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Key Takeaways
- To become an Employer of Record (EOR), you must have the relevant operational licensing, legal registration, and capital investment.
- All EORs require international licenses, tax registrations, and HR certifications to comply with international regulations.
- Compliance costs include legal fees, payroll processing, and setting up core HR systems.
- Starting an EOR requires compliance certification and business licensing.
How to Become an Employer of Record
Expanding into international markets sounds exciting, until the compliance paperwork hits your desk. That’s where becoming an Employer of Record (EOR) can turn a legal maze into a clear, revenue-generating service. Whether you’re an HR firm, payroll provider, or global business strategist, launching your own EOR operation means you can help clients hire abroad without setting up legal entities in every country.
But how do you actually become an EOR? What regulations should you know? What tech do you need? And how do you price your services without scaring clients away or selling yourself short?
In this guide, we’ll walk you through everything you need to know to become a successful Employer of Record: from compliance and infrastructure to client experience and pricing models that work.
What Does an Employer of Record Do?
An Employer of Record legally employs workers on behalf of businesses from all over the world. EORs provide services such as managing payroll, administering benefits, filing taxes, and keeping companies compliant with local laws. The purpose of an EOR is to help businesses hire employees overseas if the client doesn’t have a legal entity in a specific country.
Because an Employer of Record acts as a local employer, they will help businesses adhere to international regulations such as paying workers on time, onboarding, and drafting employment contracts.
An EOR is not the same as a third-party payroll company or a staffing agency. Their role is broader as, in addition to handling payroll and HR they become the legal employer of an overseas workforce and liable for compliance.
8 Steps to Become an Employer of Record
For businesses interested in establishing an EOR, we recommend the following steps:
1
Conduct Initial Market Research
The first step is to carry out your market research. There are hundreds of Employer of Record companies on the market. What will be your USP? Which countries will you operate in? Who will your chief competitors be.
Market research will help you avoid complications such as registration delays and unforeseen costs. Most importantly, understanding the legal requirements of setting up an EOR will support a fully operational organization compliant with the laws in that particular country.
It will also help you decide on the precise model for your Employer of Record. Do you want to be an EOR Aggregator like Papaya Global who partners with local EORs and doesn’t set up local entities? Or do you want to be a Direct or Wholly-Owned EOR like Atlas or Remote? (Read more about this in our Papaya vs Remote comparison guide).
Creating a business plan is the simplest way to prepare for establishing an EOR. Business plans can help you analyze market conditions and competitors so you can determine whether it is feasible to start an EOR in that location.
In addition to market analysis, a plan can help you develop a budget to address the startup costs.
2
Investigate the Legal Requirements
The next step is to examine the legal requirements for operating as an Employer of Record in your country of choice.
If going down the wholly-owned route, you will need to look into the requirements, cost and time expected in incorporating a local entity. This includes setting up an organization with the responsibility of managing employment contracts and working conditions, paying taxes, and weekly or monthly wages.
You will also need to investigate employer registration, tax registration and business licensing requirements in the chosen EOR country.
If you are planning to partner with local firms, you will have to investigate whether there are any legal restrictions on doing so.
For an EOR to hire a workforce and create contracts with clients, it must be registered with government authorities for tax and receive certification as a legally recognized business. This process includes proof of physical address, opening a bank account, and proof of funding for the new organization.
In some countries, depending on your operating model, you may need a special license or registration as an Employer of Record. Check whether you will need to:
- Register for an AUG license when operating as an EOR in Germany.
- Register for third-party payer accreditation with the IRS if taking care of employee tax witholding as a United States EOR.
- Register for a Labour Hire Licence if operating as an Employer of Record in some Australian states.
- Register for Labour Hire Accreditation if hiring migrant workers as an EOR in New Zealand.
For more information on this issue, check out our Are Employer of Record Services Legal?
Note some countries, like Singapore, are introducing EOR bans or restrictions. To ensure that EOR is permitted in your planned country of operation check out our Guide to EOR Bans Around the World.
3
Develop your Service Offering
Developing a service offering for an Employer of Record (EOR) company involves balancing client needs with legal compliance and operational efficiency. Defining the scope of services is crucial: All EORs provide legally compliant employment contracts, manage payroll and tax obligations, and administer benefits.
But what about additional services? For example:
- You could offer equipment provisioning services to fit out remote employees with the righ tech. Deel provides this service.
