What an employer of record does
An employer of record is a company that hires people in a country on behalf of foreign businesses, through its own legal entity there or a local partner's (Fit Small Business). The EOR is your employer under local law, while the company you work for still decides what you do and what you earn.
In the usual model the contract of employment is between the EOR and the employee only, and the client pays the EOR a fee under a separate service agreement (A&L Goodbody). Courts and tax authorities look at the substance, including how much control the client has, and can treat the client as the real employer for some purposes.
Who does what when you work through an employer of record
| Task | Employer of record | Your company (the client) |
|---|---|---|
| Employment contract | Signs it under local law | Agrees the terms |
| Daily work and reviews | No role | Manages you as before |
| Salary | Pays it through local payroll | Sets it and funds it |
| Income tax and social contributions | Withholds and pays them locally | Pays the employer share on the invoice |
| Paid leave and mandatory insurance | Provides them under local law | Adds any extras |
| Ending the job | Runs the local notice and severance process | Decides and pays the cost |
How an EOR lets you work from another country
Say you work for a US or UK company and want to live in Lisbon for 2 years. If the company keeps you on its home payroll, working remotely from another country can leave it owing Portuguese payroll filings and carrying a permanent establishment risk. Opening a Portuguese company for 1 employee is slow, so many employers either make you a contractor or hire you through an EOR that can already employ people in Portugal.
- You agree the country, start date and length of stay with your employer.
- Your employer signs a service agreement with an EOR that covers that country.
- The EOR issues a local contract, usually in the local currency, and your home contract ends.
- You confirm your right to work there, or the EOR sponsors a work permit.
- Local payroll starts, and each month your employer pays the EOR's invoice.
Because an EOR job is a local job, the permit matters. Croatia's digital nomad permit is for work for a company not registered in Croatia (Ministry of the Interior), and Spain's telework visa limits employees to companies located outside Spain (Spanish consulate). An EOR's Croatian or Spanish entity is neither, so unless you are an EU, EEA or Swiss national, an EOR hire there needs a permit that allows local employment.
Providers differ on sponsorship: Deel builds visa sponsorship into contract creation, while Multiplier helps with visa processing but does not sponsor worker visas (Fit Small Business).
An EOR contract can take you outside your nomad permit
A remote worker who moves to Zagreb on Croatia's digital nomad permit and is then rehired through an EOR's Croatian entity now works for a Croatian employer. The permit and its income tax exemption both cover work for employers not registered in Croatia, so the switch can cost the right to stay and the tax break at once.
Tax and payroll when you work through an EOR
With an EOR, a company resident in the country where you work pays your salary. Under Article 15(2) of the OECD Model Tax Convention, the treaty's 183-day exemption needs an employer that is not resident in the host country, so the host country taxes your salary from your first working day.
The EOR withholds that tax through local payroll. Whether your home country also taxes you depends on residence, and the residence tests behind digital nomad taxes usually turn on the days you spend there and whether you keep a home there. If you remain resident at home, the treaty makes your home country exempt the salary or credit the host country's tax.
A 5-month stay in Lisbon: home payroll or an EOR
Home payroll for a short stay
A UK company's developer works 5 months from Lisbon and stays on the UK payroll. She remains UK resident, and her employer is neither Portuguese nor has a branch there, so under the treaty her salary stays taxable only in the UK.
An EOR for a short stay
The same developer asks to be moved onto an EOR's Portuguese payroll for the 5 months. Her employer is now resident in Portugal, so Portugal taxes her salary from the first day, and she opens a Portuguese social security record for 5 months of work.
Social security under an EOR
Inside the EU you are covered by 1 country's social security system at a time and pay contributions only there (European Commission). That country is normally the one where you work, and posting is only a time-limited exemption from that rule (European Commission). Staying in the home system with an A1 certificate needs an employer posting you from home, so a local EOR contract starts you in the host country's system.
Each move under a new EOR contract opens a record in another system, and social security as a digital nomad becomes a pension question: contributions spread across 3 countries add up only where a coordination agreement links them.
