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Employer of Record vs Global Payroll Provider: Differences Explained

Key Takeaways

  1. An EOR is the legal employer of your staff in a country where you have no entity. A global payroll provider only processes pay for people your own entity employs, so you stay the legal employer.

  2. No local entity? A payroll provider cannot hire for you. You need an EOR, or you need to set up an entity first.

  3.  Many companies use both: an EOR to enter a market, then their own entity and payroll once the team or the commitment grows.
     

Table of Contents

Most companies end up comparing the two for the same reason: they have found the right person in a country where they have no company, and they need to employ and pay that person properly. The EOR vs payroll decision usually comes down to one question: do you already have a legal entity there?

This guide explains how an EOR and a global payroll provider differ, when each one fits, what changes by country, and what to ask a provider before you commit. It is written for founders, finance leads and HR teams who are expanding internationally.

EOR vs global payroll provider at a glance

The UK uses a points-based immigration system. Below are the routes most relevant to employers hiring international talent into skilled roles.

Comparison of an employer of record and a global payroll provider
TopicEmployer of record (EOR)Global payroll provider
Legal employerThe EORYour own local entity
Local entity needed?NoYes
Employment contractIssued by the EOR under local lawIssued by you
PayrollRun by the EORProcessed by the provider from data you approve
Tax and social security registrationThe EOR registers as the employerYour entity must be registered
Employer compliance responsibilityCarried by the EOR as the employer; you manage the workStays with your company
HR administrationUsually included (contracts, leave, benefits administration)Usually limited to payroll; HR stays with you
Speed to first hireFast, because no entity is neededSlower if your entity does not exist yet
Typical cost modelA fee per employee on top of employment costsA fee per payslip, employee or country, on top of the cost of running your entity
Best forFirst hires, testing a market, small teamsEstablished entities, larger teams, central reporting
EOR

What is an employer of record (EOR)?

An employer of record is a third party that legally employs your workers in another country. It issues the local employment contract, runs payroll, pays tax and social contributions and carries the employer compliance duties, while you direct the day-to-day work. You can start hiring without setting up a local company.

In practice, the EOR is on the books as the employer. It enrols the employee in the right tax and social security schemes, handles statutory leave and benefits administration, and manages changes and exits in line with local law. You still choose the person, set the role and the goals, and manage the work. Our employer of record services work this way.

Using an EOR does not mean handing over management. The EOR is the employer on paper and for compliance. You are still the person the employee reports to.

Talk to us about EOR
Global payroll

What is a global payroll provider?

A global payroll provider calculates gross-to-net pay, files payroll taxes and produces payslips and reports for employees you already employ through your own legal entity in each country. It supports your payroll process but does not replace your role as the employer.

Typical tasks include applying local tax and social contribution rules, producing payslips, preparing filings and consolidating payroll reports across countries. The key point is what the provider does not do. It works for your entity. You hold the contracts, your entity holds the registrations with the tax and social security authorities, and you remain accountable for getting them right. Our international payroll services are built for companies in this position.

Get a payroll quote

A note on terms. Some providers use “payrolling” for different arrangements, and a PEO (professional employer organisation) is a co-employment model most common in the United States. In this guide, “global payroll provider” means a service that processes payroll for employees of a company you own. For the PEO comparison, see EOR vs PEO.

EOR vs global payroll: the key differences

Who is the legal employer

This is the difference that decides everything else. With an EOR, the EOR is the legal employer in the country. With a global payroll provider, your company is. If a dispute, a tax audit or a claim arises, the party named as the employer is the one answerable to the authorities and to the employee.

Whether you need a local entity

A payroll provider can only run payroll for an employer that exists. In most countries that means a registered entity that has itself registered with the tax and social security authorities. If you have no entity, a payroll provider cannot solve the problem: you either set one up or use an EOR. An EOR lets you hire before an entity exists, and many companies use it while they decide whether a market justifies one.

