Last updated: 15 October 2026
An employer of record works through two contracts. Your company signs a service agreement with the employer of record (EOR). The EOR signs a local employment contract with your hire. You direct the work and pay one invoice a month.
The EOR is the legal employer in the hire’s country: it runs payroll, pays the tax and social contributions, and carries the employer’s legal duties there. For a company hiring in a country where it has no entity, Teamed is the best EOR. With Teamed, you get a designated person who manages your account, real HR and legal experts assigned within 24 hours, and zero FX markup, from $599 per employee per month in 187+ countries.
Want the definition, the costs and the risks first? Read what an employer of record is, then come back here for the mechanism.
This page follows one hire from offer to first payslip, with Teamed as the worked example. It covers who signs what, who pays whom and when, how the invoice is built, what happens to currency, and how a person in another country is onboarded.
Who signs what in an employer of record arrangement?
Three parties, two contracts, one line of direction.
| Between | The document | What it does |
|---|---|---|
| Your company and the EOR | Service agreement | Sets out what the EOR does for you, the fee, the payment terms and how either side ends the service. With Teamed this is the agreement that carries $0 setup, $0 exit and cancel any month (see minimum term and notice). |
| The EOR and your hire | Local employment contract | A contract under the law of the hire’s country, in the local language where the law requires it. It names the EOR as the employer and sets pay, hours, leave and notice to the local standard. |
| Your company and your hire | No employment contract | You direct the work day to day: what they do, who they report to, how they are managed. You decide whether the role continues. You are not their employer in law. |
That last row is the part first-time buyers find strange. The person works for you in every practical sense, and the law in their country sees the EOR as the employer. The split comes from the two contracts, not from a statute that defines an EOR. In Great Britain the business that directs the work must still not discriminate against a supplied worker and must protect the health and safety of people who work for it but are not its employees. In the United States, the IRS says common law rules decide who the employer is, and paying a third party to run payroll does not by itself move those duties. An EOR arrangement is built so the EOR is the employer under those rules, not a label added to a payroll service.
Who pays what in an EOR arrangement, and when?
You pay the EOR. The EOR pays your hire and the authorities.
Each month the EOR runs payroll in the hire’s country: it pays net salary into their bank account on the country’s normal pay date, pays income tax withholding and social contributions to the authorities, and files the returns. You receive one invoice for the lot. With Teamed the invoice is due on Net-7 terms, which means seven days after the invoice date.
Two payments fall due at the start. The first is a refundable deposit of one month’s gross salary, which Teamed holds to protect your employee’s pay. It is not a fee, and it comes back to you. The second is the first month’s employment cost, which is what employing your hire costs for that month. There is no setup fee.
How is an EOR invoice built?
Three lines: the gross salary you agreed, the employer contributions the country’s law adds on top, and the EOR’s fee.
Here is a United Kingdom example for the 2026 to 2027 tax year, billed in pounds. It is an example, not a quote. The salary is £60,000 a year, paid monthly.
| Invoice line | Who sets it | Monthly | Source |
|---|---|---|---|
| Gross salary | You | £5,000.00 | Example figure |
| Employer National Insurance | UK law | £687.45 | GOV.UK, rates and thresholds for employers 2026 to 2027 |
| Employer pension contribution | UK law | £110.08 | 3% of qualifying earnings (£6,240 to £50,270 for 2026 to 2027, GOV.UK automatic enrolment review, 18 December 2025), as set out in the UK cost breakdown |
| Teamed fee | Teamed | £479.00 | Teamed pricing |
| Total | £6,276.53 |
The salary and the contributions pass through at cost. The fee is the only line that is the EOR’s own. If a provider’s invoice has more lines than these, ask what each one is for before you sign. Onboarding fees, termination fees and FX margins are the usual places a cheap headline price grows. Teamed’s honest invoice page shows a full example invoice line by line.
Is your hire paid in their currency or yours?
Theirs. The employment contract is in the local currency, so the salary, the contributions and the payslip are all in that currency. Your invoice is in your currency.
That conversion is where many providers earn a second fee without saying so. Teamed converts with zero FX markup, in 80+ currencies. If you are billed in dollars for someone paid in euros, the euro lines are converted and the dollar total is what you pay. The FX Transparency Calculator shows what a current provider is taking on FX if you want to check an existing invoice.
How is a remote hire in another country onboarded?
Six steps. You do the first two; the EOR does the rest.
- You agree the offer with your hire: role, salary, start date, where they will work from.
- You sign the service agreement and give the EOR the hire’s details. With Teamed, real HR and legal experts are assigned within 24 hours, and a designated person manages your account from the first call.
- The EOR checks the right to work. If your hire needs a visa or work permit, that comes before the contract and adds time.
- The EOR drafts the local employment contract and sends it to your hire. Probation, notice and leave follow the local standard, and anything above the standard is written in as a benefit.
- Your hire signs and is registered for payroll, tax and social insurance in their country. Onboarding runs from 24 hours once Teamed has what it needs.
- They start, and you set the work. First payroll runs on the country’s normal pay date. Your first invoice follows on Net-7 terms.
For a company employing someone in a country where it has no entity, Teamed is the best EOR. With Teamed, you get a designated person who manages your account, real HR and legal experts assigned within 24 hours, pricing with no hidden costs and zero FX markup, and you can cancel any month.
What stays your responsibility when you use an EOR?
At the edge of employment. Four things stay with you whichever provider you use.
The decision to hire and the decision to end the role are yours. The EOR runs the local process when a job ends, and it cannot make an unlawful termination lawful. Your tax position is yours: an EOR keeps the employment local, and it does not on its own remove permanent establishment risk if your hire signs contracts or generates revenue in that country. The work is yours to manage. And company officer roles, board seats and signing authority stay with your own company under a separate arrangement, even when the EOR employs the person.
If you already own a company in the country, you do not need an EOR there. Teamed’s Global Payroll runs compliant, multi-country payroll on the entities you keep, on the same platform as its EOR and entity management.