Employer of record (EOR)
An employer of record (EOR) is an organization that becomes the legal employer of a client business’s employees, while the client directs the daily work.
The EOR carries payroll, withholding, tax filing, and employment paperwork. Businesses use the structure to engage employees in a state or country where they hold no legal entity. The arrangement changes who is responsible for what, rather than outsourcing a task. Scope, tax treatment, and liability differ between providers, so the service agreement decides the answer, not a general description of the model. Document the allocation specifically, per obligation and per jurisdiction, rather than inferring it from the label.
What does an employer of record take on?
An employer of record holds the legal employment relationship, and the client business keeps the work itself. Employer of record vs PEOPEO. A PEO (professional employer organization) is a company that co-employs your employees under a service agreement, while you keep direction and control of the work.Click to open the term: an EOR signs the employment agreement as employer; a professional employer organization (PEO) enters co-employmentCo-employment. Co-employment is a contractual arrangement in which a professional employer organization (PEO) and its client company each hold defined employer responsibilities for the same employees.Click to open the term, and the client remains an employer too. Federal tax law does not recognize co-employment, and under an ordinary PEO, federal employment tax liability generally stays with the client. Both commonly issue Form W-2Form W-2. Form W-2 is the annual wage and tax statement you give employees and file with the Social Security Administration, reporting wages paid and taxes withheld.Click to open the term under their own accounts. Choosing between them is a legal question about the allocation of duties, not a ranking.
- Registering with the tax agencies
- Running payroll under its own account numbers
- Withholding and depositing payroll taxes
- Issuing the annual wage statement (Form W-2)
- Maintaining the employee’s employment records
- The assignment
- The schedule
- The performance expectations
- The decision to end the engagement
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.