Hiring employees outside the United States should be a growth accelerator, not a legal liability.

However, for many US companies, international recruitment quickly becomes overwhelming and simple questions turn into roadblocks. 

Who manages payroll in another country? Which labor laws apply? Do we need to open a local entity just to hire one person?

These uncertainties slow hiring, distract leadership, and delay expansion. This is exactly where an Employer of Record, or EOR, comes in.

An EOR allows businesses to hire international employees legally and efficiently without setting up foreign subsidiaries. It removes compliance risk, cuts through administrative complexity, and enables companies to build global teams in a short time.

This guide explains what an Employer of Record is, how it works, when to use it, and why it has become a core strategy for fast-growing US companies.

What Is An Employer of Record (EOR)?

An Employer of Record, or EOR, is a third-party service that legally hires employees on behalf of a client company. The EOR takes care of all employment-related administration, including payroll, taxes, benefits, and compliance with local labor laws.

This setup allows businesses to hire talent in other countries without opening a local legal entity. It simplifies global expansion, reduces legal risk, and removes administrative burden. The client company still directs the employee’s day-to-day work, responsibilities, and performance.

What Does An Employer of Record Do?

An EOR takes care of all legal employment responsibilities while your company focuses on managing the employee’s daily work. Below is what EOR services typically cover:

• Supports international hiring: An EOR lets companies hire and pay employees in another country without setting up a local entity. This makes global hiring faster, simpler, and far less risky.
• Payroll management: The EOR calculates and pays salaries, handles multiple currencies for international teams, and processes expense reimbursements.
• Tax compliance: All required income taxes, Social Security contributions, and other employment taxes are properly withheld and filed with local authorities.
• Benefits management: The EOR oversees both mandatory and discretionary benefits like health coverage and paid leave.
• Legal and regulatory compliance: EOR ensures that employment practices align with both local and international labor laws. This includes providing fair contracts, supporting candidates’ compensation, and fulfilling unemployment requirements to create a safe and respectful work environment for everyone.
• Onboarding and offboarding: The EOR manages hiring and termination logistics, including paperwork, background checks, and legally compliant exit procedures.

In short, an EOR acts as a trusted partner for businesses that want a fast, compliant, and low-risk way to hire employees in new locations without dealing with complex local employment laws on their own.

What Are the Different Types of Employer of Record Service?

Employer of Record (EOR) services can be categorized primarily based on their operating model.

Different countries have different ways of operating for EOR providers, mainly because of their legal setup.

• Owned-Entity (Direct Model) EOR: This type of EOR establishes and operates through its own registered legal entities within the countries where it provides services. This model offers direct control over compliance and processes, often leading to better data security and service stability. Providers like Remote often use this model.
• Partner-Dependent (Indirect or Aggregation Model) EOR: These EORs rely on a network of third-party local partners or vendors to handle employment tasks in specific regions. This approach allows for broader international coverage without the significant investment of setting up an entity in every country, but the level of control and consistency may vary depending on the local partner.
• Hybrid EOR: This model combines the best of both approaches, using wholly-owned entities in key or high-demand markets and subcontracting to local partners in others. This offers a balance of flexibility and control across various regions. 

Benefits of Utilizing EOR

Whether you’re hiring one employee or expanding into a new market, working with an EOR offers several practical advantages.

Below are some of the key benefits companies generally notice:

• Lower costs: Setting up and maintaining legal entities in other countries is expensive and time-consuming. An EOR allows you to hire internationally through a predictable monthly fee, cutting down on ongoing overhead costs.
• Reduced risk: EORs take on legal employment responsibility and rely on in-country experts to stay aligned with local labor laws, helping protect your business from compliance issues.
• More flexibility: With an EOR, you can move quickly on hiring decisions or strategic changes. It’s easier to enter new markets or exit them without long administrative delays.
• Improved employee experience: Employees receive a consistent and compliant employment experience regardless of location, which supports fairness, inclusion, and a stronger workplace culture.
• Stronger employer brand: Using an EOR shows that your company values compliance and ethical employment practices. It also helps you avoid legal complications that could damage your reputation.

How Does An EOR Work?

The EOR model helps reduce the legal and administrative challenges of managing international employees. This allows companies to focus on leading your team instead of dealing with complicated employment rules.

Here’s how an Employer of Record typically supports global hiring:

• Agreement and onboarding: You choose an EOR partner and sign an agreement that defines responsibilities, service scope, and fees. The EOR then prepares employment contracts that comply with local labor laws for your selected candidates.
• Legal employment: The EOR becomes the official legal employer of the workers in their country. While the EOR handles legal employment matters, your company continues to manage daily work, goals, and performance.
• Payroll and benefits: The EOR runs payroll, pays salaries in local currency, withholds required taxes, and manages both statutory and optional employee benefits.
• Compliance & risk management: The EOR monitors local labor laws, handles required filings, and ensures ongoing compliance, which helps your company avoid fines or legal issues.
• Ongoing support: Throughout the employee’s time with your company, the EOR manages HR paperwork, employment records, and legally compliant offboarding when needed.

