Employer of Record Pricing in 2024: Factors That Impact Costs

An employer of record (EOR) is a third-party entity that legally employs workers on behalf of a client company, taking full responsibility for payroll, taxes, benefits, and compliance. If you want nothing to do with international employment contracts, an EOR service is what you need. 

But, what do they cost? Well, it depends. And that’s what I’m here to explain. 

In general, EOR services cost between $199 to $650 per hired employee, per month. 

However, as I’ll explain below, the exact cost is determined by a range of different factors. Let’s take a closer look. 

How Much Does an EOR Service Cost?

The cost of an EOR service can vary significantly depending on different factors, including:

• The size of the global workforce being managed, 
• The complexity of the labor laws in the countries where employees are based, 
• The level of service needed,
• The pricing model the EOR uses, and
• Any set-up fees or other hidden costs.

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EOR Pricing Models

EOR providers typically offer a range of pricing structures to suit different organizational needs. Here are the most common pricing structures you can expect to encounter from EOR service providers: 

• Percentage of employee salary: This model charges a percentage of each employee's salary as the fee for the EOR services, typically ranging from 5% to 20%. It's scalable and directly tied to the salaries of the employees, making it cost-effective for lower-wage positions but potentially expensive for high earners.
• Flat fee per employee: Some EOR services charge a consistent, flat rate for each employee, regardless of their salary. This model offers predictability in costs, making it ideal for budgeting, though it may not scale well for businesses with a large number of low-wage workers.
• Fixed pricing model: This approach involves a predetermined, set fee that covers all EOR services for a specific period, regardless of the number of employees or changes in salary. It simplifies budgeting for businesses by providing cost certainty, though it may not be the most cost-effective for all business sizes.
• Custom pricing: Custom pricing is tailored to the specific needs and circumstances of a business, taking into account factors such as the number of employees, their locations, and the complexity of services required. This model offers flexibility and can be negotiated to fit a business’s exact needs, but it requires detailed discussions and potentially complex negotiations.

Factors That Impact EOR Pricing

In addition to the different pricing structures, core EOR costs are also affected by the following factors:  

• Geographic location: Pricing can vary significantly based on the country or region due to differences in employment laws, tax requirements, and living costs.
• Role complexity: More specialized or senior roles may incur higher costs due to the increased effort in managing compliance and payroll complexities.
• Industry: Certain industries have specific regulatory and compliance requirements that can make EOR services more costly to implement.
• Number of employees: The total number of employees impacts pricing, with volume discounts potentially available for larger workforces.
• Employee benefits: Offering a wider range or higher quality of benefits can increase the cost of EOR services due to higher administrative and financial outlays.
• Custom requirements: Any bespoke service elements, such as unique payroll cycles or specific reporting needs, can lead to increased prices.
• Additional services: Requesting services beyond the standard EOR offerings, such as recruitment or employee training, will typically result in higher costs.

Potential Hidden Costs

Before you commit to an EOR service provider, you’ll also want to ask about these potential factors to avoid any unpleasant surprises down the road as these can also impact the final employer of record cost: 

• Setup fees: Initial setup fees may be charged to cover the cost of integrating a company's existing systems and processes with the EOR service.
• Security deposit: Some EOR providers might require a security deposit as a safeguard against potential future liabilities or unforeseen costs.
• Currency exchange fees: If payroll or benefits are processed in a different currency than the company's, currency exchange fees can add unexpected costs.
• Termination fees: Ending a contract with an EOR provider may incur termination fees, especially if done before the end of the agreed term.
• Additional services: Opting for services not included in the base package, such as legal assistance or custom HR support, can also lead to additional charges beyond the original quote. 

EOR Services: What Are You Paying For? 

Now that we’ve explored the different pricing models you’ll encounter and other factors that impact the final cost of an EOR service, you may be wondering what exactly is included in an EOR service? 

