Building a world-class remote team often entails global hiring. However, navigating the complexities of adding team members in different countries can be challenging.
Employer of Record services (EOR) can simplify this process. When you partner with an EOR, the service becomes the legal employer of your full-time and/or freelance international talent, handling everything from payroll, taxes, and employee benefits to ensuring compliance with local labor laws.
Before choosing an EOR, it’s essential to understand that the pricing structures and monthly fees for these services can range widely. Some providers start as low as $199 per employee/month. Others have prices starting at $599 per employee/month — or more.
This guide will explain different EOR pricing models to help you make an informed decision that aligns with the services needed for your global team and the budget you need to stick to.
The Cost of Opening an International Entity
While EORs can streamline how you hire employees internationally, another option is to establish new legal entities in each foreign country where you want to employ talent.
Establishing local entities involves setting up local branches or subsidiaries in new markets. This gives you complete control over your operations. But control comes at a cost. Consider:
- Initial setup: Registering your business, obtaining necessary licensure, and setting up financial accounts can involve a significant initial investment. In addition, expenses in one country may not help predict costs incurred in another.
- Time investment: Navigating bureaucratic processes, understanding local regulations, and establishing operations takes time. This can delay and even divert resources from your expansion roadmap.
- Talent acquisition and management: Building a local team, including HR and legal professionals, is essential to manage compliance for finances and personnel. Recruiting and managing these employees adds to your overhead.
Beyond the initial setup, you’ll also face costs such as:
- Legal and professional fees: You’ll require ongoing legal counsel to review compliance with evolving local employment laws and regulations.
- Registration and compliance fees: Annual renewals, tax filings, and other compliance requirements can result in recurring expenses.
- Insurance costs: Securing necessary business insurance, including liability and employee coverage, can be a significant expense.
- Office space and infrastructure: Depending on your needs, leasing and setting up the necessary infrastructure can add to your operational costs.
The fact is that using an EOR is often a more efficient and cost-effective solution for businesses hiring remote international employees.
Did you know? If you choose to establish a local entity in another country, on average you should expect to spend between $20,000 and $150,000! And costs differ widely between countries. This doesn’t even include the maintenance fees of the business, hiring costs, and more.
What Impacts the Cost of Employer of Record Services?
If you have done research on Employer of Record providers, then you may have noticed some different levels of what your starting costs might be.
But beyond those “per person” fees, your total costs for employing and paying global talent can also vary. Here’s a few factors into why that can be.
Local vs. Owned
There are two common Employer of Record business models. The first is partnering with local partners and the second is opening and owning local entities.
Each has pros and cons, but generally providers that own their own local entities will cost your company more to work with.
If you’d like to learn more, we’ve previously written about the local partner model for Employer of Record services. This will help you understand how the business approach enables you to employ the best talent, at the best price.
Country Location
Your costs to hire internationally will also vary based on the countries or regions you’d like to hire talent in. Every country has its own labor laws, tax requirements, etc. — which impact the time and costs to be compliant.
Number of Employees
The total amount of employees (or contractors) you plan on hiring also impacts your total costs. And the amount you’ll pay to the provider can be impacted by the employees’ location as well.
Employee Benefits
The type of benefits your company must offer employees can also increase the cost of your employer of record services.
It’s why we created RemoHealth as an add-on service to help expand health coverage and make it as affordable as possible.
Business Industry
Depending on what industry your company services, you may have some higher fees via your employer of record. Mostly due to extra compliance and legal requirements needed for your company to operate in specific countries within your industry.
Additional or Custom Services
Whether you have unique situations (like how payroll is handled) or you need extra support beyond the standard offerings, you’ll potentially accrue higher costs as well. Make sure to understand what those are if you need particular support.
EOR Pricing Comparison
EORs often provide customers with similar pricing structures, making it difficult for business owners to see how the costs and services between different providers genuinely differ.
Contractor costs can also be quite similar, with only slight differences offered by individual EOR service providers, and often impacted by where contractors are based.
Here are the starting EOR costs for some of the most popular EOR providers for global employment:
EOR Pricing Models
We broke out some starting monthly pricing costs above, but there are several different EOR pricing models, including:
Flat Monthly Fee
Many EORs use a fixed-fee model, charging a monthly set amount per employee. This is a popular choice for businesses with small or changing workforces, as it offers predictable costs and transparent pricing. While industry rates vary, many providers start at between $599 and up to $1,000 per employee/month.