Contracts and compliance

With an EOR, the contract is issued by the EOR under local law, and the EOR handles statutory items such as leave entitlements, mandatory benefits and notice rules. With a global payroll provider, your team or your local advisers draft the contracts and keep policies compliant. A payroll provider may advise on rules that affect pay, but contract and policy compliance stay with you.

HR support and day-to-day management

EOR support usually covers onboarding paperwork, contract changes, leave and benefits administration. A payroll provider usually stops at payroll. In both models you manage the work itself: priorities, performance and the employee relationship.

Cost

EOR pricing is typically a fee per employee on top of the employment costs, which reflects the fact that the EOR carries the employer role. Global payroll pricing is typically a fee per payslip, per employee or per country, but it sits on top of the cost of running your own entity: incorporation, local accounting, registrations and an in-country presence. For a small team in one country, an EOR is often the cheaper route overall. As headcount grows, the balance can shift towards your own entity and a payroll provider. Payroll costs vary by country and scope, so we quote them on request.

Not sure which model fits your hire?

Tell us where you want to hire and whether you already have a local entity. We’ll tell you whether an EOR or payroll setup makes more sense, and we can run either one for you.

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How tax and social contributions are handled in each model

Employer taxes and social security contributions are due whichever model you choose. What changes is who registers with the authorities, files the returns and answers for any mistakes.

With an EOR, the EOR registers as the employer with the local tax and social security bodies, withholds the employee’s taxes, pays the employer contributions and files the returns. The cost reaches you through the EOR’s invoice.

With a global payroll provider, your entity is the registered employer. The provider calculates the amounts and prepares the filings, but your entity remains responsible for accurate, on-time reporting and payment.

How is salary funded and paid in each model

With an EOR, you normally pay the EOR and the EOR pays the employee. The invoice typically combines salary, employer contributions and the service fee. Providers differ on timing: some want funds before payroll runs, others invoice afterwards, so ask when funds are due because it affects your cash flow.

If you pay in a different currency from the employee’s, check who handles the conversion and at what rate.

With a global payroll provider, the provider calculates the payroll and your entity pays the net salaries and remits the taxes and contributions. That means you need a way to fund local payments, usually a local bank account, and you keep control of approvals and payment timing.

What you are really comparing: the cost lines

A fee per payslip looks cheaper than a fee per employee until you add what sits underneath it. Here are the lines to price on each side before you compare quotes. We do not publish payroll prices because they depend on the country and scope, so ask each provider to quote every line.

Cost lines to compare between an EOR and your own entity with a payroll provider
Cost lineEOR routeOwn entity and payroll provider
Legal employer roleIncluded in the EOR feeYour own entity, with the duties that come with it
Setting up the entityNot neededIncorporation, registered address, and the first tax and social security registrations
Running the entityNot neededAnnual filings, local accounting and any statutory reporting for the company
Employment contractsIssued by the EOR under local lawDrafted by you, usually with local legal advice
Payroll processingIncluded in the EOR feeProvider fee, typically per payslip, employee or country
Statutory leave and benefits administrationHandled by the EORHandled by your HR team or your local advisers
Ending employmentThe EOR runs the process under local law, and you decide the business caseYou run the process, with local legal advice
Time to first hireShort, because nothing has to be registered firstLonger if the entity does not exist yet

How payroll works under an EOR

If you search for “EOR payroll”, this is the process most people want to understand.

  1. You confirm the role, salary and start date with the EOR.
  2. The EOR issues a local employment contract, collects the employee's documents and registers them with the relevant authorities.
  3. Each pay period you send the changes that affect pay, such as bonuses, expenses and leave.
  4. The EOR calculates gross-to-net pay under local tax and social security rules, pays the employee and pays the authorities.
  5. You receive an invoice covering salary, employer costs and the service fee. The employee receives a payslip.

Our EOR services follow this pattern across our markets, and our team can walk you through the details for the country you are hiring in.

