Employer of record services (EOR) enable businesses to hire employees in foreign countries without establishing a legal entity. An EOR becomes the legal employer, managing payroll, taxes, benefits, and compliance while you retain full operational control of your workforce.
Expanding globally is no longer optional for competitive businesses. However, the traditional path: establishing subsidiaries, navigating foreign labor laws, and managing international payroll – drains resources and delays market entry. Setting up a legal entity typically costs between $15,000 and $20,000 depending on the country, plus up to $200,000 in annual maintenance fees, according to Pebl's 2025 analysis. Meanwhile, competitors who move faster capture market share.
That's where employer of record solutions transform the expansion timeline. Instead of months of paperwork, businesses can hire internationally in weeks. Instead of building local HR infrastructure, they leverage existing compliance frameworks. For companies testing new markets or scaling rapidly, EOR services provide the speed and flexibility traditional expansion methods can't match.
This guide covers everything you need to know: how EOR services work, when to use them, what they cost, and how to choose the right provider for your business model.
An employer of record is a third-party organization that becomes the legal employer of your workforce in a foreign jurisdiction. You maintain day-to-day management – assigning tasks, setting schedules, evaluating performance, while the EOR handles legal and administrative employment responsibilities.
The operational framework works as follows:
The EOR registers as the official employer with local authorities. Your employee signs a contract with the EOR, not your company directly, satisfying local employment laws without requiring you to incorporate a subsidiary. The EOR processes monthly salaries, calculates and withholds income taxes, manages social security contributions, and ensures timely payments through local banking systems.
Every country mandates different employee benefits: health insurance, pension contributions, paid leave, severance provisions. The EOR ensures your employment packages meet local statutory minimums and market standards while maintaining compliance with evolving labor regulations, protecting you from legal penalties.
This model differs from a Professional Employer Organization (PEO), which requires you to already have a legal entity in the target country. An EOR eliminates the entity requirement entirely, making it the faster, more flexible option for businesses entering new markets.
Companies turn to employer of record services for strategic advantages that traditional expansion cannot deliver:
Accelerated Market Entry Traditional entity formation requires extensive legal documentation, government approvals, and administrative setup – typically 6-12 months. With an EOR, businesses can post job openings and begin onboarding within 2-3 weeks. This speed advantage allows you to test market demand, hire critical talent, and establish presence before competitors complete incorporation paperwork.
Reduced Financial Exposure Entity formation carries substantial upfront costs: legal fees, office space deposits, local accounting services, HR infrastructure, and ongoing compliance expenses. These fixed costs exist regardless of whether your expansion succeeds. EOR services convert fixed costs into variable costs. You pay only for active employees, avoiding the $50,000+ investment in entity infrastructure.
Comprehensive Compliance Protection Employment regulations vary dramatically across jurisdictions. France mandates 30 days of paid vacation; Singapore requires Central Provident Fund contributions; Armenia has specific termination notice periods. An experienced EOR maintains expertise across regulatory frameworks, monitors legislative changes, and shields your business from compliance violations.
Administrative Efficiency Managing international payroll requires converting currencies, navigating foreign banking systems, calculating complex tax formulas, and submitting filings in different languages. EOR providers consolidate this complexity into a single interface. You approve timesheets or salaries; they handle everything else, allowing your finance team to focus on strategic work.
Understanding the right use cases prevents overpaying for services you don't need while ensuring proper support for international expansion:
Testing New Markets If you're validating demand in a new region, an EOR minimizes commitment. Hire a small sales team, run a pilot program, or establish customer support without permanent infrastructure. If the market proves viable, transition to a subsidiary later. If not, exit without complex dissolution procedures.
Hiring Specialized Talent in Specific Locations Sometimes the best candidate lives in a country where you have no presence. According to McKinsey research, 87% of companies worldwide are experiencing skills gaps now or expect to within a few years, with 90 million workers in Europe alone requiring reskilling or upskilling by 2025. For companies seeking technical talent, this scarcity transforms hiring from a routine process into a competitive battle.. Rather than reject qualified candidates based on location, an EOR enables you to hire wherever talent exists.