An EOR provides a structured, low-risk way to hire and manage global employees without dealing directly with employment regulations.

What Is the Relationship Between an EOR, the Client Company, and the Employee?

Understanding how each party works together helps ensure a smooth and compliant global hiring experience.

• Employer of Record and client company:

The EOR handles employment compliance, payroll, and HR tasks. Your company makes hiring decisions and manages the employees’ daily work and responsibilities.

• Employer of Record and employee:

The EOR is the official legal employer. It manages employment contracts, salary payments, benefits, and compliance with local labor laws. Employees contact the EOR for payroll, benefits, and employment terms.

• Client company and employee:

Your company directs the employee’s day-to-day tasks, sets expectations and goals, and manages performance. Employees work as part of your team and report to your internal managers.

This structure allows businesses to hire internationally with confidence. While the EOR manages the legal and administrative details behind the scenes, your company stays focused on leading teams and driving growth. With the right EOR partner, building a global workforce becomes faster, more flexible, and fully compliant, no matter where you choose to hire.

What Should an Employer of Record Service Cover?

An EOR is responsible for managing all legal and administrative aspects of employment on behalf of a company. This includes handling payroll, taxes, benefits, and ensuring compliance with local labor laws from the moment an employee is hired to the time they leave the company. A reliable EOR also supports HR processes and helps businesses scale, both domestically and internationally, while reducing legal and financial risk.

• Payroll and taxes: The EOR runs payroll, withholds and submits all required payroll taxes, and ensures compliance with local tax regulations. This includes managing employee tax documents and required employment records.
• Benefits administration: The EOR handles employee benefits. This includes health insurance and retirement plans. They also manage required paid time off, maternity leave, and sick leave.
• Legal compliance: As the legal employer, the EOR ensures all employment practices follow local, state, and federal labor laws. This includes employment contracts, workers’ compensation coverage, and unemployment insurance.
• HR and administrative support: The EOR handles employee onboarding, maintains HR records, and manages the full employment lifecycle, from hiring through termination.
• Onboarding and offboarding: All administrative steps related to hiring and termination are handled by the EOR, including required paperwork and, when applicable, support for visas or work permits.

• Global expansion support: The EOR allows companies to hire people in new countries without needing to create a local legal entity.
• Worker classification: The EOR ensures workers are correctly classified as employees rather than independent contractors, helping avoid legal and tax issues.
• Risk management: By taking on employment liability, the EOR helps reduce legal and financial exposure for the client company.

When Is an EOR the Right Choice?

Global expansion should support growth, not slow it down with legal complexity. Different countries have different labor laws, tax rules, and compliance requirements, and managing all of this internally can delay hiring. An Employer of Record helps businesses move forward faster while staying compliant.

An EOR is the right choice in the following situations:

1. You want to test a new market before making a long-term commitment

Entering a new country comes with financial and legal uncertainty. An EOR allows you to hire locally, operate in the market, and evaluate demand before investing in setting up a legal entity.

2. You need flexibility to scale global teams

Hiring needs can change quickly. Whether you are expanding into multiple regions or adjusting headcount based on market conditions, an EOR lets you scale teams up or down without the burden of setting up or closing local entities.

3. You need to hire quickly in a new country

Growth opportunities do not wait for long setup processes. Since setting up a local entity can take months, an EOR enables you to onboard employees within days while handling local compliance.

4. You want to avoid permanent establishment risks

Hiring in another country without the proper structure can trigger unexpected tax or legal obligations. An EOR employs workers on your behalf, reducing exposure while you retain control over their work.

5. You’re hiring for short-term or project-based roles

Some roles are temporary by nature. An EOR removes the administrative burden of short-term or project-based hiring while ensuring workers are employed legally and correctly.

6. You don’t have in-house global HR expertise

Employment regulations vary widely by country, and mistakes can be costly. An EOR provides local expertise to manage employment contracts, payroll, benefits, and compliance without adding internal complexity.

How The Talent Company Supports Global Hiring Through EOR?

At The Talent Company, Employer of Record services are built to solve the real challenges US businesses face when hiring globally. Our focus is not just on compliance, but on enabling fast, low-risk growth without adding operational complexity.

Here’s how we support global hiring through our EOR services:

• Full legal employment coverage
• Hire international high-performing candidates quickly without setting up local entities.
• Local laws and regulations are handled by in-country experts.
• Clear and predictable pricing with no hidden fees.
• Provide end-to-end support and manage from onboarding and payroll to compliant offboarding.

Final Thoughts

Global hiring does not have to be complicated or risky. An Employer of Record gives businesses a practical way to access global talent while staying compliant with local labor laws and tax regulations. 

Companies can focus on growth, delivery, and team performance instead of managing complex administration. With the right Employer of Record, hiring across borders becomes quicker, more flexible, and fully under your control.

For US businesses looking to scale efficiently, an EOR is not just a short-term solution, but a long-term strategy for building agile, global teams with confidence.