US citizens working through an EOR
US citizens stay taxable in the US on worldwide income (IRS), and the foreign earned income exclusion can take up to $132,900 of 2026 wages out of US income tax if your tax home is abroad and you pass the physical presence or bona fide residence test (IRS).
US Social Security and Medicare taxes apply to work abroad for an American employer, and to work for a foreign affiliate only under a voluntary agreement between the American employer and the Treasury (IRS). An EOR's local entity is not an American employer, and even a US-owned one is covered only if its US parent has signed that agreement, so US contributions usually stop and the host country's start. On a US payroll instead, a totalization agreement with the host country removes dual contributions for the same work.
Permanent establishment: what an EOR solves and what it does not
Without an EOR, your home office can become a permanent establishment of your employer, which lets the host country tax the profits attributable to it. An EOR takes the employment side away, but not your employer's business: under Article 5(5) of the OECD Model, a company has a permanent establishment where a person acting on its behalf habitually concludes contracts, or plays the principal role leading to them. That is the 2017 wording; treaties that keep the older one ask whether you habitually exercise an authority to conclude contracts in the company's name (HMRC). Both tests look at what you do, not at who employs you, so a client using an EOR still has to weigh that risk (A&L Goodbody).
Permanent establishment risk with an EOR
Low risk
A developer employed through an EOR in Lisbon writes code for a US software company with no Portuguese customers. Nobody in Portugal negotiates or signs deals for it.
Still a risk
A country manager employed through an EOR in Madrid negotiates and signs client contracts for the same company. The EOR is her employer, but she habitually concludes contracts on the company's behalf.
Where an EOR counts as temporary agency work
Under section 1 of Germany's Temporary Agency Work Act, a worker is leased when integrated into the client's organization and subject to its instructions, which describes an EOR hire. The lender needs a permit and may not lease the same worker to the same client for more than 18 consecutive months, unless a collective agreement in the client's sector sets a different maximum; earlier assignments to the same client count unless there was a gap of more than 3 months. Ireland does not expressly recognize employers of record, and an EOR with Irish premises may need an employment agency license (A&L Goodbody).
What an employer of record costs
As of October 2026, EOR fees run from $199 to $1,000 per employee per month (Tech.co), and typically between $400 and $800 (Fit Small Business).
Your company pays the fee on top of your salary and the employer's social contributions. Portuguese employers pay social security at 23.75% of gross pay with no cap (PwC Worldwide Tax Summaries, last reviewed July 24, 2026), so at a €50,000 (about $56,900) salary the employer pays €11,875 (about $13,500), more than a $599 monthly fee costs in a year.
- Gross salary
- Employer social security
- EOR fee
Source: Employer rate: PwC Worldwide Tax Summaries, Portugal (last reviewed July 24, 2026). EOR fee: Deel's starting price reported by Fit Small Business (April 30, 2026), converted at the ECB euro reference rate of September 28, 2026 (USD 1.1378 per EUR). All listed under Sources
Show the numbers
| Gross salary | Employer social security | EOR fee | Total | |
|---|---|---|---|---|
| €30,000 salary | €30,000 | €7,125 | €6,317 | €43,442 |
| €50,000 salary | €50,000 | €11,875 | €6,317 | €68,192 |
| €80,000 salary | €80,000 | €19,000 | €6,317 | €105,317 |
Because the fee is flat, it weighs most on lower salaries: with the 23.75% rate from PwC and a $599 fee, it is 14.5% of the employer's total cost at €30,000 (about $34,100) and 6.0% at €80,000 (about $91,000).
Watch for currency markups, security deposits and termination fees (Tech.co).
EOR providers compared: Deel, Remote, Oyster and others
These list prices come from Fit Small Business and Tech.co; a quote for your country can differ.
