What is an Employer of Record (EOR)? Explanation + costs

An Employer of Record (EOR) is an external party that legally becomes the employer of your employees in a specific country, while you continue to determine the daily management and work [1]. The EOR handles the employment contract, payroll administration, tax remittances, and compliance with local legislation. This allows you to hire staff in a country without setting up your own legal entity there.

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What is an Employer of Record? (definition)

An Employer of Record (EOR) is an external organization that legally employs staff on behalf of your company in a specific country [4]. The EOR is formally listed as the employer on the payroll, while your employee practically works for you. You determine what the employee does; the EOR assumes the legal employer role.

The core idea is a split that is unusual in labor law: the legal employer status lies with the EOR, while the factual management remains with you. This allows you to hire someone in a country where you do not have a branch, no local entity, and no local payroll administration.

Inzicht

An EOR is not a temporary employment agency or a secondment agency. The difference lies in the intention: an EOR is designed to compliantly place your own, permanent employees on a foreign payroll — not to provide temporary external staff.

In practice, companies primarily use an EOR to hire internationally quickly and without their own entity. If you want to implement this model concretely, you can explore international hiring with an Employer of Record and make the step to suppliers later.

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What does Employer of Record mean? (term and abbreviation EOR)

Employer of Record is abbreviated to EOR. The English term is best translated as registered employer: the party listed as the employer in official registers and with the tax authorities. "Of record" here literally means "in the books" or "formally recorded."

The term itself explains what the role entails:

Employer — the party bears full employer responsibility: contract, wages, contributions, and obligations.

Of Record — that employer role is legally and administratively recorded; the EOR is the officially registered employer.

You sometimes encounter the term as a synonym for "global employment" or "international hiring partner." Strictly speaking, EOR refers to one specific construction: a third party that takes over legal employer status, so you don't need your own entity.

An Employer of Record is in essence your employer-on-paper in a country where you yourself do not (yet) have a foothold — while the employee remains a full part of your team.

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How does an Employer of Record work?

An EOR works by splitting employer status in two: the EOR takes on the legal and administrative obligations, while you retain substantive control over the work. The employee signs an employment contract with the EOR but performs the work for and under the direction of your organization.

The legal employer versus factual management

This is the heart of the model. The EOR is the legal employer: it concludes the contract, pays the salary, remits wage tax and social contributions, and is accountable for labor law. You remain the factual manager: you determine the tasks, goals, working hours in consultation, and daily collaboration.

For the employee, little changes substantively — they work for your team. On paper, a lot changes: the payslip, the contract, and legal responsibility run through the EOR.

What the EOR takes over

An EOR takes over the entire administrative and legal employer package. Specifically, this involves:

the employment contract that complies with local labor law;

payroll administration and monthly salary payment;

the remittance of wage tax and social contributions;

local compliance: minimum wage, vacation days, notice periods, and legal regulations;

often also additional matters such as insurance, pension schemes, and leave administration.

Tip

Clearly define in advance which responsibilities lie with the EOR and which remain with you. Management, evaluation, and work content belong to you; everything related to legal employer status and the payslip belongs to the EOR. Clear demarcation prevents surprises.

Step by step: from vacancy to onboarding

Broadly speaking, an EOR process proceeds as follows:

You select a candidate in the country where you want to hire.

The EOR draws up a locally compliant contract and presents it to the employee.

The employee is employed by the EOR, at your expense and under your direction.

The EOR handles payroll administration, taxes, and contributions every month.

You manage the employee daily as if they were directly employed by you.

An important advantage lies in speed. One large provider indicates that you can onboard talent via an EOR within a few days — approximately two working days — whereas setting up a local entity yourself in the Netherlands can take up to three months [1]. These figures are an example from one provider and not a universal standard, but they illustrate the order of magnitude of the difference.

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What exactly does an EOR do? (tasks and responsibilities)

An EOR is responsible for everything related to legal employer status, so you don't have to arrange it yourself in a foreign country. The tasks roughly fall into four categories:

Contract and hiring — drafting an employment contract that complies with local law, including the correct clauses and notice periods.

Wages and taxes — paying salary, withholding and remitting wage tax, and arranging social contributions.

Compliance and obligations — ensuring compliance with minimum wage, vacation days, holiday pay, and local labor legislation.

Management and support — administratively handling leave, illness, mutations, and employee inquiries.

With this, the EOR also bears the employer risk: if something goes wrong in the payroll declaration or compliance, that responsibility lies with the registered employer. Covering that risk is precisely why many companies choose this model [5].

Cijfer

The global EOR market was approximately USD 6.82 billion in 2025 and is expected to grow to approximately USD 15.89 billion by 2035, with an annual growth (CAGR) of 9.24% over 2026–2035 [2]. The demand for borderless and compliant hiring is therefore structurally increasing.

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EOR vs. payroll vs. PEO vs. temporary employment agency — what's the difference?

These four models are often confused but differ on one decisive point: who the legal employer is and whether you need your own entity. The table below compares them.

