How each model works
Contractor agreement
You sign an agreement with the person, they invoice you, and you pay them through a platform or a transfer service. They handle their own taxes and registration in their country. You have the least admin and the lowest cost, and you carry the risk that the relationship is treated as employment.
Employer of record
A provider with a company in the person's country employs them under a local employment contract, runs payroll, pays the contributions and provides the benefits local law requires. You direct the day-to-day work and pay the provider each month: the salary, the employer costs in that country and the provider's fee.
What an EOR takes off your hands
- A local employment contract that follows local law.
- Payroll, income tax withholding and social contributions.
- Statutory benefits, such as paid leave and sick pay, as local law requires them.
- Employment paperwork, and with some providers help with work permits.
- Ending the employment according to local rules.
What it does not do: find the person, manage the work or tell you whether they are good at it. Those stay with you.
When an EOR is worth it
- The person works only for you, full-time, on your hours, for the long term, and an adviser says that looks like employment in their country.
- The candidate wants employment, for example for social security, a loan or a visa.
- You plan to hire several people in the same country.
- Investors, auditors or large customers ask how your international staff are engaged.
When a contractor agreement is enough
- One or two people abroad, at an early stage, with an adviser comfortable with the set-up.
- Part-time or project-based work, or people who have several clients.
- Contractors who are registered as self-employed in their country and invoice clients routinely.
- A first phase, before you decide on a long-term structure.
Many small companies start with a contractor agreement and move to an EOR when the team or the role grows. Our overview of contractor and employee status explains the factors that usually decide.
The costs to compare
On the contractor route, the cost is the person's fee plus the payment service: Deel's contractor plan is $49[1] a month per person, and Wise charges from 0.23%[2] per transfer. On the EOR route, the provider bills the gross salary, the employer contributions and benefits of that country, and its own monthly fee, which is priced well above a contractor plan.
Ask EOR providers for a full written quote for the actual salary, including onboarding and termination fees and the currency. Then compare yearly totals, not the headline monthly fee.
Questions for an EOR quote
What is the total monthly cost for a gross salary of [amount] in [country]?
Which employer contributions and benefits are included, and which are extra?
Is there a deposit, an onboarding fee or a termination fee?
How are notice and severance handled if we end the employment?
Can the person be paid in [currency] to their current bank?
Switching from contractor to EOR later
- Talk to the person first: employment changes their take-home pay, their taxes and their benefits.
- Ask the EOR how they take on a worker you already engage, and what the start date and probation will be.
- End the contractor agreement with the notice it states, and settle the final invoice.
- Keep the role, hours and pay continuous, so the switch does not feel like a new job.
If you hired through Silkstaff, the placement fee was charged once at the start, and changing the engagement model later costs nothing extra from us.
Questions
Is an EOR the same as a PEO?
Not quite. A PEO (professional employer organisation) usually shares employer duties for staff in a country where you already have a company; an EOR employs people in countries where you have none. Providers use the terms loosely, so ask what exactly they do.
Can I use Deel for both?
Deel offers a contractor plan, at $49[1] a month per contractor, and employer of record services, priced separately. Other providers do the same; compare them on full quotes.
Does an EOR remove the classification question?
Largely: the person is an employee of the EOR under local law, so the question of whether they are really a contractor no longer arises. You still follow the EOR's terms and local rules, for example on hours and ending the employment. This is general information, not legal advice.
Can I engage a Silkstaff placement through an EOR?
Silkstaff placements are set up as a direct contract between you and the person, paid through Deel, Wise or Payoneer. If your adviser recommends an employer of record, say so in your brief, so that the offer to candidates describes the real set-up.
General information for small employers, not legal or tax advice: check contracts, tax and data rules for your country with a qualified adviser. Figures carry their sources below; our own prices are on the pricing page. Spotted a mistake? Write to hello@silkstaff.com.