What is an Employer of Record?
An Employer of Record (EOR) is the legal employer of a worker under a service arrangement with the company that directs the work. The EOR performs the employer duties written in the local employment documents and the service agreement. The client company selects the person and manages day-to-day business activity.
The working definition
Three parties appear in a typical EOR hire: the worker, the client company, and the EORβs local employing entity. The worker has an employment contract with the EOR. The client has a services contract with the EOR. The worker still reports into the clientβs managers for the job itself.
The label βEmployer of Recordβ is an operating description. Local law still decides who is an employer, which duties cannot be delegated, and whether the arrangement is available for the role and worksite. Farlinkoβs operating product for this model is described on the Employer of Record service page.
What an EOR commonly administers
Employment documents
A local contract or equivalent, required policies, and the records needed to start work in that jurisdiction.
Payroll and statutory pay
Gross-to-net calculation, employee deductions, employer contributions, payslips, and filings in the agreed scope.
Benefits in scope
Statutory coverage and any additional plans the country and the agreement include, with enrollment and changes.
Lifecycle events
Compensation changes, leave, investigations, and exits routed through a local process rather than an informal email.
What an EOR does not automatically do
- It does not make the client a local company. Customer contracts, licences, leases, and bank accounts still follow corporate law.
- It does not close a permanent-establishment analysis. Tax presence depends on the business activity. See EOR and permanent establishment.
- It does not create a right to work. Immigration categories, sponsors, and processing times remain country-specific.
- It does not convert a directed full-time role into a contractor relationship. Classification follows the facts. See EOR vs independent contractor.
When companies use an EOR
The model is commonly used for a first hire in a country without an entity, a market test before incorporation, or a bridge while a subsidiary is being formed. It is less suitable when the business already needs a local contracting vehicle, a regulated presence, or direct employment control that only its own entity can provide.
Compare the operating trade-offs in EOR vs subsidiary and the neighbouring US model in EOR vs PEO.
How to read an EOR quote
Ask for four layers, written separately: employee compensation, statutory employer on-cost, benefits, and the providerβs fees plus disclosed pass-throughs. A single monthly number hides the parts that change with country, salary, and events such as deposits or exits. Build a directional statutory view in the labor cost calculator before you compare service fees.