Model	Legal employer	Own entity needed?	Typical use
Employer of Record (EOR)	The EOR	No	International hiring without a local establishment
Payroll (salary processing)	You	Yes	Outsourcing payroll administration, you remain the employer
PEO (co-employment)	Shared (you + PEO)	Yes	Supporting HR and payroll for an existing entity
Temporary employment agency / secondment	The agency	No	Hiring temporary external staff

EOR vs. payrolling

With payroll (salary processing), you remain the legal employer and bear all employer obligations and risks; the payroll party only processes salary payments. With an EOR, the EOR becomes the legal employer and takes over full employer status, compliance, and risk. Therefore, for payroll, you do need your own entity in the country, and for an EOR, you do not.

EOR vs. PEO (co-employment)

A PEO (Professional Employer Organization) works via co-employment: you share employer status, but you still need your own legal entity in the country where you hire. An EOR is the sole legal employer, so you do not need a local entity. An EOR is therefore the usual choice for new international hiring, and a PEO for supporting an existing local entity.

EOR vs. temporary employment agency / secondment

A temporary employment agency or secondment agency provides temporary external staff: the employee belongs to the agency and is lent to you for an assignment. An EOR compliantly places your own, permanent employee on a foreign payroll — it's your team member, not hired capacity. In the Dutch context, this difference is important: temporary employment and secondment fall under their own rules (such as the WAADI), while an EOR is intended for regular remote employment.

EOR vs. setting up a foreign entity yourself

You can also organize international employment entirely yourself by setting up a local entity. This provides maximum control but costs time and money: registration, local accounting, legal advice, and ongoing management. One provider indicates that such an entity in the Netherlands can take up to approximately three months, compared to onboarding in about two working days via an EOR [1]. For a few employees or a test market, an EOR is therefore almost always faster and cheaper; for large, permanent teams, your own entity can pay off in the long run.

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When do you choose an Employer of Record?

An EOR makes sense when you want to quickly hire staff in a country where you don't have an entity. Typical situations include:

Testing a new market with one or a few employees, without immediately setting up an entity.

Securing remote talent living and working abroad.

Scaling quickly when you don't want to lose a candidate due to a slow startup procedure.

Converting a contractor to employment to prevent bogus self-employment (see the Dutch context further on).

Let op

For large, permanent teams in one country, your own entity may be more advantageous in the long run than an EOR. Service costs per employee increase as your team grows. Calculate the break-even point before setting up an EOR as a permanent solution for dozens of employees.

The growing EOR market — from approximately USD 6.82 billion in 2025 to approximately USD 15.89 billion in 2035 [2] — shows that more and more companies are recruiting across borders and using the model as a standard route for international hiring.

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Advantages and disadvantages of an EOR

An EOR primarily provides speed and certainty but comes with costs and a certain dependency. Weigh both sides before making a choice.

Advantages

Speed of onboarding — hiring in days instead of months; one provider mentions approximately two working days versus up to three months for your own entity [1].

No own entity needed — you avoid registration, local accounting, and ongoing management.

Compliance ensured — the EOR ensures a locally correct contract, payroll declaration, and social contributions.

Risk reduction — the legal employer risk lies with the EOR, not with you [5].

Broad country coverage — large providers offer EOR services in many countries; one provider mentions over 100 countries [1].

Disadvantages and points of attention

Service costs / margin — the EOR charges a fee on top of salary and employer costs.

Less direct control — formal employer matters go through a third party, not through you.

Dependence on the provider — the quality, coverage, and continuity of the EOR partly determine your employer status [5].

Inzicht

The biggest misconception is that an EOR is "expensive." The correct comparison is not EOR versus nothing, but EOR versus setting up and managing an entity yourself. Against that background, the trade-off often shifts towards speed and certainty.

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What does an Employer of Record cost?

An EOR typically charges a fixed amount per employee per month or a percentage of the gross salary, on top of the salary and employer costs. Exact rates vary by country and provider, so firm figures are only reliable via a customized quote.

Consider three cost components:

The gross salary of the employee.

Employer costs (social contributions). In the Netherlands, one provider indicates approximately 15–25% of the gross salary [1] — a guideline, not a fixed rate.

The EOR fee itself: a fixed monthly amount per employee or a percentage.

Against this fee, you avoid the startup, legal, and management costs of your own entity. For a small or temporary team, an EOR is therefore generally cheaper and faster than setting up a foreign entity yourself [1].

Tip

Always compare the pricing models of multiple providers. A fixed amount per employee can be more advantageous for high salaries than a percentage, and vice versa. Also, explicitly ask which costs are included in the fee and which are charged separately.

If you want to compare providers on price and coverage, it helps to compare the best EOR providers in the Netherlands based on your actual situation rather than on individual rates.

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Employer of Record in the Netherlands: labor law and employer costs

An EOR in the Netherlands is fully legal, provided it adheres to Dutch labor law. The registered employer must comply with minimum wage, vacation days, holiday pay, social contributions, and correct payroll declaration. Below are the most important Dutch rules.

