Definition
What is an employer of record?
An employer of record (EOR) is a company that becomes the legal employer of a worker on your behalf in a country where you have no legal entity. The EOR holds the employment contract, runs local payroll, withholds taxes, provides statutory benefits and carries employment liability. You still choose the person, direct the daily work and can end the engagement. In practice an EOR lets you hire compliantly in a new country in days instead of the months it takes to incorporate.
In one line
An EOR is how you legally employ someone in a country where your company does not exist.
- Also written as
- EOR, employer-of-record, international EOR, global employment organization
- Time to a compliant start
- 5 to 15 business days when the person is already identified
- Typical cost shape
- Gross salary + 22% to 55% statutory burden + EOR fee
The big picture
The real question is not what an EOR is, it is what it fixes
Every company that reaches for an EOR is stuck on the same thing: the work is ready, the person is ready, and the legal ability to employ them is not. An EOR removes that one blocker, and with it eight problems that usually arrive together.
You found the right person, in the wrong country
You can employ them legally in days without incorporating anything. The hire stops depending on a legal project.
Opening an entity would take 3 to 9 months
The EOR is already registered as an employer in-country, so the entity question moves from blocker to a later decision.
You are paying people abroad as contractors
Misclassification is the single most expensive LATAM mistake: back taxes, severance, benefits and labor-court exposure. An EOR converts them to real employees.
Nobody on your team knows local labor law
Notice, severance, 13th month, vacation, profit sharing and registrations are the EOR's obligation, not a spreadsheet you maintain.
Payroll, taxes and benefits are stitched across vendors
One employer, one invoice, one point of accountability per person instead of a local accountant plus a broker plus a bank.
You cannot forecast the real cost of a hire
You get one landed monthly cost per seat: gross salary, statutory burden, accruals and fee, before you commit.
You need to be able to exit cleanly
Ending an engagement or a country is a termination the EOR administers, not a company you have to dissolve.
Growth stalls between countries
The same contract structure works across every LATAM market, so market two and market three are not new projects.
Read together, those eight are one problem: hiring abroad forces you to become an employer in a country you do not operate in. An EOR is how you skip that, keep the person, and keep the option to open your own entity later when the headcount justifies it.
What an employer of record actually does
Signs the local employment contract
In the local language and format, with the statutory terms that country requires.
Runs in-country payroll
Gross-to-net calculation, tax withholding, social security and pension contributions, payslips.
Files and pays employer taxes
Employer burden runs roughly 22% to 55% of gross salary depending on the country.
Provides statutory benefits
Vacation, 13th month or aguinaldo where applicable, severance accruals, mandatory health coverage.
Carries employment liability
Termination process, notice, severance calculation and labor-authority exposure sit with the EOR.
Handles onboarding and offboarding
Background steps, registrations, equipment agreements, final settlements.
What an EOR does not do
- •Find or recruit the candidate for you (that is staffing or recruitment).
- •Supervise the work or own the deliverable (that is an SOW or managed team).
- •Replace a local entity forever if you plan to scale past roughly 15 to 25 people in one country.
- •Legalize a misclassified contractor arrangement retroactively.
EOR vs PEO vs staffing vs your own entity
The fastest way to pick is to ask what you are actually missing: the legal employer, the person, the supervision, or a permanent local presence.
| Model | Who is the legal employer | Local entity required | Finds the talent | Time to live | Best when |
|---|---|---|---|---|---|
| Employer of Record (EOR) | The EOR is the legal employer | No local entity needed | No, you bring the person | 5 to 15 business days | Hiring 1 to 20 employees in a country where you have no entity |
| PEO (co-employment) | Shared: you keep the legal employer role | Yes, you must already have an entity | No | 2 to 6 weeks | You have an entity and want HR, payroll and benefits administration off your plate |
| Staffing / staff augmentation | The staffing firm employs the worker | No | Yes, sourcing is the core service | 2 to 6 weeks to placement | You need the talent found, screened and delivered, not just employed |
| AOR / contractor of record | Nobody, the worker is an independent contractor | No | No | 2 to 5 business days | Genuinely independent, project-based contractors only |
| Own local entity | You are the legal employer | You incorporate it | No | 3 to 9 months | 20+ people in one country, long horizon, permanent presence |
The single most common mistake: buying a PEO when you have no entity abroad. A PEO co-employs inside an entity you already own. With no entity, only an EOR can employ the person. Go deeper in EOR vs staffing vs payroll or compare PEO services in Latin America.
What an EOR costs
Compare landed monthly cost per seat, not fees. Four components decide the number.
Gross salary
What the employee earns locally, set by market band, not by your US pay scale.
Statutory employer burden
Mandatory employer contributions on top of gross salary. Roughly 22% to 55% depending on the country.
EOR fee
Either a fixed monthly amount per employee or a percentage of gross salary.
Accruals and one-offs
13th month, vacation provisioning, severance reserve, onboarding and equipment.
Country-by-country salary bands and statutory burden are published free in the LATAM Workforce Index.
Employer of record by country
Employment rules, burden and notice periods differ sharply by market. Start with the country you are hiring in.
Regional overview: Employer of record in Latin America.
Employer of record FAQ
Not sure if you need an EOR?
Tell us the country and the role. We come back with the model that fits, the landed monthly cost per seat and a realistic start date.