A Guide to Employer of Record Responsibilities

If your business is hiring internationally, you've probably encountered the question: Should you set up legal entities in every country where you hire, or find a partner who already has them? For many growing companies wanting to add global team members to their roster, working with an Employer of Record (EOR) is the practical answer. But signing an EOR contract isn't the same as handing off all responsibilities. Knowing what stays with you and what moves to the EOR helps you avoid compliance gaps and unexpected liability down the road. Let's dive in.

What are the Core Employer of Record Responsibilities?

Scaling internationally with an EOR offers many advantages over establishing an entity in each country where you want to hire. When you work with an EOR, they become the legal employer on paper while you keep day-to-day control of your team. It's a co-employment arrangement that helps you grow your international team. How you divide responsibilities will vary a bit depending on your provider and the countries involved. Here's a breakdown of the big ones:

Employment Contracts and Local Hiring Compliance

Your EOR handles the technical side of global hiring. That means drafting employment contracts, which will hold up under local labor law. Many countries have regulations on termination notice periods, statutory benefits, working conditions, and paid time off (PTO).

In France, that involves specific rules on probationary periods and severance calculations. In Brazil, it means navigating some of the most complex labor codes in the world. The EOR also handles local registration requirements: obtaining employer identification numbers, filing new-hire reports with government agencies, maintaining required employment records, and ensuring workplace posters are available in the right language.

Payroll Processing and Tax Withholding

Getting payroll right across multiple countries can get complicated. Your EOR handles it all, including:

• Local Tax Withholdings: It withholds federal, state, and municipal income taxes at the correct rates

• Social Contributions: The EOR handles the required deductions for social security, unemployment insurance, disability, and pension contributions

• Statutory Deductions: These could be health insurance or union dues, where applicable

• Currency Conversions: The EOR manages exchange rates for international payments

They also deposit withheld taxes with the appropriate authorities, file required returns (such as Form 941 in the U.S. or equivalent filings abroad), issue year-end tax documents to employees, and address corrections when errors occur.

Employee Benefits Administration

EORs give you access to employee benefits packages that meet both local legal requirements and competitive market standards. In the U.S., that often means health insurance, dental coverage, vision insurance, and 401(k) options.

Internationally, the structure looks different. It could include mandatory health funds in Israel and superannuation in Australia, for example. Canada may require additional insurance or fringe benefits, and so on. The EOR manages benefits enrollment and ongoing administration, which includes tracking eligibility and handling life event changes. It's a lot of backend work that keeps everything running.

Ongoing Labor Law Compliance

Employment regulations change constantly, and keeping up across multiple jurisdictions is a full-time job in itself. Your EOR monitors these shifts in minimum wage, overtime rules, paid leave mandates, and workplace safety requirements. It also updates their processes accordingly. They also maintain the required insurance, such as workers' compensation, and respond to unemployment claims. The EOR handles workplace injury reporting and serves as your registered agent for employment-related legal notices in each jurisdiction.

What are the Legal Responsibilities of an Employer of Record?

The legal sphere is where things get more nuanced. EORs take on significant compliance responsibilities, but that doesn't mean all legal liability automatically transfers to them. According to IRS guidance on third-party payer arrangements(opens in a new tab), contractual language alone doesn't determine who's on the hook for employment taxes.

The IRS looks at which entity actually exercises control. Even with an EOR in place, you may still hold liability if you:

• Control which EIN appears on tax filings

• Directly fund payroll accounts

• Make employment decisions without EOR involvement

Another thing to keep in mind is the risk of joint employer status. The focus is on who controls the core terms of employment. Maintaining clear boundaries between your operational role and the EOR's legal role helps protect you from shared liability for issues such as wage-and-hour violations or discrimination claims.

Employer Responsibilities vs. EOR Responsibilities: Who Owns What?

As the employer, you decide who to hire and what they work on. The EOR ensures all of that happens through compliant processes, including offer letters that meet local requirements and terminations with proper notice periods and final pay. Here's a side-by-side look at the usual division of responsibilities:

Some situations require close coordination between both parties. You make the business call to terminate an employee in Germany, for example, but the EOR ensures the works council is properly consulted and severance is calculated correctly. For workplace injuries, you handle the immediate response and any safety improvements, while the EOR manages the workers' comp claim and required reporting.

Questions to Ask Before Signing With an EOR

With different employers of record to choose from, you'll want to partner with one that has expertise in your countries of interest. Before committing, make sure you have discussed these points:

• Tax Registration Model: Which EIN will appear on employee W-2s, and who bears liability if there's a deposit failure?

• Insurance Coverage: Who is the workers' comp carrier, and what are the coverage limits? How do claims affect your experience rating?

• Data Security: What encryption and access controls are in place, and what's the breach notification process?

• Service Levels: What are the payroll funding deadlines, how are errors corrected, and how responsive is support?

As you evaluate providers, ask for System and Organization Controls (SOC) reports that demonstrate their internal controls. It's also a good idea to speak with references from businesses similar to yours operating in the same locations you're targeting. And if you outgrow your current employer of record or need additional international support, there's always time to switch EOR providers.

Grow Your Global Team with Justworks EOR

Partnering with an EOR for international hiring eliminates the need to establish foreign entities and gives you local expertise in payroll, benefits, labor law, and cultural norms. It works best when you go in with a clear understanding of what the EOR handles and what remains your responsibility. Justworks' compliance support covers the complex regulatory landscape that growing businesses face. Through our EOR solution, you can easily hire internationally, while accessing local payroll, benefits, and labor law compliance expertise across key global markets. Get started with Justworks today.