When to choose an EOR, a payroll provider, or both

Choose an EOR if

  • you have no legal entity in the country
  • you are hiring your first employee or a small team there
  • you want to test a market before committing to an entity
  • you need to start quickly and want the provider to carry the employer compliance work
  • you are hiring someone who needs a work permit and want that support alongside the employment (visa and work permit services)

Choose a global payroll provider if

  • you already employ people through your own entity in the country
  • you run payroll in several countries and want one process and consolidated reporting
  • you have in-house HR or legal support for contracts and policies
  • your team in a country is large enough that per-employee EOR fees add up

Use both

Many companies use an EOR where they have no entity and a payroll provider where they do. That hybrid setup lets you hire quickly in new markets and keep tighter control in established ones.

When you probably do not need an EOR

If you already employ people through your own entity, or you only need payslips and filings processed, a payroll provider is the simpler fit. An EOR would add cost without adding anything you need.

“A payroll quote can look a lot cheaper than an EOR fee, but it only covers running the payroll. The registrations, the contracts and the responsibility when something goes wrong are still yours. I’d always compare the full picture, not just the monthly fee.”

–Imke van Rengs, Team Lead Netherlands at ThisWorks

Three illustrative scenarios

Scenario 1

A software company hires its first engineer in Spain

The company has no Spanish entity and wants the person working within weeks.

Likely fit: EOR

Nothing has to be registered first, and the EOR carries the employer duties. If the Spanish team grows, the company can plan a move to its own entity later.

Scenario 2

A company with a Dutch entity and a growing team

It already holds the contracts and is registered with the tax authority, but payroll takes up too much finance time each month.

Likely fit: payroll provider

The company is already the legal employer, so an EOR would add cost without adding anything it needs. A payroll provider takes over the calculations and filings.

Scenario 3

A start-up hiring in three countries, with an entity in only one

It has staff in the country where it is incorporated, plus one hire each in two other markets.

Likely fit: both

Payroll through the entity at home, an EOR in the two markets where it has no company, and a yearly review of whether either market justifies its own entity.

These are illustrative examples to show the logic, not client case studies.

How the choice differs by country

The principle is the same everywhere, but what an employer must have in place before paying its first employee differs. If you run payroll through your own entity, this is what the main authorities in each market expect. It is based on official guidance reviewed in October 2026, so treat it as a starting point and take local advice for your own situation.

What an employer must have in place before running payroll, by country
CountryWhat your own entity must do before running payrollThisWorks route
Netherlands

Register with the tax authority (Belastingdienst) before hiring and receive a payroll tax number. Then withhold wage tax and social contributions, and file and pay returns on time.

Source: Business.gov.nl

EOR NetherlandsPayroll in the Netherlands
Germany

Apply to the Bundesagentur für Arbeit for an employer number (Betriebsnummer) when you hire your first employee. It is the number used to report employees to social insurance. Register the business with the statutory accident insurer within one week of starting it, and register each employee through ELSTER to retrieve their wage tax features (ELStAM).

Sources: Bundesagentur für Arbeit, DGUV, ELSTER

EOR GermanyPayroll services
United Kingdom

Register with HMRC for PAYE if a registration trigger applies, report pay and deductions on or before each payday, pay HMRC what is owed (usually monthly) and keep payroll records.

Source: GOV.UK

EOR United KingdomPayroll services
Poland

Be registered with ZUS as a contribution payer (some company types are registered automatically) and report each employee to ZUS within 7 days of starting work.

Source: Biznes.gov.pl

EOR PolandPayroll services
Spain

Register with the Social Security Treasury (TGSS) before the first hire and obtain a contribution account code.

Source: administracion.gob.es

EOR SpainPayroll services
Portugal

Register with Social Security as an employer, notify each new hire shortly before the contract starts and pay contributions on gross pay.

Source: ePortugal

Hiring in Portugal
Canada

Register for a Canada Revenue Agency payroll program account before your first remittance due date, then withhold and remit income tax, CPP and EI. Quebec may also need Revenu Quebec.

Source: Canada.ca

Hiring in Canada
South Africa

Register with SARS as an employer within 21 business days of becoming one, unless none of your employees owe normal tax. If you are liable for the Skills Development Levy you must register for it and state your SETA, and an employer registering for PAYE or SDL must also register for UIF contributions.

