What is a Tax Identification Number (TIN)?

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Gino Peters

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Gino Peters

Reviewed By: Belinda E.

June 3, 2026 7:27 pm

Category Tag: News

The rise of remote work made international expansion much easier in recent years, but hiring abroad still comes with legal and administrative complexity, as every country has its own labour laws and payroll rules that must be followed. In addition, not many companies can open a new entity in every new market that they are expanding into. That is when the Employer of Record (EOR) solution comes in handy.

The EOR serves as the legal employer on paper, while the client company manages important activities related to the employees responsibilities and performance.

In this guide we will cover what an employer of record is, how it works in detail, how much it can cost and which business should consider an EOR solution.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third party service provider that legally employs a person on behalf of another company in the country where the employee officially resides. As an official employer the responsibilities of EOR include issuance of an employment contract, processing payroll and withholding taxes and necessary social security contributions, as well as preparation of offboarding documents or any documentation that need to be signed by the employer. In addition, EOR ensures the compliance with local labour laws and serves as a first point of contact for any legal disputes.

The client company that hired the employee through an EOR also has a list of responsibilities. As an Employer of Record does not have the visibility on operational activities behind the scenes a client company needs to provide direction and ensure proper team integration.

In simple terms, the EOR provider acts as a legal employer in the country of the employee’s residence, while the client company takes on day-to-day manager work.

Responsibility	Employer of Record (EOR)	Client Company
Employment contracts & any other official documentation
Payroll processing
Income tax & social security contributions
Compliance with local labour laws
Statutory benefits administration
Managing daily work and projects
Setting goals and performance expectations
Providing equipment and tools
Leading the employee’s team and workflow

Employer of Record solutions gain more and more popularity in the field of global expansion as they allow businesses to hire best candidates fast and easy while staying compliant with local employment regulations. More information about EOR service are available if you would like to understand more.

EOR Meaning

The term “EOR” is the abbreviation for Employer of Record.

Employer in this instance stands for the company that hires the employee and takes on duties related to it, such as onboarding and offboarding process, payment of wages and compliance with other legal requirements.

“Record” from the EOR perspective refers to official registration with government authorities. The name of the EOR provider is stated in all payslips and tax filings, and should also be listed by the employee in any documents where employer must be stated, such as mortgage or loan applications.

One might ask a question of why this legal structure exists. As it is not possible to provide an employment contract directly to a person that legally resides in another country, the business expanding abroad typically needs to establish a local entity. That involves legal registration, arrangement of local bank accounts and organisation of payroll structure, as well as compliance with local law.

EOR allows to simplify the global hiring and reduce administrative burden through their existing legal entity.

There are some other hiring models that can be confused with EOR.

EOR and PEO

Many sources online refer to EOR as “international PEO”, which may create confusion as these models have 1 important difference.

A Professional Employer Organisation (PEO) serves as a co-employer of a client company. In other words, a business must already have an established entity in the country. The hiring tasks are, therefore, shared between 2 companies, while legal liability stays only with the client company. In the EOR model all legal risks are being taken by the official employer. Read more about the difference between PEO and EOR here.

EOR and staffing agency

Staffing companies mainly provide assistance for short-term projects by providing temporary workers. If the client wishes to employ a person for a longer time, EOR approach must be chosen.

EOR and contractor model

Contractor agreements assume the involvement of independent workers rather than employees. This model is also often used for temporary, project-based assignments. It is important to remember that there is a big misclassification risk between a contractor and an employee in the company which can lead to potential legal issues. An EOR ensures that employment is legally compliant with local labour law.

How does an Employer of Record work?

While it may sound complicated at first, a process behind the employer of record model is relatively straightforward.

The operating company selects a candidate

The client company recruits the employee they want to hire in another country

The EOR becomes the legal employer & local employment contract is issued

The Employer of Record uses its local legal entity to prepare and issue an employment contract that complies with labour law of the country where the employee is based. Depending on case-by- case situation, the work visa might need to be secured beforehand. Our company provides immigration services, more details can be found here.

