Key takeaways

• An employer of record (EOR) legally employs international workers on your behalf, managing payroll, taxes, benefits, and compliance while you retain control of day-to-day work.

• EORs allow you to hire globally in days, avoiding entity setup costs that can reach $15,000–$40,000 upfront and $200,000 annually in maintenance.

• EORs are cost-effective for small or distributed teams but become less economical when hiring 10–15+ employees in one country—at that stage, a local entity often makes financial sense.

• Common drawbacks include higher per-employee costs, limited HR policy control, and dependency on the provider.

• Rivermate eliminates these limitations with flat-rate pricing, in-country legal support across 160+ markets, and personalized onboarding for every employee.

The pros and cons of hiring with an employer of record (EOR)

Hiring globally used to mean months of setup, legal uncertainty, and heavy upfront costs. Today, an employer of record (EOR) makes it possible to hire talent anywhere, without creating a local entity or navigating foreign employment laws alone.

The model has become essential for companies expanding across borders, offering speed, compliance, and lower risk. But like any global hiring strategy, it has tradeoffs.

In this article, we break down the real pros and cons of hiring with an EOR, so you can understand when it’s the right fit, what to watch for, and how a partner like Rivermate helps you scale globally without added complexity.

What is an employer of record (EOR)?

An employer of record (EOR) is a partner that legally employs your team members in countries where you don’t have a local entity. While your company manages day-to-day work—assigning tasks, setting goals, and measuring performance, the EOR handles everything tied to legal employment.

That includes payroll, taxes, benefits, local contracts, and compliance with country-specific labor laws. In effect, the EOR becomes the local employer on paper, while you remain the operational employer in practice.

This structure lets companies hire internationally in days instead of months. It eliminates the cost and complexity of setting up foreign subsidiaries, often $15,000 to $40,000 in upfront fees and up to $150,000-$200,000 a year in ongoing maintenance.

Understanding how the EOR model works is the first step toward knowing whether it’s the right fit—or if alternatives like hiring independent contractors or using a contractor of record service make more sense for your global strategy.

Top benefits of using an employer of record

An employer of record (EOR) simplifies how companies expand globally. It combines speed, compliance, and flexibility, allowing teams to hire anywhere without unnecessary risk or setup delays.

1. Faster global hiring and market entry

Setting up a local entity can take three to twelve months and require complex filings. With an EOR, companies can hire within days.

The EOR manages contracts, payroll registration, and compliance from the start—so new hires can begin work almost immediately. This speed helps companies move quickly into new markets and capture opportunities faster than competitors.

2. Compliance and legal risk reduction

Every country has its own labor laws, tax systems, and employment standards. Missteps like misclassifying workers or missing a local filing deadline can lead to fines or legal penalties.

An EOR takes on this responsibility, ensuring contracts, payroll, and benefits meet local regulations. Rivermate adds an extra layer of assurance with in-country legal experts who monitor changes in employment law and update documentation automatically.

3. Simplified payroll and benefits administration

Managing payroll across borders involves multiple currencies, pay cycles, and tax structures. An EOR centralizes these processes, ensuring employees are paid accurately, on time, and in their local currency.

It also manages statutory benefits: health coverage, pensions, and paid leave, according to each country’s standards, saving HR teams hours of administrative work.

4. Lower upfront costs compared to entity setup

Setting up a local subsidiary means hiring lawyers, accountants, and administrative staff—and managing ongoing compliance costs in each location. With an EOR, these expenses are eliminated.

You pay a predictable monthly fee per employee, covering payroll, compliance, and local benefits.

Check out our guide on choosing an international payroll provider to understand the full financial picture.

5. Scalable and flexible global expansion

An EOR makes it easy to grow or reduce headcount as business needs change. You can hire one person in Singapore, three in Germany, and five in Brazil, without worrying about local registrations or exit processes.

This agility helps companies respond faster to market shifts, pilot new operations, or manage short-term projects globally with minimal friction.

6. Better employee experience and global talent access

Employees hired through an EOR receive clear contracts, accurate pay, and access to local benefits—creating trust and stability from day one.

Rivermate EOR enhances that experience through personalized onboarding, ensuring every hire understands their employment terms, benefits, and support channels in their time zone.

The drawbacks of an employer of record

While the employer of record model offers clear advantages, it isn’t a perfect fit for every situation. Understanding its limitations helps companies plan ahead and decide when an EOR makes strategic sense.

1. Cost considerations and long-term pricing

Although EORs reduce upfront expenses, they can be more expensive over time for large-scale operations. Monthly fees per employee may add up once headcount grows significantly. For example, if you plan to hire 50–100 employees in one market, setting up your own entity could eventually become more cost-effective.