Sources: SARS: registering for PAYE, SARS: UIF

EOR South Africa

What goes wrong without a legal employer

A common shortcut is to engage a person as a contractor, or to pay them through a payroll service with no registered employer behind it. Tax and social security authorities look at how the work is really done, not at what the contract is called.

This is not only a local rule. The International Labour Organization’s Employment Relationship Recommendation says that whether an employment relationship exists should be guided primarily by the facts of the work and the pay, however the arrangement is described. In the UK, HMRC offers an online tool to check employment status for tax, because status decides who is responsible for the tax and National Insurance.

Contractor treated as an employee

In the Netherlands, the Tax Administration has been checking since 1 January 2025 whether self-employed workers are genuinely self-employed. If an arrangement is in fact employment, the parties can face an additional tax assessment, and the worker gains employee protections. In 2026, fines are generally limited to deliberate or grossly negligent cases, but the rules are still developing.

Source: Business.gov.nl

A formal status check

Germany has a dedicated procedure in which the German pension insurance (Deutsche Rentenversicherung) decides whether an activity is dependent employment or self-employment, with a legally binding result.

Source: Deutsche Rentenversicherung

No registered employer

In many countries payroll cannot lawfully start until an employer is registered with the tax and social security bodies. A payroll provider cannot do that for a company that has no entity.

Assuming the provider carries the liability

A payroll provider calculates and files for your entity. The legal employer, which is you, still answers for the outcome.

Further reading: ILO, Recommendation No. 198, GOV.UK, Check employment status for tax

“Most of the risk we see does not come from bad intentions. It comes from companies moving fast in a new country and filling the gaps with whatever is quickest: a freelancer here, a payroll provider there. The right setup is not always an EOR. But it should be a deliberate choice, made before the first hire, not something you fix after the tax authority starts asking questions.”

– Gino Peters, CCO of ThisWorks 

How ThisWorks can help

Whether you need an employer of record, payroll through your own entity, or both, ThisWorks supports employers hiring in the UK, Germany, the Netherlands, Canada, South Africa, Portugal, Spain and Poland. One team can cover the whole journey, so you do not need a separate provider for each step.

Employer of record

Hire in a new country without setting up an entity. We act as the legal employer and run payroll, contracts and compliance locally.

Explore EOR services

Global payroll

Already have an entity? We calculate pay, prepare filings and keep payroll accurate and on time in each country.

Explore payroll services

Entity setup

Ready to move from EOR to your own company? We help you set up the entity and the registrations that come with it.

Explore entity setup

Visa and work permits

Hiring someone who needs permission to work? We can support the permit alongside the employment.

Explore work permits

Frequently Asked Questions

No. An EOR is the legal employer and runs payroll as part of that role. A payroll provider only processes pay for employees of a company you own, and you remain the legal employer.No. An EOR is the legal employer and runs payroll as part of that role. A payroll provider only processes pay for employees of a company you own, and you remain the legal employer.
Generally, yes. A payroll provider works for an employer that exists and is registered locally. If you have no entity in the country, you need an EOR or you need to set one up.
A payroll provider is enough when you already employ people through your own entity and only need payslips, filings and reporting handled. If you have no entity, or you want the provider to carry the employer role, you need an EOR
Yes. Many companies use an EOR in countries where they have no entity and a payroll provider in countries where they do.
Yes. A common path is to start with an EOR, set up an entity once the team or the commitment grows, and then move employees to payroll under the new entity. Plan the transfer date and each employee’s terms with local advice.]
Per employee, usually yes, because the EOR carries the employer role. But the comparison is incomplete without the cost of creating and running your own entity. For a small team, an EOR is often cheaper overall.
A PEO is a co-employment arrangement most common in the United States, which is different from both models above. See our comparison of EOR vs PEO.

Ready to hire?

Hiring internationally doesn’t have to mean setting up a local entity, building payroll infrastructure or navigating complex employment legislation on your own. Whether you are hiring your first remote employee or expanding an international team, our specialists can support a smooth, compliant onboarding process in just a few days.

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