Payroll and taxes are managed

The EOR takes on recurring responsibilities related to a payroll and ensures correct processing of income tax, social security contributions etc

Benefits are administered

Paid leave, sick leave, pension contributions and any other statutory benefits are being managed by the EOR.

Ongoing compliance and HR support

It is the responsibility of the EOR to monitor changes in local labour law and ensure ongoing compliance.

Example:

Imagine a UK-based tech company found a perfect candidate in Germany for a position of a software developer.

Instead of going through the administrative burden of opening a legal entity in Germany, the company chooses to work with an Employer of Record. The EOR hires the developer under a German employment contract and manages payroll and taxes. At the same time the UK company welcomes the new employee in the team and manages the daily work of a developer.

What services does an Employer of Record provide?

The Employer of Record does more than just providing an employment contract to the employee. Typically a wide range of HR and compliance services is included in the EOR offer. For example, read about the services included in our EOR package here.

Employment and HR administration

Locally compliant employment contracts and support with other documents requested by authorities
Employee onboarding
Employee record management. For example, control over PTO

Payroll and tax management

Regular payroll processing
Tax withholding and reporting of social security contributions with authorities
Payslip generation and creation of annual wage tax certificates

Benefits administration

Management of statutory benefits
Pension contributions (where required)
Support with benefits such as maternity leave allowance, sick leave allowance etc

Compliance and risk management

Insuring compliance with local labour law
Management of onboarding and offboarding processes
Representation in difficult legal and court cases

Additional services:

Some EOR providers ( such as ThisWorks EOR Services) provide additional services such as:

Work permit and dependent visa support
Background checks
Relocation support
Value added services: support with housing, company car, banking, etc ( depending on the country).

This vast list of services allows businesses to manage international teams, while staying compliant and avoiding complex local employment administration.

Benefits of using an EOR service

There are multiple advantages the businesses can get from working with an Employer of Record provider.

Faster global hiring

Setting up a new entity can take up to several months. With an EOR the hiring process can take several days.

Reduced compliance risk

A trustworthy EOR provider ensures the compliance with all local regulations. As the labour law varies greatly between countries, having a knowledgeable party to rely on can make a big difference.

Lower expansion costs

Establishment of a new entity is not only a time-consuming process, but also costly. With EOR services these costs can be avoided.

Access to global talent

The location of a remote candidate is not a problem if the company uses Employer of Record services. In other words, the best candidate for specific business purposes can be chosen.

Scalable hiring model

EOR services are ideal for organisations that want to scale international hiring quickly. They are particularly useful in the following situations:

Remote-first teams and organisations
Companies testing new markets abroad
Startups expanding internationally

How to choose the right Employer of Record

Choosing between several EOR providers is important, as it influences not only compliance, but also employee experience for new hires and how your company is perceived on the job market.

Here are some important things to keep in mind when deciding on your EOR partner:

Geographic coverage

Make sure that EOR provider can cover the country where you want to expand globally. Read about our EOR coverage here.

Pricing transparency

Check that EOR provider does not have any hidden costs and the pricing is clearly outlined in your MSA.

Compliance expertise

A strong EOR provider should have a team of experienced local HR specialists who understands all in and outs of a national labour law.

In-house vs partner model

Some EOR providers rely on their third-party partners, while others manage employment directly through their own local entities.

Customer support

It is important to find a EOR partner that helps with any questions or concerns in a quick and professional manner. That can be crucial when dealing with employee offboarding or any legal disputes.

Warning signs

Understanding the importance of choosing a right party, your company should be cautious of providers that lack local expertise and cannot give clear answers to your labour law questions. In addition, companies with slow response times can prove to be unreliable in critical situations. Furthermore, providers with complex pricing models with many hidden fees can create a lack of cost transparency and result in unforeseen expenses.

By selecting a provider with strong expertise in local labour law and reliable support from dedicated teams, your company can ensure a smooth international growth. Learn why companies choose ThisWorks as their EOR partner.

