For any business that wants to expand its operations globally, it is crucial to understand the cost structure of EOR services. The pricing of EOR varies based on factors such as employee count, countries of operation, and services offered.
Some EOR pricing structure have hidden charges, adding to the total cost to the company. Before making decisions on an Employee of Record solution, companies must thoroughly analyze these cost components. This knowledge will enable businesses to anticipate potential expenses, negotiate confidently with EOR providers, and make informed global expansion strategies.
How Much Does an EOR Cost?
An Employer of Record (EOR) costs from $7/user/month to $599/employee/month, depending on factors such as EOR provider, location, number of employees, and benefits. For example, the popular EOR Deel offers a flat monthly rate of $499. This rate does not depend on the number of people you hire or manage from foreign countries. For payroll and contractor management, users need to subscribe to separate Deel plans.
A general cost breakdown of EOR cost is given below:
- Employee count
- Setup fees
- Country of operation
- Offboarding fees
- Employee benefits
- Payroll management
Common additional costs to consider before buying EORs are listed below.
Onboarding Fees: Many EORs charge an initial onboarding fee for each new EOR that a company hires. While this fee typically includes tasks like contract management, employee data entry, and compliance checks, some EORs may have background checks, drug screenings, or onboarding training as part of their onboarding services.
Benefits Administration Fees: If a business offers its employees specific benefits such as healthcare or retirement plans, it might incur additional fees. EOR usually charges this fee for providing benefits counselling, Enrolling employees in benefits plans, Processing claims, and complying with benefits regulations. The specific benefits administration fees vary depending on the size and complexity of the benefits program.
Compliance Fees: Many countries have complex local compliance laws. EOR service providers often charge additional fees to ensure compliance with local regulations, covering payroll tax filings, reporting, and managing labour disputes.
Offboarding Fees: When an EOR leaves the organization, administrative tasks regarding employment relationship termination have to be performed. Some EOR solutions charge for offboarding services such as final paycheck processing, unemployment insurance claim management, and exit formalities.
Comparing the Cost of Top Employer of Record Services
Here is the latest pricing structure of popular EORs and the costs of additional services they offer.
| EOR | Starting Price (monthly) | Additional Charges |
|---|---|---|
| Deel | $599 | Deel Contractor: $49/month Deel US Payroll: $19/employee/month Deel Payroll: $29/employee/month Deel US PEO: $79/employee/month |
| Papaya Global | $599/employee | Contractors: $30/month/contractor Global workforce payments: $2.5/ transaction PayrollPlus: $15/month/employee |
| Multiplier | $400 | Contractors: $40/month |
| Oyster | $599/employee | Global Payroll: $25/employee/month Contractor: Free for 30 days, then $29/contractor/month |
| Remote | $599 | Payroll: $29/employee/month Contractor Management: $29/contractor/month Contractor Management Plus: $99/contractor/month Talent: $119/month |
| Rippling | £7/user | NA |
| Skuad | $19 | NA |
| Remofirst | $199/person | Contractor Payment: $25/person/month |
| Omnipresent | £499/employee | Contractor Solution: £29/month/employee Virtual Employer Organization: £350/month/employee Professional Employer Organization: £100/month/employee |
Cost of EOR vs Setting Up Local Entities vs Contractors
Here is a cost-benefit comparison of an EOR, local entity, and contractor.
| Basis | EOR | Local Entity | Contractor |
|---|---|---|---|
| Time Required | EOR setup can be done in a few weeks. | Establishing a local entity is a time-consuming process and can take months. | Hiring a contractor is usually a quick process. |
| Capital Requirement | EORs usually have low upfront fees. | Setting up a local entity requires substantial capital for registration, business permits, and office space. | Hiring a contractor needs no upfront costs. |
| Legal Compliance | EORs handle most legal and compliance matters. | Local entities must adhere to all local laws and regulations, which can be a complex procedure. | Hiring contractors usually does not require complex legal compliance. |
| Taxation | EORs often handle payroll and related taxes, but companies may still need to file corporate taxes. | Local entities are subject to corporate taxes, payroll taxes, and other local taxes, requiring them to manage taxation completely. | Local entities must adhere to all local laws and regulations, which can be a complex procedure. |
| Benefits | EORs can provide benefits like health insurance and retirement plans, but their options may be limited compared to a local entity. | Local entities can offer a full range of benefits to employees. | Contractors are generally not eligible for benefits provided by the company. |
| Control | EORs have some control over HR functions but not complete autonomy. | Local entities have complete control over their employees’ activities. | Companies have limited control over contractors’ work. |
| Flexibility | EORs offer moderate flexibility in hiring and firing employees, but limitations may exist. | Local entities are highly flexible in operations and staffing. | Contractors offer high flexibility for duration and scope of work. |
| Payroll Processing | EORs handle payroll processing, taxes, and deductions. | Local entities are responsible for managing their own payroll processing. | Contractors are responsible for their own payroll. |
| Ongoing Administrative Costs | EORs charge ongoing fees for their services. | Local entities incur ongoing costs for administration and compliance. | Contractors have minimal ongoing administrative costs for the company. |
| Office Space and Utilities | EORs do not require company office space. | Local entities need office space and utilities to run operations. | Contractors often work remotely, with no need for office space. |
| Audits | EORs may be subject to audits, but the organizations do not have direct exposure. | Local entities must go through regular audits and inspections. | Contractors are generally not subject to company audits. |
What Influences EOR Costs?