- You could offer in-house recruitment, to acquire the best global talent. Horizons is one of the few EORs providing this.
- You could offer global mobility and visa support. Globalization Partners and Bradford Jacobs provide this service.
- You could offer a remote jobs advertising service. Remote has a jobs board.
You will also want to think about data protection compliance. For example, it is not compulsory to be SOC 2 compliant, but many EORs are.
Finally, pilot testing your services with a small group of clients allows you to gather feedback and make necessary adjustments before scaling up. Monitoring growth and investing in resources like technology and staff ensure that service quality is maintained as your client base expands. By carefully planning each aspect—from market research to scaling—you can create a robust EOR service that provides value to clients and establishes your company as a trusted partner in global employment solutions.
4
Come Up with an EOR Pricing Strategy
Setting the right price for your EOR services isn’t just about staying competitive; it’s about building trust and delivering value. Your pricing model should reflect the level of service you provide, the complexity of compliance in each country, and the expectations of your target clients.
Most EORs charge a monthly fee per employee, which typically ranges from $299 to $999 depending on location, benefits administration, visa support, and other factors. Some providers opt for a flat fee model, while others charge a percentage of the employee’s gross salary, often between 10% and 15%.
When building your pricing structure, benchmark against competitors, but also consider your unique strengths. Do you offer hands-on support? Faster onboarding? Better local compliance coverage? Make sure your rates reflect that.
And most importantly, be transparent. Clients appreciate clear pricing with no hidden fees. It builds confidence and positions your brand as a reliable, professional partner.
Want more detail? Check out our full guide on EOR pricing.
5
Establish the Hiring Entity
To move forward with establishing an EOR and expanding overseas, you must adhere to the local labor laws and tax regulations. This means setting up your local entity/partnership, registering with the tax authorities, and getting all necessary licenses or accreditations.
A lack of compliance with these legal requirements can lead to major fines, lawsuits, and possible imprisonment, depending on the country of operation.
6
Set up your Local Payroll
Establishing an efficient and compliant local payroll system is crucial. You’ll need to develop systems that accurately calculate wages, taxes, social security contributions, and other statutory deductions specific to each jurisdiction. Implementing robust payroll software that can handle multiple currencies and adapt to various regional requirements is essential. This technology should integrate seamlessly with your HR systems to streamline processes and reduce the risk of errors.
It’s important to stay updated on changes in legislation that could affect payroll obligations, such as adjustments in tax rates or labor laws. Transparent communication with employees about their pay, deductions, and benefits builds trust and contributes to a positive employment experience.
7
Set Up your Onboarding Process
Creating a seamless onboarding process is vital for integrating new employees and streamlining your EOR for profitability. As an EOR, your onboarding procedures must accommodate the cultural, legal, and logistical differences of each region. Begin by standardizing core onboarding elements while allowing flexibility to adapt to local practices. This includes preparing employment contracts that comply with local laws, gathering necessary employee information, and providing clear explanations of company policies and job expectations.
Utilize technology to streamline onboarding tasks, such as electronic document signing, online training modules, and centralized platforms where new hires can access resources and information. Effective communication is key; consider language preferences and cultural norms to make the onboarding experience welcoming and informative. Assigning a dedicated onboarding specialist or team can help address any questions or concerns promptly. Additionally, ensure that all compliance requirements are met during the onboarding process, such as verifying work eligibility and providing mandatory employee notices or benefits enrollment information. A well-structured onboarding process not only enhances employee satisfaction but also promotes efficiency and reduces the likelihood of compliance issues down the line.
8
Implement your Marketing and Sales Strategies
What Certifications Do I Need to Become an EOR?
Before operating as an EOR in any country, you must have the certifications and licensing to move forward. A few examples of these international certifications are described below:
Labor or Temp Hire Licensing
Labor or Temp Hire licensing sometimes is necessary when you wish to hire temporary workers or contractors for a specific project locally. It is defined as a labor leasing license because a third party or separate leasing agency hires employees.
Germany is one of the countries that has incorporated AUG licensing to provide temporary workers with the same rights and regulations as full-time employees. This includes paid time off, sick leave, severance pay, and related employee expenses. The AUG license protects the rights of contracted workers and supports legal temporary staffing.
Compliance Certifications
International tax compliance is defined as a business’s adherence to tax regulations when operating in more than one country. It is necessary for organizations operating in multiple jurisdictions to understand and abide by tax laws to avoid penalties for non-compliance.