How much does an employer of record cost

The vast coverage of services the employer of record provides makes many businesses ask how much an EOR costs.

Pricing models vary greatly on the provider and the country of coverage, but most EORs use one or more of the following structures.

Flat monthly fee per employee.

The EOR provider charges a fixed monthly fee for each employee they have on the payroll from the client.

Percentage of salary

While not being a popular approach, some EOR providers charge a percentage of the employee’s salary, typically ranging between 5%-15%.

Setup fees

Some providers charge onboarding or offboarding fee for each employee.

The fee that the business needs to pay to an EOR provider also depend on the location of a service. Local labour law complexity of some countries can influence the fee. In addition, some countries have specific statutory benefits and payroll administration requirements. Furthermore, employee headcount in the specific location can influence the fee.

EOR vs setting up a legal entity

To establish a new entity the organisations needs to go through legal and tax registration. In addition, accounting support and ongoing compliance costs such as the fees for local labour lawyers can make setting up a legal entity significantly more expensive.

An EOR allows companies to expand globally without these upfront investments.

EOR vs hiring contractors

Some businesses decide to hire international workers as contractors. However, this approach can often lead to a misclassification risk, which can cause legal and tax liabilities.

A professional EOR provider ensures that the new starters are compliantly onboarded under local employment regulations.

EOR FAQs

Is an EOR the same as a PEO?

No. PEO model assumes co-employment and requires the business to already have established local entity, while EOR employs new talents through its own entity only.

Can an EOR hire contractors?

While some EOR providers can support hiring contractors, it is important to remember that main function of EOR is the employment of full-time workers legally in a country. A risk of misclassification between EOR and contractor should be also considered carefully.

Is an employer of record legal?

Yes, when established and structured properly, Employer of Record entities are legal and widely used for international expansion by many companies.

When should you use an EOR?

The most common reason for using EOR include:

Hiring employees located in another countries remotely
Testing new markets before establishing an entity
Expanding internationally

Can you switch from EOR to your own entity?

Yes. Many companies initially hire through an EOR for the ease and speed of expansion and later transition employees to own legal entities upon their establishment. It is important to remember that some countries require specific procedure to be followed in such a scenario.

Get in touch with ThisWorks

Expanding your team globally does not need to be long and administratively complex.

With the use of Employer of Record the businesses can have access to the best talent from around the world while ensuring full compliance with local labour laws.

ThisWorks can support your global expansion with our compliant Employer of Record services.

Contact our team to find our how we can help your international team glow fast and compliantly!

A Tax Identification Number (TIN) is an identification number used by governments for the identification of people and companies for tax payments. It facilitates documentation of income and revenues, taxation, and legal compliance to tax requirements. TINs used in the U.S. include the SSNs (Social Security Number), EINs (Employer Identification Number), and ITINs (Individual Taxpayer Identification Number).

TINs have a very significant role in tax administration. Organizations employ them to ensure individuals and other organizations declare the right amount of tax to be paid. A TIN is required for filing taxes for the business, payment of employees’ wages, and for adhering to the tax laws in the country. A TIN is required by persons in order to file returns, claim refunds, and even some rights.

It is possible to avoid penalties and have smooth processes when it comes to tax by having knowledge of what a Tax Identification Number is and how it functions. Therefore, TINs are significant to individual and company tax filing processes and are crucial in the planning of one’s financial future.

Types of Tax Identification Numbers in the U.S.

Social Security Number (SSN)

A Social Security Number (SSN) refers to a number that the Social Security Administration assigns to people. It is mainly used for the identification of individuals and monitoring of incomes for tax collecting purposes. Employers are the one responsible for reporting wages to the IRS (Internal Revenue Service) and they do it using the employee’s social security number. This number is also used in the reporting of personal taxes and qualifying for social services.

What’s the difference between TIN and SSN? TIN is an umbrella for different identification numbers, of which the SSN is a part, though it is only for individuals while TIN can also be used by companies and other organizations.