The factors that influence EOR costs are as follows.
Geographic Location
The geographic location of the employees significantly impacts EOR costs. Different countries have unique labor laws, tax systems, and regulatory frameworks, which largely influence EOR costs. Solution providers need to exert more administrative effort and compliance measures in countries with complex regulations, leading to higher EOR costs.
Number of Employees
Many EORs charge based on the number of employees they hire for a company, leading to overall cost increases with the number of employees under the EOR. EOR companies have to allocate additional resources to manage payroll processing, benefits administration, and compliance. However, some EORs offer discounts for larger numbers of employees as the cost per employee tends to decrease with the increase in the number of employees.
Service Scope
The scope of services is a significant determinant of EOR costs. While basic EOR services are less expensive, full-service EORs with payroll, benefits, compliance, onboarding, and offboarding generally cost more.
Employee Benefits
Further, the types and extent of employee benefits offered by EORs affect their cost. Healthcare benefits and retirement plans vary significantly between countries, so EORs with more comprehensive benefit packages may charge higher fees.
Industry
EOR cost also depends on the industry to which the employees belong. Industries like technology or healthcare have stricter compliance standards and regulatory obligations that drive up the costs of managing employees in these sectors.
EOR Pricing Models
The EOR pricing models are listed below.
Flat Monthly Fee
This EOR pricing model offers a straightforward and predictable monthly cost per employee, ideal for businesses with a stable workforce and comparatively simple HR needs. The fee typically includes essential services such as payroll processing, tax filing, and basic compliance tasks. In these cases, additional services incur extra charges.
Percentage of Payroll
In this model, the EOR’s fee is calculated as a percentage of the employee’s total salary, usually ranging from 3% to 10%. However, note that the percentage may vary based on the complexity of compliance regulations, benefits packages, and other factors. This approach can be more cost-effective for businesses with a low payroll, as the fee increases proportionally with the company’s growth.
Tiered Pricing
The tiered pricing structure determines the cost by the number of employees and the services required. It involves multiple tiers or levels, each of which is for a specific range of employees and services. The pricing tiers are typically structured to reward larger clients with lower per-employee fees.
How to Choose the Right EOR Based on Cost?
Geographic expertise, service offerings, pricing transparency, and other factors should be considered before choosing the right EOR based on cost.
Geographic Expertise
Hiring and employee onboarding from another country is a complex procedure, considering the local labor law, tax rules, and compliances. Hence, businesses must ensure their chosen EOR has a proven track record of operating efficiently in their target regions. EOR costs vary significantly between countries due to differing labor laws, tax regulations, and compliance requirements. However, experienced EOR can minimize compliance risks and potential cost overruns.
Service Offerings
Full-service EORs typically offer a wider range of services, including payroll processing, benefits administration, and HR compliance. While these comprehensive packages may be more expensive, they can save time and resources in the long run. Assess specific business needs to choose an EOR that offers necessary services. Thus, companies can avoid paying for unnecessary services that will increase costs.
Pricing Transparency
Cost plays a vital role when choosing an EOR. Look for EORs that offer transparent pricing models. Flat fees or per-employee charges enable companies to understand the exact costs involved in the process. Organizations must also be careful of hidden charges associated with employee benefits, onboarding, and offboarding. Upfront clarification of all fees prevents surprises.
Customer Support
While premium support services might cost companies more, they ensure smooth operations and minimize compliance risks. Hence, businesses must weigh the cost of premium support against operational inefficiencies to determine whether they want an EOR with priority support.
Final Words
Companies must remember that Employer of Record (EOR) costs vary depending on factors, including the country where the service is required, the level of service, and the workforce size. Many EOR services include payroll, benefits, and offboarding, while others may charge extra.
Hence, businesses must carefully evaluate their needs and budget before choosing the most suitable EOR. Especially when an organization plans to expand into complex or high-risk markets, it must choose its EOR strategically to mitigate risks, comply with local regulations, and have smooth operations.