The most common tax requirements include:
- tax registration
- withholding tax on certain payments
- filing tax reports based on the laws of the country they are operating in
Data protection certifications are also impossible including SOC 2 which certifies that data is handled securely.
GDPR is a regulation of the European Union that defines how personal data should be used and managed. EORs operating in Europe should be GDPR certified, which means that they have implemented strategies and technology to protect sensitive client information.
Labor Law
Compliance with international labor law refers to the steps that businesses have taken to satisfy labor standards as determined by the countries they are operating in.
This includes the creation of a dedicated team to understand these laws and regulations while implementing measures such as safe working conditions, enrolling employees for mandatory benefits, and abiding by written employment contracts.
HR/Payroll Certifications
Individuals hired for HR management should usually possess HR certification, which demonstrates their skills and knowledge in developing tailored employee maintenance and compliance strategies.
An example of payroll certification is the United States Fundamental Payroll Certification (FPC), which verifies an individual’s competencies in handling payroll processes.
HR and payroll certification provides proof of individual experience and expertise when hiring staff to occupy professional roles. Businesses with HR and payroll-certified staff are viewed as more credible as they have specialized and knowledgeable teams to oversee financial tasks.
How Much Does it Cost to Become an EOR?
Setting up an EOR can be an expensive process if you don’t plan and prepare for the costs, such as the initial setup, licensing, and legal fees. The following expenses are associated with establishing an EOR:
| Cost Category | Expense Type | Estimated Cost | Notes |
|---|---|---|---|
| Legal and Compliance | Company registration | $1,000–$10,000 per country | Varies by jurisdiction, legal structure, and use of external advisors |
| Licenses and permits | $500–$5,000 per country | Depends on industry and regulatory requirements | |
| Legal consultation | $200–$500 per hour ($10,000–$50,000 annually) | Ongoing compliance and regulatory support | |
| Human Resources and Staffing | Local HR personnel | $50,000–$100,000 per employee annually | Required for local labor compliance and HR operations |
| Training and development | $5,000–$10,000 per employee | Initial onboarding and compliance training | |
| Technology and Infrastructure | HR information systems (HRIS) | $20,000–$100,000 upfront; $5,000–$20,000 annually | Includes implementation and maintenance costs |
| Cybersecurity measures | $10,000–$50,000 upfront | Does not include ongoing monitoring and upgrades | |
| Accounting and Payroll | Accounting software | $5,000–$15,000 annually | Pricing varies by features and number of users |
| Payroll processing fees | $20–$200 per employee per month | Applicable when outsourcing payroll services | |
| Insurance and Risk Management | Insurance premiums | $10,000–$50,000 annually | Coverage type and headcount impact total cost |
| Risk assessment services | $5,000–$15,000 per country | Often a one-time or periodic requirement | |
| Marketing and Sales | Brand development | $5,000–$20,000 | Includes branding assets and website creation |
| Marketing campaigns | $10,000–$50,000 annually | Digital marketing, content, and advertising spend | |
| Sales team salaries | $60,000–$120,000 per employee annually | Excludes commissions and performance incentives | |
| Operational Costs | Office space | $500–$5,000 per month per location | Costs vary widely by city and office size |
| Administrative expenses | $1,000–$5,000 per month | Includes utilities, supplies, and general overhead | |
| Travel expenses | $10,000–$30,000 annually | International travel for management and compliance | |
| Contingency Funds | Unforeseen expenses | 10–20% of total budget ($20,000–$100,000) | Recommended buffer for regulatory or legal changes |
| Total Estimated Initial Investment | Small-scale operations | $150,000–$300,000 | Typically one to two countries |
| Multi-country operations | $500,000 to $1,000,000+ | Costs increase with geographic scope | |
| Ongoing Annual Costs | Operating expenses | $200,000–$500,000+ | Varies by headcount, technology, and market reach |
What Are the Challenges in Becoming an EOR?
Compliance with International Tax Laws
Navigating international tax laws is a significant challenge for Employers of Record (EORs) operating across multiple countries. Each country has its own tax codes, regulations, and compliance requirements that can be complex and subject to frequent changes. EORs must accurately manage payroll taxes, social security contributions, and other statutory deductions specific to each jurisdiction. They also need to understand and apply double taxation treaties to prevent employees and the company from being taxed twice on the same income. Failure to comply with local tax laws can result in severe penalties, legal issues, and damage to the company’s reputation. Staying updated with international tax legislation and collaborating with local tax experts are essential steps to mitigate these risks.
