act, 2023 and its forthcoming rules.
4) Permanent establishment awareness
Using an EOR can reduce, but not automatically eliminate, permanent establishment risk. Monitor fixed-place and dependent-agent activity against OECD model treaty concepts and obtain tax advice.
Costs, timelines, and operating models
EOR pricing is typically per-employee per-month plus pass-through statutory costs. Setup can be days to a few weeks depending on verifications, benefits onboarding, and country complexity. Compare this with the months required to open and run your own entity.
Risk areas and how to mitigate
- Joint employer and co-employment confusion in the U.S. Keep vendor scopes clear and maintain direct management of work while the EOR handles employment. Note that the NLRB’s 2023 joint-employer rule was vacated in March 2024 and related efforts were later withdrawn, but joint-employer exposure still exists case-by-case. Consult counsel.
- Tax and PE Request a written memo from your EOR or tax advisor on activities permitted without creating PE, then train managers on boundaries.
- Data protection Execute controller-processor agreements, conduct DPIAs where needed, and verify cross-border transfer mechanisms.
Vendor due-diligence checklist
Ask any prospective EOR to provide:
- Proof of local entity and employer registrations, plus sample statutory filings in your country of operation. For India, ask for EPFO and ESIC registration details.
- Sample employment contracts, onboarding workflow, payroll calendars, and SLAs
- Security attestations and data-flow maps that match GDPR or local law duties. Include Article 28 terms for processing.
- Written guidance on permanent establishment do’s and don’ts in each country, tied to OECD concepts.
Spotlight: India EOR in a visa-shock scenario
On September 19–20, 2025, multiple outlets reported a new 100,000 USD annual H-1B fee in the United States, triggering budget and continuity risks for employers with Indian talent. This kind of policy shock is a classic use case for moving affected roles to an India EOR model while projects continue.
As a current market example, Elatre publicly announced a 72-hour Employer of Record pathway for U.S. companies to retain or hire employees in India, with details published on its service page and press release. Treat any “first to market” language as the company’s assertion unless independently verified.
Frequently asked questions
Is an EOR legal in my target country
EOR is a contractual arrangement that depends on local labor, tax, and data laws. The model is widely used in many jurisdictions. Validate country fit with your counsel and verify the provider’s local registrations.
Will an EOR eliminate permanent establishment risk
No single vendor can guarantee that. EOR reduces entity-setup exposure but PE analysis depends on facts and activities. Use OECD concepts and local guidance to frame acceptable conduct.
What is the difference between EOR and staffing
Staffing supplies contingent labor. EOR hires employees and becomes their legal employer for payroll, tax, and benefits while you manage work. HR and legal responsibilities differ.
What happens if my company later opens a local entity
Many EORs support a migration or build-operate-transfer plan. Confirm commercial terms and timelines in advance.