Rapid Scaling Across Multiple Countries Companies expanding into 5+ markets simultaneously face enormous administrative complexity establishing entities in each location. An EOR provides a unified framework for hiring across jurisdictions, enabling faster geographic scaling with consistent employment practices.
Compliance-Sensitive Industries Industries like fintech, healthcare, and data services face additional regulatory scrutiny. An EOR with sector expertise ensures employment practices align with both labor laws and industry-specific regulations: particularly important in jurisdictions with strict data residency or financial licensing requirements.
When NOT to use an EOR: If you're building a substantial long-term presence with 20+ employees in a single country, ongoing EOR fees may exceed entity establishment costs. Similarly, if you need complete control over employment contracts and benefit structures beyond local minimums, direct employment through your own subsidiary provides more flexibility.
EOR pricing varies based on provider, location, service level, and contract terms. Understanding cost structure helps you evaluate proposals accurately:
Standard Pricing Models
Most EOR providers charge a flat monthly fee per employee, typically $300-800 depending on country complexity. High-cost jurisdictions like Switzerland or Japan sit at the upper end; emerging markets like Armenia or Poland fall toward the lower end. Some providers charge 10-15% of each employee's gross salary, while others use hybrid models combining a base monthly fee ($200-300) plus a smaller percentage (5-8%).
Additional Costs to Anticipate
One-time setup fees typically range from $500-2,000 per employee. While basic statutory benefits are often included, premium benefits, stock option administration, or relocation support add 10-20% to base fees. International transfers incur currency conversion costs (1-3% of transferred amounts), and termination may trigger exit fees based on local severance obligations.
Cost Comparison: EOR vs. Entity Formation
A traditional entity requires:
An EOR serving 3-5 employees costs approximately $15,000-40,000 annually – substantially lower. The breakeven point typically occurs around 15-25 employees, at which point establishing your own entity becomes more cost-effective for long-term operations.
The EOR market includes global platforms covering 100+ countries, regional specialists focused on specific markets, and boutique providers serving particular industries.
Global vs. Regional EOR Providers
Global platforms like Deel, Remote, and Globalization Partners offer unified administration across multiple markets with standardized processes. However, broad coverage often means less specialized local knowledge. Regional specialists provide deep local expertise, established government relationships, and more competitive pricing for their coverage areas.
The strategic consideration: If you're hiring across 10+ countries simultaneously, a global platform's unified interface provides value. If you're building teams in 2-3 specific markets, regional specialists typically deliver better service at lower costs with more personalized support.
Critical Evaluation Criteria
Request case studies demonstrating how providers handled regulatory challenges. Evaluate whether their technology platform integrates with your existing HR systems. Look for providers offering guidance on competitive compensation, local hiring practices, and cultural integration: the best EOR services don't just handle paperwork, they help you build cohesive international teams.
Demand clear pricing with all fees itemized. Understand minimum contract periods, cancellation terms, and termination penalties. During evaluation, assess communication speed and quality: slow, generic responses during sales indicate poor support after signing.
Red Flags to Avoid
While most businesses consider EOR services in traditional hubs like London or Singapore, emerging tech markets offer compelling alternatives. Armenia exemplifies how regional specialization delivers exceptional value.
Armenia's technology sector recorded 24.5% growth in early 2025, supported by over 1,250 active IT companies generating $2.3 billion in annual turnover. The sector contributes approximately 7% to Armenia's GDP, according to Armenia's Enterprise Incubator Foundation.
Key advantages include:
Armenian developers, designers, and technical specialists typically command 40-60% lower salaries than equivalent roles in Western Europe or North America without compromising quality. Most Armenian tech professionals speak English fluently and have experience working with Western business cultures. Time zone overlap with Europe (GMT+4) and reasonable overlap with U.S. East Coast teams facilitates real-time collaboration.
