You have found the perfect candidate, but they are in Portugal, Spain or elsewhere, and you have no legal entity there. Should you set up a subsidiary? Hire them as a freelancer? Neither: this is exactly what an Employer of Record (EoR) solves.
What is an Employer of Record?
An Employer of Record is a third-party company that legally employs a worker on your behalf, in a country where you have no presence. On paper, the EoR is the employer; in practice, you direct the day-to-day work: tasks, objectives, management.
The EoR handles the entire administrative and legal side:
- The employment contract, compliant with local law
- Payroll and salary payments
- Taxes and social contributions
- Mandatory benefits (leave, insurance, and so on)
- Compliance and end-of-contract management
When should you use an EoR?
- Hiring one to a few people in a new country, without opening an entity there.
- Testing a market before committing to a lasting presence.
- Recruiting remote talent beyond your borders.
- Moving fast: an employee can be onboarded in a few weeks, versus several months to create a subsidiary.
EoR or umbrella company? Don't confuse them
The two are often mixed up, because in both cases a third party employs the person. But the role and the purpose are very different:
- An umbrella company (portage salarial in France) is for an independent professional: the consultant finds their own assignments and stays autonomous; the umbrella company turns their fees into a salary to give them employee status (social protection, unemployment, pension).
- An Employer of Record is for a company: the company recruits and directs the employee; the EoR only takes care of employing them legally in a country where the company has no entity.
In short: with an umbrella company, the worker is in control; with an EoR, the company is. The umbrella model is also specific to France, whereas the EoR is an international solution.
EoR, subsidiary or freelancer: which to choose?
| Option | Best for | The watch-out |
|---|---|---|
| EoR | 1 to a few employees, speed, new market | Cost per employee (service fees) |
| Local subsidiary | Large, long-term team | Slow, costly, heavy administration |
| Freelancer | One-off assignments, genuine independence | Reclassification risk if the relationship looks like employment |
Beware of the disguised freelancer: having someone work like an employee while paying them as a freelancer can be reclassified, with back payments and penalties. An EoR is precisely what secures this relationship.
Points to watch
- Cost: the EoR charges fees (a monthly flat rate or a percentage of salary) per employee. Very cost-effective for small teams; beyond that, a subsidiary may become cheaper.
- Choosing the provider: favour an EoR that is genuinely compliant in the target country and gives the employee a good experience (the talent should feel well supported).
- Data and intellectual property protection: define it contractually from the start.
In summary
An EoR is the fastest, simplest and safest way to employ talent in a country where you have no presence, without the delays and risks of setting up locally. The winning combination: find the right candidate, then employ them properly, wherever they are.
Want to recruit abroad and employ people without creating a subsidiary? That is exactly what we do at Effitalents: we find the right talent and manage the employment through our Employer of Record solution, in Portugal, France, Spain and across Europe. Let's talk about your needs.