Operating model

How an Employer of Record works in practice

An Employer of Record is a sequence of operating steps, not a software toggle. The client company defines the role. A local employing entity hires the person. Payroll, filings, and lifecycle events then run on an agreed calendar until the assignment ends or transfers.

Last reviewed: 29 September 2026For: HR, finance, legal and founders

The three contracts

A working EOR hire uses three documents that must describe the same facts:

Client–EOR services agreement. Identifies the employing entity, country scope, fees, data handling, and which employer duties the EOR performs.
Local employment agreement. The worker’s contract with the EOR’s local entity, written for the work country.
Internal role definition. The job, compensation, manager, and work location the client actually intends to run.

If those three files disagree, payroll, immigration, or an exit will surface the gap. The product description is on the Employer of Record page. The legal definition is in What is an Employer of Record.

The operating sequence

1. Intake

Country, city, start date, compensation mix, worker nationality, and whether the person already has a right to work. Incomplete intake is the usual cause of a slipped first payroll.

2. Classification

Confirm the relationship is employment. A contractor invoice does not rewrite a directed, full-time role. See EOR vs independent contractor.

3. Local employment

The EOR issues the local contract, collects statutory identifiers, and enrolls the worker in required funds or insurance. Work does not start on a visit visa.

4. First payroll

The client funds gross pay, employer contributions, and fees by the cutoff. The EOR calculates, pays, files, and returns the agreed reports. Use the payroll readiness checklist.

5. Lifecycle

Compensation changes, leave, investigations, and location changes route through the local employer. A manager email is not a payroll instruction until it meets the cutoff and evidence rule.

6. Exit or transfer

Termination follows local process. A later move to the client’s own entity is a separate transfer project, not an automatic switch. See EOR vs subsidiary.

What still sits with the client

Day-to-day work direction, candidate selection, business equipment, and most customer relationships remain with the client. Corporate tax presence, regulated licences, and the ability to sign local customer contracts also remain the client’s analysis. EOR administration of employment does not close those items.

For a first hire, start with first international hire. For a Chinese headquarters, use China outbound hiring.