In a nutshell, EOR services aim to eliminate the typical hassles HR teams face when tasked with managing international employees. Here’s a quick overview to get you grounded: 

• International Hiring: With their expertise in global employment markets, EOR services facilitate the hiring of talent across borders, eliminating the legal and logistical barriers to international recruitment.
• Onboarding: EOR services streamline the onboarding process by handling all the paperwork and initial setup for new hires, ensuring a smooth and efficient welcome to the company.
• Payroll Management: They manage all aspects of payroll, from calculating taxes to ensuring timely payment, removing the complexity of dealing with various tax systems and currencies.
• Benefits Administration: EOR services administer employee benefits, offering tailored health insurance packages that comply with local regulations and are competitive within the market, enhancing employee satisfaction and retention.
• Compliance with Local Employment Laws: EORs ensure that employment practices comply with local laws and regulations, reducing the risk of legal issues and fines for your business.
• Other Administrative Tasks: From managing new employee records to handling exit interview formalities, EOR services take care of the administrative burden, allowing companies to focus on their core activities.

How to Choose an EOR That Works With Your Budget

Now that you have a better understanding of the different factors that can contribute to the final cost of an EOR service, the next step is to figure out which EOR service is the best fit for you. Here’s a five-step process you can follow to guide you through these final steps:

1. Determine a Realistic Budget: Assess your company's financial situation and define a budget that reflects the scope and scale of the EOR services you need. This step prevents overspending and helps eliminate potential EOR solutions that are too costly for your budget.
2. Request quotes from different EOR Services: Gather detailed quotes from several EOR providers to ensure a broad comparison of pricing models, hidden fees, and service offerings. Getting a range of quotes and information upfront can lead to more informed decision-making.
3. Compare costs per country: If you're hiring internationally, compare the costs of EOR services in each new market where you plan to hire top talent. Different foreign countries may have significantly different EOR service costs due to the complexity of their local laws. (If hiring international employees in Canada or the UK is part of your long-term strategy, our lists of the best Canadian EORs or best UK-focused EOR services are definitely worth peeking at.)
4. Look beyond costs for additional value: Consider the additional value an EOR service provides, such as expertise in local regulations, advanced technology platforms, and the ease of integration with your current systems. These factors can justify higher costs if they bring significant value to your business.
   1. EOR reputation: Research the reputation of each EOR provider by reading client testimonials, case studies, and independent reviews. A reputable EOR can provide assurance of quality service and reliability, reducing potential risks.
   2. Level of client support: Evaluate the level of client support offered by each EOR, including the availability of a dedicated account manager, responsiveness to inquiries, and the ability to provide tailored advice. High-quality support can significantly impact the success of your global team management.
   3. Scalability: Ensure the EOR service can scale with your business as it grows, both in terms of increasing your employee headcount and supporting your global expansion plans.
5. Justify the importance of peace of mind: Consider the value of peace of mind that comes from knowing your international employment responsibilities are managed correctly. This aspect, while not directly quantifiable, can justify a higher investment in a quality EOR service, saving potential future costs and legal challenges down the road.
   1. Legal compliance: Remember that an EOR will assume legal compliance responsibilities for your new global talent, helping you avoid potential issues like employee misclassification.
   2. Enhanced employee experience: Since EOR services cover onboarding new hires, your new team members will feel well taken care of right from day one, starting their employee experience off on the right foot. 

Amplify Your Human Resources by Partnering with an EOR Service

With the baseline price for an EOR service sitting between $199 and $650 per employee, per month, that may seem a bit expensive at first. However, remember that using an EOR service can actually lead to savings in the long run.

Plus, an EOR takes over many time-consuming HR tasks, often resulting in improved efficiency and a reduced risk of non-compliance penalties. Hence, when considering the cost of an EOR, it's best to also consider the value they bring in.

If you do have a legal entity set up abroad already and just want help managing on-the-ground administrative tasks, a Professional Employer Organization (PEO) may be a better fit for your needs. If that’s the situation you’re in, head over to our analysis of EOR vs PEO services to figure out which is the best fit for you.

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