Is an Employer of Record Agreement the same as an employment contract?

No. The Employer of Record Agreement is between your company and the EOR provider. The employment contract is a separate document between the EOR and the worker. The agreement sets the commercial and compliance terms of your relationship with the provider, whilst the employment contract governs the worker's terms and conditions.

What should I check before signing an EOR agreement?

Look closely at the indemnity and liability clauses, how compliance responsibility is allocated, the currency conversion basis, all fees beyond the headline per-employee charge, data protection terms, and the notice and offboarding process. These clauses decide your true cost and your exposure if something goes wrong.

Does the agreement transfer compliance liability to the EOR?

In a well-structured agreement, the EOR takes on legal responsibility for local employment compliance and indemnifies you against related penalties. The extent of that protection depends on the wording, and it can be narrower where the EOR relies on a local partner rather than its own entity.

Glossary

Employer of Record Agreement

An Employer of Record Agreement is the governing contract between a company and its EOR provider, setting out which employer responsibilities the EOR assumes, how compliance liability is shared, how employee data is protected, and how fees, currency conversion and termination are handled.

Reviewed by Teamed's in-house employment-law team·Last updated 28 July 2026

Also known as: EOR Master Services Agreement, EOR MSA, EOR services agreement

What is Employer of Record Agreement?

An Employer of Record Agreement is the contract that governs the relationship between a company and the Employer of Record it uses to employ people abroad. It sets out exactly which employer duties the EOR takes on, from running payroll and remitting tax to holding legal liability for compliance in each country.

The agreement also fixes the commercial and legal terms that decide your real exposure. These include how compliance liability and indemnities are shared, how employee personal data is protected, how currency conversion is priced, and how notice, termination and offboarding are handled.

Reading this document closely matters because two EOR arrangements that look similar on a pricing page can differ sharply once you compare their agreements. A clear agreement states who carries the risk when something goes wrong, so you know what you are buying before anyone is hired.

What does an Employer of Record Agreement actually cover?

It defines the split of responsibilities between you and the EOR. Typical clauses cover the scope of employer duties the EOR assumes, compliance indemnities and their limits, data protection obligations, service levels, fees and currency conversion, and the process for ending the arrangement or moving employees onto your own entity later.

The indemnity clause is the one that decides who pays if a filing is late or a worker is wrongly classified.

Why does the currency conversion clause matter?

Because it determines a cost most buyers never see. An agreement can state that you are billed at the mid-market rate, at the mid-market rate plus a disclosed margin, or at a rate the provider sets at its own discretion. The last option lets an undisclosed foreign exchange spread inflate every payroll run.

If the basis of the rate is not written down, the true cost of employing someone abroad becomes hard to check month to month.

How is data protection handled in the agreement?

Employing someone means processing their personal data, so the agreement must set out how that data is handled. Under the GDPR, the employer is the data controller and the EOR is a processor, which means the two parties are legally required to agree written data processing terms before any employee information changes hands.

Key facts

GDPR requirement for processor contracts: GDPR Article 28(3) requires a binding written contract whenever a controller such as an employer engages a processor such as an EOR to handle personal data, and lists the mandatory terms it must contain.Source: GDPR (gdpr-info.eu)· verified 2026-07-28

Frequently asked questions

Is an Employer of Record Agreement the same as an employment contract?
No. The Employer of Record Agreement is between your company and the EOR provider. The employment contract is a separate document between the EOR and the worker. The agreement sets the commercial and compliance terms of your relationship with the provider, whilst the employment contract governs the worker's terms and conditions.
What should I check before signing an EOR agreement?
Look closely at the indemnity and liability clauses, how compliance responsibility is allocated, the currency conversion basis, all fees beyond the headline per-employee charge, data protection terms, and the notice and offboarding process. These clauses decide your true cost and your exposure if something goes wrong.
Does the agreement transfer compliance liability to the EOR?
In a well-structured agreement, the EOR takes on legal responsibility for local employment compliance and indemnifies you against related penalties. The extent of that protection depends on the wording, and it can be narrower where the EOR relies on a local partner rather than its own entity.

Related terms

Note

This is general information, not legal advice. Statutory rules vary by country and change over time.

Glossary

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Last verified 2026-07-28