When is an employer of record the right call, and when are you paying for something you don't need?

Summary

An EOR earns its fee when you have no entity in the country, you are hiring one or a few people, and you cannot yet say how long the team will last. Providers such as Deel and Remote do not lock you into long contracts, so you can start without incorporating and stop paying when the people leave. If you already have an entity there, are only crossing US state lines, are working with a genuine independent contractor, or keep adding people in the same country, there is a cheaper way to do it.

Small, uncertain, and new

The fee is charged per employee per month, so one hire costs one fee. Deel lists $599 and says in its pricing FAQ that it offers "flexible month-to-month pricing with no long-term commitments required." Remote says it has no "minimums, contract lengths, or exclusivity agreements."

That flexibility is what you are paying for at the start: a first hire in a new country, or two or three people testing a market. An entity starts costing money for registration, accounting, and audits whether you employ one person or ten. An EOR fee stops when the employee leaves.

Stopping the service is not the same as ending the employment on your terms, though. Deel says you can cancel at any time, then adds: "For EOR employees, local labor laws will apply." Notice periods and severance follow the country's rules either way.

Where the fee starts to hurt

At Deel's $599, the annual fee is $7,188 for one person, $35,940 for five, and $143,760 for twenty. An entity's fixed costs do not grow in step with headcount, so at some number of people in one country your own entity comes out cheaper.

That number depends on a local entity quote, and there is no universal figure. The formula divides the entity's fixed annual cost by the annual EOR fee per person minus the entity's own per-person running cost; SeatBill's EOR-versus-entity page walks through it with the calculator.

Four cases where something else is cheaper

• You already have an entity in the country. You need payroll, not an employer. Remote's payroll product is $29 per employee per month.
• You have a US entity and are hiring in another state. A PEO covers that. Remote's starts at $99; Deel's US PEO is $125.
• The person genuinely runs their own business. Contractor management costs $29 at Remote and $49 at Deel.
• One country keeps growing. Get an entity quote and run the break-even.

The third case depends on the word "genuinely." If you direct someone's work like an employee's and call them a contractor because the tooling is cheaper, the contract will not protect you once the working relationship is judged to be employment. The comparison that matters then is not the fee you saved but the back contributions you owe.

Sources

• https://www.deel.com/pricing/
• https://remote.com/services/employer-of-record
• https://remote.com/pricing
• https://support.remote.com/hc/en-us/articles/4413629551501-What-does-an-employer-of-record-EOR-do

Related on this site

• What does an employer of record actually take off your hands?
• How do you get someone working for you in a country where your company has no entity?
• If you already have a local entity, what does an EOR give you that payroll doesn't?
• Is a PEO just the American version of an employer of record?
• Employer of record or your own entity: where the number flips
• Employer cost calculator