What is an Employer of Record (EOR)?

If you want to hire someone in another country, you will soon come across the term Employer of Record (EOR). This guide explains what it means, how it works and when it makes sense, for business owners in the UK and Europe who are new to the idea.

What does EOR stand for?

EOR stands for Employer of Record. The “employer of record” is the employer named on paper: on the employment contract, the payslips and the tax and pension filings. So the EOR meaning is simple: another company is the official employer of someone who works for you.

What is an Employer of Record?

An Employer of Record is a company that legally employs people on behalf of another business. It is mostly used to hire in a country where you do not have your own company. The EOR is already set up there: it signs the local employment contract, runs payroll, pays income tax and the contributions local law requires, and keeps the HR records.

The person works for you, as part of your team. You decide who to hire, what they work on and how they are doing. The EOR looks after the employment side.

How an EOR works

Who employs the person

The EOR. It signs an employment contract with the employee under local law and is their legal employer.

Who manages the work

You. You set the role, the priorities and the targets, and you manage the person day to day, like anyone else in your team. You also approve salary changes, promotions and terminations; the EOR handles the formal steps under local law.

Who pays what

• The EOR pays the employee’s salary each month, issues the payslip and pays income tax and contributions to the authorities.
• You pay the EOR, usually through one monthly invoice that covers the salary, the employer’s contributions and the EOR’s fee.
• The employee is paid in the local currency, through local payroll.

The fee is the EOR’s charge for the service. The salary and employer contributions are the cost of employing the person, which you would pay whichever route you chose.

What employer of record services usually include

• Employment contracts under local law.
• Monthly payroll and payslips.
• Income tax and the employer contributions local law requires.
• Onboarding paperwork and HR records.
• Paid leave and public holidays.
• Ending employment on the grounds local law allows, with the right notice.

Some EORs offer more, such as finding candidates, equipment or office space. Always ask what the fee includes and what is charged separately.

EOR vs opening your own company vs contractors

Opening your own company

Registering a local company gives you full control, but it can take months and needs a local accountant, payroll and ongoing reporting. It usually makes sense for a large, long-term operation.

Hiring contractors

Contractors invoice you for their work and handle their own tax. It is quick, but a contractor is not your employee. In many countries, someone who works full time, only for you and under your direction can be treated as an employee rather than a contractor, whatever the contract says. That can lead to unpaid tax, contributions and penalties. Contractors also do not get the security of an employment contract, which can make good people harder to keep.

Using an EOR

Your hire becomes an employee with a local contract, payslips and paid leave, without you opening a company. You pay the EOR a monthly fee for the service.

When an EOR makes sense

• You want to hire one person or a small team in a country where you have no company.
• You are testing a new country before committing to a company there.
• You want people on employment contracts rather than as contractors.
• You would rather not run payroll, tax filings and local HR paperwork yourself.

For a large, long-term operation, a company of your own is worth considering, but many businesses stay with an EOR much longer.

Global EOR platforms vs a local specialist

There are two broad kinds of EOR. Global platforms cover many countries, often through local partners in each one. That can suit a business hiring one or two people in lots of different places.

A local specialist works in one country, with hands-on local support. That can suit a business building a team in one place.

Elara is a local specialist. We work in Kosovo only: Kosovo isn’t one of our markets, it’s our focus. Candidate sourcing and screening are included: we post the role, screen applicants and send you CVs, usually within 24 hours. You interview and choose.

Using an EOR in Kosovo

UK and EU companies use Kosovo to build customer support, sales and operations teams. Kosovo uses the euro, is one hour ahead of the UK and has Europe’s youngest population, and English is widely spoken.

With Elara as your Employer of Record in Kosovo, your team is employed on contracts in Albanian and English under Kosovo law. We run payroll monthly in euros and file income tax and pension contributions (5% of gross salary from the employer and 5% from the employee). You receive one invoice a month, in advance, in euros. Employment costs are passed through at cost, with no mark-up.

From €350 per employee, per month. Candidate sourcing and screening included. Office space, equipment and other services available, quoted separately. One-off setup fee of €2,000 per client. No offboarding fees. Larger team? Talk to us. To see what it could save you, compare hiring costs.