Minimum wage, vacation days, and social contributions

Dutch labor law sets strict minimums that an EOR must comply with:

Minimum wage — as of January 1, 2026, the statutory minimum wage for employees aged 21 and over is €14.71 gross per hour [3].

Vacation days — a full-time employee is entitled to a minimum of 20 vacation days per year, supplemented by statutory holidays [4].

Holiday pay — employees are entitled to holiday pay (vacation allowance) on top of their salary.

Social contributions — the employer remits social contributions; one provider indicates approximately 15–25% of the gross salary [1].

Cijfer

The statutory minimum wage in the Netherlands has been set at €14.71 gross per hour for employees aged 21 and over as of January 1, 2026 [3]. An EOR acting as an employer in the Netherlands must adhere to this minimum.

Point of attention: bogus self-employment and the DBA Act

A common reason to choose an EOR is the risk of bogus self-employment. Anyone who consistently works with a freelancer or contractor who effectively functions as an employee runs a risk in the Netherlands under the DBA Act (Deregulation Assessment of Employment Relationships). The Tax Authorities can classify such a relationship as employment, resulting in additional assessments and fines.

An EOR structure is often used precisely to avoid this risk: you correctly employ the contractor via the EOR, with a real employment contract, payroll declaration, and contributions. This eliminates the discussion about bogus self-employment, as there is an undisputed employment relationship.

For specific Dutch rules and providers, you can delve further into EOR solutions for the Netherlands.

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Choosing an EOR: what to look for?

Choosing an EOR is a structured process, not an impulse purchase — after all, you entrust the provider with your legal employer status. Keep these points in mind during your orientation:

Country coverage — does the provider offer EOR services in precisely the countries where you want to hire? Large providers sometimes cover more than 100 [1], but coverage means nothing if your country is missing.

Transparent pricing — is it clear which costs are included in the fee and which are separate? Avoid hidden surcharges.

Compliance and reliability — how does the provider ensure a locally correct contract, payroll declaration, and contributions? Ask for the legal basis.

Support and service — does your employee receive timely, local support for leave, illness, and inquiries?

Continuity — how stable and how large is the provider? Your employer status relies on the continuity of the party.

Tip

Don't start with a quote, but with your requirements: which countries, how many employees, what budget, and what risk profile. Those who first clarify what is needed will have sharper discussions and prevent a low introductory price from driving the choice.

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Frequently asked questions about Employer of Record

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is an external party that legally becomes the employer of your employees in a specific country, while you continue to determine the daily management and work. The EOR handles the employment contract, payroll administration, tax remittances, and compliance with local legislation. This allows you to hire staff in a country without setting up your own legal entity there.

What is the difference between an EOR and payroll?

With payroll (salary processing), you yourself remain the legal employer and bear all employer obligations and risks; the payroll party only processes salary payments. With an Employer of Record, the EOR becomes the legal employer and takes over full employer status, compliance, and risk. An EOR is therefore suitable for hiring in a country where you do not have your own entity.

What is the difference between an EOR and a PEO?

A PEO (Professional Employer Organization) works via co-employment: you share employer status, but you still need your own legal entity in the country where you hire. An Employer of Record is the sole legal employer, so you do not need a local entity. Therefore, an EOR is the usual choice for international hiring, and a PEO for supporting existing local entities.

What does an Employer of Record cost?

An EOR typically charges a fixed amount per employee per month or a percentage of the gross salary, on top of the salary and employer costs. This is significantly cheaper and faster than setting up and managing a foreign entity yourself, as you avoid the startup, legal, and administrative costs of your own entity. Always compare the pricing models of multiple providers, as actual costs vary by country and provider.

When do you choose for an Employer of Record?

An EOR makes sense when you want to quickly hire staff in a country where you don't have an entity, want to test a new market with a few employees, want to secure remote talent abroad, or want to convert a contractor to employment to prevent bogus self-employment. For large, permanent teams in one country, your own entity may be more advantageous in the long run.

Is an Employer of Record legal in the Netherlands?

Yes. An EOR that acts as a legal employer and adheres to Dutch labor law — minimum wage, vacation days, holiday pay, social contributions, and correct payroll declaration — operates completely legally. Pay attention to the rules regarding bogus self-employment (DBA Act): an EOR structure is often used precisely to correctly employ contractors and avoid that risk.

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Next steps

Now that you know what an Employer of Record is and how it works, it helps to make the step to selection concrete:

Determine your requirements — put on paper in which countries you want to hire, how many employees are involved, and what budget and risk profile you have.

Explore the model — delve into internationally hiring with an Employer of Record and what it means for your situation.

Compare independently — compare providers by comparing the best EOR providers in the Netherlands on functionality and price instead of marketing.

Test the Dutch context — check if a provider aligns with minimum wage, social contributions, and the DBA Act via EOR solutions for the Netherlands.

Request a personal shortlist — accelerate your orientation with a free intake for a personal EOR shortlist, tailored to your countries and team.

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