An employer of record (EOR) is a third-party organization that employs and pays one or more individuals on behalf of your business. EOR services enable your company to seamlessly hire and work with employees, either domestically or internationally, without the need to establish your own entity or navigate complex compliance requirements in the employee’s country.

Imagine you’re a UK-based company looking to employ a skilled professional residing in Brazil. By partnering with an employer of record with a Brazillian entity, the company can lawfully employ the Brazillian worker. The new hire works in Brazil while effectively contributing to the UK company’s operations.

The employer of record is responsible for ensuring adherence to local labor laws and regulations, running payroll, and managing various HR tasks and administrative duties, thus simplifying international employment processes.

When you use an employer of record, it officially assumes the role of the legal employer for any individuals you hire: These employees enter into contracts with the Employer of Record rather than with your own company.

While you maintain control over setting the employees’ salaries, defining their daily tasks, and assessing their job performance, the employer of record takes on all legal responsibilities for your workforce and manages all aspects related to employment, such as creating employment agreements, handling salary and benefits administration, and managing payroll tax obligations to ensure compliance with local employment laws when hiring internationally.

Employer of Record services vary depending on the provider. The most comprehensive Employer of Record providers, such as Deel EOR, provides the following services:

• Legal employment of your domestic and international employees
• Creation of locally compliant employment contracts
• Background checks
• Global payroll processing and tax filing
• Employee benefits and perks administration
• Equity management
• Work visa and immigration support
• Intellectual property protection
• Equipment management
• Employee onboarding and offboarding
• Engagement tools to support remote work and distributed teams Contract termination

Companies don’t need an EOR partner to engage freelancers and contractors since they fall under the category of independent workers, which means they don’t have employee status. Therefore, a local entity is not required to process these workers’ payroll, taxes, and social security contributions.

However, employer of records like Deel understand that contractors are essential to the contingent workforce, and engaging intentional contractors can subject the company to legal and compliance risks, such as misclassification if you fail to follow local contractor laws.

Deel provides agent of record (AOR) services for hiring and paying contractors so that you can confidently and compliantly engage contractors and manage them under the same global platform alongside your Employer of Record employees and direct employees.

An employer of record allows companies to hire part-time and full-time employees abroad without setting up their own legal entity in the new country, which usually takes months and requires significant financial investment. Hiring global talent through an employer of record is cost-effective and removes the regulatory obstacles to international employment.

See a full-service EOR like a global expansion starter kit. Instead of handling each new country on an ad-hoc basis, with Deel EOR, you gain access to a fully assembled team of HR professionals, payroll, and compliance experts with local expertise.

✨ Discover how Revolut outpaces its competitors in entering new markets with Deel.

Employer of records sometimes refer to themselves as global employers of record. This distinction in terminology often arises because while all EORs can employ individuals in the client company’s home country, not all possess extensive international coverage.

By designating themselves as global EORs, certain service providers emphasize their ability to facilitate employment across multiple different countries, highlighting their broader scope in assisting businesses with global hiring needs.

Deel has the most extensive country coverage, with EOR services in 150+ countries.

An employer of record caters to businesses aiming to build and manage a global workforce without bearing compliance liabilities. Meanwhile, a professional employer organization (PEO) is tailored for companies seeking domestic HR services and workforce management support willing to accept a shared responsibility for any instances of non-compliance.

Unlike employers of record, who are the sole legal employers of your workers, PEOs provide co-employment services. A co-employment relationship means you and the PEO share legal liabilities and management responsibilities related to your employees. Another crucial difference is that PEOs operate locally, so you can’t hire international employees through a PEO.

See also: EOR vs. PEO: The Difference (And Why It Matters)

Companies can tap into a staffing agency’s existing talent pool to bolster their workforce, secure project support, or cover temporary positions.

Conversely, the employer of record services facilitates the compliant engagement of top talent directly recruited by the client company. To leverage EOR services, your company must first identify the talent it wishes to hire and then engage them through the Employer of Record’s legal framework.

See also: How Staffing Agencies Can Guarantee a Good Employee Experience With an EOR

With Deel, we can get your new employee onboarded in as little as one day. Your new employee will be invited via email to create an account with Deel, where they will will provide their personal and bank details, any required documentation and sign their new employment contract. You'll have a dedicated onboarding manager on hand to help with any questions along the way.

Each country has its own set of laws that set out the benefits that must be provided for employees. These range from health and unemployment to insurance and social security.‍ Deel exists to ensure every employee receives all necessary localized benefits, along with any optional benefits the employer would like to provide.

Some people wonder if using an EOR means they can still grant employees equity. The short answer is "yes" but it really depends on the country. ‍For example, in the U.S., companies can issue non-qualified stock options, also known as NSOs. Since the company doesn't have a direct employment relationship (on paper) with the employee, NSO is the only viable option.

Handling severance and termination according to a country’s local labor laws is crucial. These laws often vary depending on an employee’s location. Typically though, you always need to pay attention to the proper termination notice, severance payouts, and managing any accrued benefits like unused vacation days. Deel manages the entire process to ensure everything goes smoothly.

We have the strongest intellectual property protection clauses built into our contracts. This means that any and all IP passes through to you.