EOR providers at list price, as of October 2026 (Fit Small Business, April 30, 2026; RemoFirst from Tech.co, February 4, 2026)
| Provider | EOR, per employee per month | Contractors, per month | EOR countries | Notes |
|---|---|---|---|---|
| Deel | $599 ($899 Enterprise) | $49 | 110+ | Own entities; visa sponsorship built in |
| Remote | $699 | $29 | 90+ | Own entities; free HRIS; deposit possible after a risk check |
| Oyster | $699 | $29 | 120+ | Mix of own and partner entities; deposit for each employee; no setup fee |
| Multiplier | $400 | $40 | 150+ | Own entities; no deposit or setup fee; no visa sponsorship |
| Papaya Global | $499 | $5 ($295 contractor of record) | 160+ | Partner entities only; setup fees and deposits possible |
| RemoFirst | $199 | $25 | 160+ | Visa help costs extra |
| Rippling | Quote only | Not published | 80+ | Own entities |
Deel vs Remote
Deel's EOR starts at $599 per employee per month and Remote's at $699, a gap of $1,200 a year per employee at list price (Fit Small Business). Both employ through their own local entities, Deel in 110+ countries and Remote in 90+; Deel builds visa sponsorship into contract creation, and Remote includes a free HRIS. For contractors the order flips: $29 per contractor per month at Remote and $49 at Deel (Fit Small Business).
For working abroad, ask 2 questions before price: does the provider employ through its own entity in your country, and can it sponsor the permit you need?
EOR or contractor: which route fits working abroad
The other route is to become your company's contractor: you register as self-employed where you live, invoice the company, and pay your own income tax and social contributions there, because freelancers abroad are taxed where they live and work, not where the client is. The company saves the employer contributions and the EOR fee, and you lose paid leave, sick pay and notice protection.
A contractor who works full time for 1 company, on its hours and instructions, looks like an employee, and the country where the work is done decides which one you are. Some providers sell a contractor-of-record service, engaging you in place of your company, at $325 per worker per month at Deel and Remote (Fit Small Business).
| Contractor: monthly invoice | €4,167 (about $4,740) |
|---|---|
| Contractor: platform feeDeel contractor plan | $49 (about €43) |
| EOR: gross salary | €4,167 (about $4,740) |
| EOR: employer social security23.75% of gross pay | €990 (about $1,130) |
| EOR: provider feeDeel's starting price | $599 (about €526) |
The EOR route costs the company about €5,683 (about $6,470) a month and the contractor route €4,210 (about $4,790), on fees from Fit Small Business and the rate from PwC. Under the EOR the employee's own 11%, about €458 (about $521) a month, comes out of the gross salary (PwC). The contractor pays Portugal's self-employed social security of 21.4% on 70% of revenue once the 12-month exemption for first-time self-employed people ends, about €624 (about $710) a month.
An EOR fits when:
- You want to stay an employee. Paid leave, sick pay, notice and the local pension system come with the contract.
- You will stay in 1 country for a year or more. The setup and any permit pay off over a long stay.
- Your role is not sales. Staff who never negotiate or sign deals keep the permanent establishment risk low.
- You need a work permit sponsored. A provider with its own entity can be the local employer immigration expects.
It is the wrong tool when:
- You move every few months. Each country means a new contract, payroll and social security record.
- You would stay in Germany past 18 months with the same company. The leasing cap applies unless a sector collective agreement sets another limit.
- You run your own business. An EOR employs you for someone else's company, not your own.
If you are choosing between an EOR salary and invoicing as a freelancer, comparing the full tax on both routes at your income shows more than the fee does.
How to ask your employer for an EOR
Your employer signs the EOR agreement and pays the fee, so the request starts with your manager and HR.
Settle these before you move on an EOR contract
- Name the country, the start date and how long you plan to stay.
- Confirm your right to work there, or that the EOR will sponsor a permit.
- Ask which EOR the company would use and whether it has its own entity in that country.
- Get the local gross salary and a net pay estimate before you resign from the home contract.
- Agree what happens to accrued leave, bonuses and equity when the home contract ends.
- Plan your exit from tax residence at home, so the salary is not taxed in 2 places.
David's note
I would expect your employer to price the move on its total cost, not on your old salary. If the employer contributions and the fee push that total up, the usual answer is a lower gross salary, so I would agree the gross figure in the new currency before signing anything that ends your home contract.