Global EORs who operate through partnerships with local EORs need to consider the very real risk of permanent establishment. This would make the EOR liable for corporate income tax and potential penalties and interest charges.
Managing Multi-Currency Transactions
Managing multi-currency transactions presents financial and operational challenges for international EORs. Paying employees in their local currencies involves dealing with fluctuating exchange rates, which can affect budgeting and financial forecasting. Currency volatility can lead to unexpected costs or losses, impacting the profitability of the EOR’s operations. Additionally, processing payments across different countries incurs varying transaction fees and may involve complex regulatory requirements related to foreign exchange controls and anti-money laundering laws. Implementing robust financial systems that can handle multi-currency accounting and partnering with reliable banking institutions are crucial for efficient and compliant financial management.
Potential Breach of Labor Laws
Complying with international labor laws is another major hurdle for EORs. Every country has unique employment laws governing contracts, minimum wage, working hours, termination procedures, employee benefits, and workplace safety standards. Misunderstanding or misapplying these laws can lead to legal disputes, financial penalties, and harm to employee relations. For instance, what constitutes fair dismissal in one country might be illegal in another. Additionally, cultural differences can influence the interpretation and implementation of labor laws, making it imperative for EORs to have in-depth knowledge of local employment practices. Ensuring compliance requires continuous monitoring of legal developments and often necessitates legal counsel specialized in each country’s labor laws.
EOR companies that offer contractor of record services need to take care to manage the risk of misclassifying contractors as employees
Case Studies: Successful EOR Implementations
Talent500
Talent500 is a relatively new EOR, which came about as a strategic extension of ANSR’s recruitment services to meet the growing demand for global talent acquisition and management. ANSR, founded in 2004, specialized in helping multinational corporations establish Global Capability Centers (GCCs) or Global In-house Centers (GICs) in countries like India, enabling companies to leverage local expertise and tap into global talent pools.
As ANSR assisted clients in setting up these centers, they recognized a recurring challenge: sourcing and managing high-quality talent at scale across diverse geographical locations. Traditional recruitment methods were insufficient for the specialized needs of global enterprises, so ANSR created Talent500 to provide end-to-end talent solutions tailored to the complexities of international hiring.
Leveraging ANSR’s extensive experience and infrastructure, Talent500 streamlined the process of identifying, recruiting, and managing top professionals worldwide through its advanced EOR platform. The platform utilized advanced technologies like artificial intelligence and machine learning to match employers with candidates who possessed the precise skills and cultural fit required.
Justworks
Founded in 2012 by Isaac Oates, Justworks recognized that many businesses were overwhelmed by the complexities of managing payroll, benefits, and compliance with employment laws. By adopting the Professional Employer Organization (PEO) model, Justworks entered into co-employment agreements with its clients, where it became the administrative co-employer for tax and compliance purposes.
In 2023, Justworks merged with the existing EOR company Via and started offering global EOR services. This enabled Justworks to support its clients to focus on their core business activities without the administrative burden associated with international expansion. The company manages all aspects of employee administration, including filing taxes, securing workers’ compensation insurance, and ensuring adherence to federal, state, and local labor laws. This arrangement provided clients with access to large-group benefits and streamlined HR processes, making it easier for smaller businesses to offer competitive packages to attract and retain talent.
Justworks’ evolution into an Employer of Record was driven by its mission to simplify complex HR tasks and provide scalable solutions that mitigate employment-related risks for businesses across the United States and beyond.
Read more about how Justworks operates in our in-depth Justworks EOR and PEO review.
Should you Start an EOR Company?
An Employer of Record can operate across multiple countries by helping businesses start a workforce overseas. Establishing an EOR requires proper planning, capital investment, and adherence to specific international licenses and certifications.
An Employer of Record must also comply with the country’s labor and tax laws and employment regulations to operate in different markets.
The best strategy to become an EOR is to research the market you want to expand in and create a business plan with a breakdown of the costs for company registration and processing of particular licenses.
Careful planning and adherence to international business and labor laws will help you achieve long-term success.
To learn more, get in touch with our Employer of Record experts for tailored support!
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Written by
Marcel Deer