Although it pays to look for the most competitive pricing, a flat fee offers a transparent option that allows predictable control over your EOR expenses, giving you more flexibility to expand your headcount by adding more staff.
Percentage of Payroll
Other EORs charge a percentage of each employee’s salary. This might seem appealing initially, but it’s often an indicator of hidden costs. You’ll pay a percentage of every salary, which means costs increase when you give raises, bonuses, or hire more employees.
This can put downward pressure on growth and limit how much you can pay your team. Additionally, as your number of employees grows and salaries increase, these percentage-based fees can become significantly more expensive than those of a fixed-fee model.
Custom Pricing
EORs can also offer customized pricing based on specific client needs, allowing businesses to choose the services they need without paying for the ones they don’t.
Custom pricing models can seem ideal for businesses with unique HR requirements or those that need a high level of customization in their HR management. But, as with percentage-based pricing, the long-term costs can be challenging to predict.
Additional Costs/Hidden Fees of EORs
What many Employer of Record providers won’t tell you upfront is that there are often other potential costs associated with where you plan to hire.
While it’s understandable that your costs will vary, there should never be “surprises.”
So, before committing to an Employer of Record provider make sure you ask a few important questions during your vetting process to understand all of the costs involved.
At Remofirst, we always provide the full view of your costs upfront, before you decide to work with us. We'll walk you through the numbers and answer any questions you may have. No surprise fees here!
Here's some areas about pricing your should be asking vendors:
- Setup fees: Ask EORs if they charge upfront to cover the initial cost of establishing services for your employees.
- Termination fees: Understand the conditions for ending your contract and any associated penalties.
- Compliance fees: Know whether you’ll be charged extra to maintain legal compliance.
- Benefits administration: Identify whether the service charges extra for managing your employees’ benefits.
- Currency conversion or wire transfer fees: Some EORs might charge fees for converting currencies when paying your international employees or pass wire transfer costs on to you.
- Offboarding fees: EORs can charge a fee when an employee leaves the company, increasing your administrative costs when an employee terminates..
Always carefully review the EOR's contract and service agreement to understand the entire pricing structure and avoid any unexpected costs. Don't hesitate to ask questions to alleviate any doubts before signing an agreement.
Choose an EOR That Works With Your Budget
So now you have a better understanding of the costs and what questions to ask about specific fees. Your last step is deciding which Employer of Record is right for your company and overall budget.
To help you in this journey, here’s what else you need to think about before signing a contract.
- Make a list of what matters to your global needs. Beyond overall budgets, what are the things you most need from your EOR provider? This might include the countries serviced, if it’s a local or owned-entity model, other HR services and benefits, how intuitive the platform is to use for your company and employees, and more.
- Look at other positive indicators beyond price. What level of client support and education will the provider give you? What’s their level or trust, expertise, and overall reputation in the marketplace? Can they easily scale with you as you decide to expand and hire more, even in new countries? How healthy is their overall business?
- Compare with other EOR vendors. There are a few Employer of Record providers on the market. Many look pretty comparable at first, which can make your decision feel overwhelming. But as you look under the hood and ask questions, you’ll start to discover what is going to work best for your needs and budget. Ask for the most accurate quotes from each provider that you demo with to ensure you can price compare and scope out all of the fees.
Lastly, just remember why you initially began investigating an employer of record service. By going this route, you are avoiding:
- Large potential costs with opening your own legal entity
- Having to understand the sometimes complicated unique local laws and regulations
- Managing administrative aspects of employing and paying global employees
And you are streamlining the onboarding and offboarding experience, with everything taken care of for you by the EOR. This ensures consistent compliance and avoiding major legal fees if you accidentally misclassify employees.
Why Remofirst?
Remofirst collaborates with existing in-country partners to manage your global workforce management and oversee everything from payroll and benefits to background checks and compliance.
Why choose Remofirst? We are:
- Cost-effective: Our pricing starts at just $199 per person/month.
- Comprehensive: We offer a complete suite of HR solutions.
- Easy to use: Our platform is simple and intuitive.
- Compliant: We ensure you're always operating in accordance with local laws.
Book a demo today to learn more and see why fast-growth startups to Fortune 500 companies choose us.