Employer Identification Number (EIN)

An EIN, also known as a federal tax identification number, is a unique number assigned to a business by the IRS for tax purposes. It is mandatory for corporations, partnerships and non-profit organizations. An EIN is used to pay taxes, report taxes to employers, and conduct financial transactions by organizations.

How to apply for an Employer Identification Number (EIN)? This application can be done online and through the IRS website. The process is fast, and once companies apply for an EIN, it is assigned quickly, enabling companies to operate and be compliant with taxes. You can apply here.

Individual Taxpayer Identification Number (ITIN)

A valid US tax account holder who cannot get an SSN needs to apply for an ITIN. The IRS provides this tool to help nonresidents, together with foreign individuals and other persons who must file taxes in the U.S.

An ITIN provides non-US citizens with a tool for tax filing and income reporting, and tax deduction claiming. Those who do not possess an SSN can use ITINs to pay taxes according to their financial capabilities. The number enables individuals to comply with tax laws and for tax calculations.

Differences between TIN and SSN

TIN stands for Tax Identification Number and is a general term encompassing numbers that represent the taxpayers. It comprises of what is known as SSNs and the EINs, both of which have different uses.

Social Security Number (SSN):

The Social Security Administration distributes SSNs to both U.S. citizens and residents along with other persons. The statements for personal wages and taxes need to be filled with SSNs.

Employer Identification Number (EIN):

EINs stand for identification numbers that the IRS issues to businesses. Tax purposes and payroll management, and business account processes are among the common uses of EINs.

What is the difference between TIN and SSN?

The term TIN therefore, encompasses all tax identification numbers, including the SSN and EIN. While SSNs are assigned only to individuals, EINs are assigned to businesses.

Eligibility and Issuance:

What is the difference between TIN and SSN in eligibility and insurance? SSNs exist exclusively for people who hold either American citizenship or resident status. The IRS distributes EINs exclusively to businesses. Taxpayers together with businesses must understand these distinctions in order to select the proper identification number for their tax obligations. You can obtain additional details from the IRS organization.

Is TIN required for filing taxes?

A TIN functions as the key requirement for precise tax filing because it provides individual identification to taxpayers. A TIN functions as the assigned identifier for taxpayers who enable the IRS to maintain income records and simplify tax return processing. The government establishes requirements to receive a TIN which means taxpayers who fail to fulfill these rules cannot fulfill their reporting obligations or meet their tax responsibilities.

Is TIN required for filing taxes? A person must obtain a TIN when they file their tax return. Tax documents need TIN verification for authentication purposes while preventing errors that could occur during tax computation. A TIN system enables all eligible rebates, allowances and tax credits to be correctly distributed.

A TIN serves as a requirement to access tax incentives as well as tax deduction benefits. A person must have a Tax Identification Number to qualify for Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). Both employers require TINs to manage the wages of their employees as well as to gain access to business tax exemptions.

How to apply for an Employer Identification Number (EIN)

How to apply for an Employer Identification Number (EIN)? The process is easy and may be done online, by mail or fax with the Internal Revenue Service. Here’s a step-by-step guide:

Determine eligibility:

Make sure to establish your business in the United States or its territories if you wish to tap in this market successfully. It is only for those people with TIN as the eligibility criteria for applying for the Card.

Gather required information:

You should input your business name, business address, legal form, and name and details of the person who will take responsibility for the business. You will also need information on the kind of activities your business engages in.

Choose an application method:

Online: The fastest option. You can obtain your EIN online using the IRS EIN Assistant page to complete the form and get your number right away.

Mail or Fax: Visit the official website of the IRS to download form SS-4, fill out the form, and then submit it to the IRS. It can take as long as four weeks for the processing stage.

Receive your EIN:

Upon approval, you will be issued an EIN, which can be used for tax purposes, payroll, and opening business bank accounts.

How to apply for an Employer Identification Number (EIN) efficiently?

