The rise of remote work since Covid-19 has fuelled the rapid growth of Employer of Record (EOR) services. As organisations increasingly hire employees who live abroad or retain relocating employees, demand for cross-border employment solutions has surged. The trend is expected to continue, with the global EOR market projected to grow from approximately USD 5.7 billion in 2025 to more than USD 10 billion by 2031. With countless providers offering a variety of global solutions, an EOR is often presented as the default answer. But is it always necessary?
An EOR acts as the legal employer in the host country while the employee works for another organisation. The EOR manages employment contracts, payroll, tax, social security compliance, and often immigration support.
In some situations, an EOR is genuinely the best, or even the only solution. A remote worker may require sponsorship by a locally established and eligible employer. Likewise, a company may have established an entity but still be awaiting immigration approval before employing staff directly. In such cases, an EOR can provide an effective temporary bridge. An EOR can also provide a practical solution where a company wants to test a new market through a single employee before establishing a local presence.
In some jurisdictions, direct foreign employment is difficult or impractical. In El Salvador, for example, foreign employers cannot simply establish a local payroll presence without additional local infrastructure, making an EOR a valuable option.
In many cases, however, an EOR is primarily a matter of convenience. The provider manages employment administration, payroll, compliance, and, where relevant, immigration support. Organisations effectively pay for speed, simplicity, and reduced administrative burden. While this can be worthwhile, EOR fees may significantly increase the overall cost of employing a worker abroad.
What is often overlooked is that an EOR is not always required. In a number of countries, a foreign employer can engage a remote worker directly without establishing a local entity. Where payroll registration is required, a payroll provider may administer payroll on behalf of the foreign employer. The outcome can be equally compliant, but substantially less expensive.
EOR availability also differs by country. France does not generally recognise a standalone EOR framework and arrangements often need to be structured through recognised mechanisms such as portage salarial. Spain and Belgium allow EOR-type solutions only within a regulated framework, and generally require appropriate licensing or qualification as an authorised temporary employment agency to avoid unlawful labour leasing.
In the Netherlands, EOR services are widely accepted, although selecting a Labour Standards Foundation (SNA)-certified provider offers additional compliance comfort. In some jurisdictions, including Andorra, recent legal developments are restricting the scope of EOR arrangements, making local advice increasingly important.
The conclusion is simple: EOR solutions undoubtedly have their place and can be invaluable when they are the only viable route to employ talent in a particular country. However, they should not automatically be considered the default solution. A case-by-case assessment often reveals alternatives that are equally compliant and significantly more cost-effective.
In global mobility, the smartest solution is rarely the standard solution. The key is understanding all available options before choosing the right one.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