However, it's essential to consider the total cost of ownership. When evaluating costs, also consider pricing models of alternatives like Deel, Remote.com, Oyster HR, or Omnipresent.

2. Limited customization and HR control

When using an EOR, some HR policies, benefit structures, or internal systems must align with the provider's standardized framework. This can limit customization for companies that want full control over their employee experience or branding.

That said, Rivermate mitigates this by maintaining close alignment between your HR policies and local legal requirements, ensuring compliance doesn't compromise culture.

3. Dependency on a third-party provider

Outsourcing employment to an EOR introduces dependency. If the provider experiences system issues, delays, or policy changes, it may temporarily affect your operations.

This is why due diligence is critical. Choose an EOR with proven reliability, transparent SLAs, and responsive support—ideally with direct communication channels like Slack or WhatsApp.

4. Complex transitions if exiting the EOR model

If your company eventually sets up its own entity, transferring employees from the EOR can be a detailed legal process involving new contracts, tax registrations, and benefit transitions. A reputable provider will guide you through this shift, ensuring employees are protected and operations remain uninterrupted.

Understanding EOR vs. alternatives

EOR vs. other global hiring models: how to decide what’s right for you

When expanding internationally, companies often compare an employer of record (EOR) with other hiring models like setting up a local entity or engaging independent contractors. Each approach offers different levels of flexibility, compliance, and control.

Consideration	EOR model	Local entity	Payrolling	Contractor model
Setup time	Days	3–12 months	Weeks	Hours
Legal employer	EOR	Your company	Your company	Independent contractor
Compliance coverage	Full (managed by EOR)	In-house team required	In-house compliance, outsourced payroll	Limited (contract-based)
Scalability	High	Moderate	High	High
Control over policies	Shared	Full	Full	Minimal
Cost efficiency	Predictable monthly fee	High setup and maintenance cost	Lower cost, limited scope	Low upfront, compliance risk
Best for	Fast expansion, pilot markets	Established operations	Companies with entities needing payroll support	Project-based or short-term work

Table caption: Comparison of EOR, local entity, payrolling, and contractor hiring models

If your headcount in a single country exceeds 10–15 employees, creating a local entity or transitioning to payrolling may become more cost-effective.

For short-term or project-specific roles, a contractor model offers flexibility—just ensure it’s managed compliantly through a reliable partner.

If you’re hiring employees across multiple countries or testing new markets, an EOR provides the fastest and safest path to global expansion.

Why companies choose Rivermate as their EOR partner

Rivermate combines compliance precision with human-led support, helping companies hire confidently in over 160 countries. Every employee receives dedicated onboarding, local legal coverage, and responsive help through Slack, WhatsApp, or email—so global hiring feels personal, not procedural.

Unlike most providers, Rivermate’s model is flat-rate and transparent, with no hidden fees or conversion markups. Our in-country experts track labor laws daily, ensuring your contracts and payroll remain compliant everywhere you operate.

For teams expanding globally, Rivermate delivers what most platforms miss: clarity, accountability, and real partnership.

Rivermate Insight: Building a compliant team in Mexico

When CloudCart, a fast-growing German tech company, needed to hire a remote employee in Amsterdam, they hit a wall of tax, legal, and compliance hurdles. Despite multiple attempts through local accountants, the process stalled—putting both the employee and role at risk.

Rivermate stepped in with an EOR solution that resolved every issue within days.

Contracts were backdated, payroll was stabilized, and full legal compliance was restored.

Real Results:

• 80% reduction in administrative time

• $12,000 saved monthly in admin costs

• Employee transitioned from risk to secure, compliant employment

• Seamless documentation delivery even under tight deadlines

“Rivermate was a game-changer. Their team went above and beyond to turn a stressful process into a seamless experience.”

— Paul Gassner, Product @ CloudCart

Read the full story here.

For a personalized walkthrough of how Rivermate can help you compliantly hire and manage global talent, book your demo today.

FAQs on employer of record pros and cons

What are the cons of an employer of record?

Potential drawbacks include higher long-term costs for large teams in single markets, dependency on the provider's systems, limited customization of HR policies, and complexity when transitioning to your own entity.

What are the benefits of being an employer of record?

EORs simplify international hiring by managing payroll, compliance, and benefits—helping companies expand quickly and safely. Key advantages include faster market entry, reduced legal risk, centralized payroll, and scalability.

Can you hire international workers without an EOR?

Yes, but you'll need to either register a local entity (time-consuming and expensive) or engage workers as independent contractors (which carries misclassification risks if they should legally be employees).

How much does an employer of record (EOR) cost?

Costs vary by country and provider but typically range from a few hundred to over a thousand USD per employee per month. Rivermate's transparent, flat-rate pricing makes costs predictable and easy to budget.