Apply online to avoid delays. This number is crucial for tax compliance and identifying your business with the IRS.

How to verify a Tax Identification Number?

The IRS offers tools to confirm TIN validity for businesses and individuals. You can use the IRS TIN matching program for businesses or consult with a tax advisor. Employers can verify employee TINs during tax reporting to avoid penalties.

Verification prevents errors and ensures accurate tax filings. It also reduces the risk of fraud, such as identity theft or improper tax claims. Incorrect TINs can delay tax refunds and result in IRS penalties.

How to verify a Tax Identification Number quickly? Use the IRS online system for EIN verification or check SSNs through the Social Security Administration. For ITINs, consult the IRS directly.

By verifying TINs, you maintain compliance and safeguard financial data. Accurate verification ensures smooth tax processing and prevents fraudulent activities. Always confirm TINs before submitting tax forms.

What are the tax identification numbers in different countries?

TINs differ per country depending on the format of issuing and administering identification numbers for the purpose of identifying taxpayers and enforcing the applicable laws.

In the United States they involve Social Security Numbers (SSNs), Employer Identification Numbers (EINs) and Individual Taxpayer Identification Numbers (ITINs). These are provided to the individual by the Internal Revenue Service and the Social Security Administration depending on the taxpayer’s status.

In the United Kingdom, taxpayers use a Unique Taxpayer Reference (UTR), issued by HM Revenue and Customs (HMRC). People and companies use this number when filling their taxes.

In Canada the most common tax identification number for individual is the SIN while for business entities it is the BN.

In Germany people have a Steueridentifikationsnummer (Tax ID) and companies have a Wirtschafts-Identifikationsnummer (Business Tax ID).

In terms of format, what are the tax identification numbers in various countries?

They vary significantly, ranging from seven digits (U.S. TIN) to letters and numbers combined (Canada’s BN). The issuance process varies from one local tax authority to the other.

Conclusion

What is a Tax Identification Number? There is no doubt it helps to maintain compliance with tax legislation and report the organization’s financial status truthfully. TINs assist in tax compliance since they enable people and companies to file their taxes, apply for benefits, and meet their legal requirements. It is important to use the correct TIN in order to avoid such misconduct and penalties with regard to the type of TIN used either SSN, EIN or ITIN.

Check your TIN applications are properly filled and current to help reduce time spent on tax procedures. Efficient management and utilization of TINs help in harmonious transactions with the tax departments. In compliance and avoiding unnecessary stress, always check and keep your Tax Identification Number records.

FAQs

What is a Tax Identification Number (TIN)?

A TIN is a unique figure assigned from one fiscal authority to identify a specific taxpayer. Filing taxes, reporting income, and checking on compliance to tax laws is done with this tool.

How do I find my Tax Identification Number?

Your TIN can be found on the tax return, social security card, or other documents that are issued by an employer in the form of W-2 or 1099. EINs can be found on tax returns and letters received from the IRS.

What are the different types of Tax Identification Numbers?

There are different forms of TINs within the United States, they include the SSN’s, EINs as well as the ITINs. Each has its own uses in the lives of people and companies.

Is a Social Security Number a Tax Identification Number?

Yes, a Social Security Number is considered as one of the TIN. It is provided by the Social Security Administration and is employed in individual tax returns and in reporting income.

How do I apply for a Tax Identification Number?

To obtain a TIN, it is necessary to apply to the appropriate agency. To obtain an SSN, people should go to the Administration of Social Security. To get an EIN, you must fill out one online through the IRS. For ITIN, you have to apply for the form W-7 on the IRS.

Can I use my TIN for both personal and business taxes?

No. Personal TINs like SSNs or ITINs are for individual tax purposes, while business taxes require an Employer Identification Number (EIN).

What is the difference between a TIN and an EIN?

A TIN is a broad term that includes all taxpayer identification numbers. An EIN is a type of TIN specifically for businesses, issued by the IRS for tax reporting and compliance.