Armenia offers straightforward regulatory frameworks, an 18% corporate tax rate (with preferential 1% turnover tax for qualifying IT/high-tech companies), and strong intellectual property protections. Companies like Picsart (1 billion+ downloads) and CodeSignal (serving major enterprises including Netflix, Uber, Facebook, and Capital One) demonstrate the ecosystem's capacity to build globally competitive products.
For businesses seeking cost-effective technical talent without sacrificing quality, Armenia and similar emerging markets represent untapped opportunities. However, successfully hiring in these locations requires an EOR partner with genuine local expertise, not just generic global coverage.
At CollabFabrik, we combine the reach of a global EOR with the depth of regional expertise – particularly in Armenia and the broader Caucasus region. Our approach goes beyond basic compliance and payroll to support your strategic growth objectives.
What makes our EOR services different: We provide market-specific guidance on competitive compensation, local hiring practices, and cultural considerations. We integrate EOR services with our outstaffing capabilities to create comprehensive staffing solutions. Our transparent, founder-friendly pricing has no hidden fees, optimized for startup and scale-up budgets with dedicated account managers who respond rapidly when questions arise.
Whether you're hiring your first international employee or scaling teams across multiple markets, we provide the infrastructure and expertise to expand confidently. Schedule a consultation to discuss how our employer of record services can accelerate your global hiring strategy.
An Employer of Record becomes the legal employer in countries where you have no entity, handling all employment responsibilities. A Professional Employer Organization requires you to already have a legal entity and co-employs workers with you. EOR services enable hiring without entity formation; PEO services optimize HR for existing entities.
Most EOR providers can onboard employees within 2-3 weeks after you've selected a candidate, including contract preparation, local registrations, and payroll setup. Traditional entity formation typically costs between $15,000 and $20,000 depending on the country, plus up to $200,000 in annual maintenance fees, taking 6-12 months by comparison.
Pricing ranges from $300-800 per employee per month, depending on country, service level, and provider. Setup fees of $500-2,000 per employee are common. Total annual costs for 3-5 employees typically range from $15,000-40,000. This is substantially lower than establishing your own entity, which requires $50,000-150,000+ in first-year costs.
No. While the EOR is the legal employer handling administrative and compliance functions, you retain complete operational control. You assign work, set schedules, evaluate performance, and make management decisions.
EOR services specifically cover employees – individuals who work under your direction with employment contracts. For independent contractors, you contract directly with them. However, misclassifying employees as contractors creates legal risks. For classification questions, consult our glossary page.
Employees can transfer to a new EOR or your established entity through a formal transition process. This involves terminating the relationship with the first EOR and simultaneously establishing employment with the new employer. Proper management ensures no gap in employment or benefits.
CollabFabrik provides a comprehensive employer of record services in Armenia, handling all legal employment, payroll, taxes, benefits, and compliance requirements. Armenia offers an 18% corporate tax rate with preferential 1% turnover tax for qualifying IT/high-tech companies, straightforward regulatory frameworks, and strong intellectual property protections. Our regional expertise ensures you navigate local practices effectively while building high-performing teams in a market where technical talent costs 40-60% less than Western Europe or North America. Contact us to discuss your specific hiring needs.
Employer of record services transform international hiring from a months-long compliance project into a weeks-long strategic initiative. For businesses testing new markets, accessing specialized talent, or scaling rapidly across geographies, EOR solutions provide speed, cost efficiency, and risk mitigation that traditional expansion cannot match.
The key is selecting an EOR provider aligned with your growth strategy. Global platforms offer breadth; regional specialists provide depth. The best partnerships combine both—giving you reliable infrastructure across multiple markets while delivering exceptional local expertise where it matters most.
As you evaluate options, prioritize transparency, proven compliance track records, and providers who view their role as strategic partners rather than administrative vendors. Whether you're hiring your first international employee or building teams across continents, the right EOR service doesn't just manage employment: it accelerates growth.
Ready to hire exceptional tech talent in Armenia and beyond?Contact CollabFabrik to discuss how our employer of record services can support your global expansion strategy.
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