Many HR and People leaders understand the challenges of hiring internationally, particularly when entering new markets or recruiting specialised talent. Even fewer realise there’s already a model to make it easier.
What is an Employer of Record?
Businesses are always looking for the best candidate for a role. The problem is, that person may live in another country.
While the hiring need may be straightforward, employing someone internationally is often more complicated. HR teams need to understand whether they can legally employ someone in that market, whether a local entity is required, how payroll, pensions, and benefits will be managed, and which employment laws apply.
For many organisations, not having that employment structure in place can delay hiring decisions, create administrative barriers, or keep them from pursuing strong candidates altogether.
That is where an Employer of Record, or EOR, comes in. An employer of record (EOR) is a company that legally employs a worker on behalf of another business. While the employee works for the client company and reports to its managers, the EOR serves as the legal employer, handling payroll, pensions, benefits, employment contracts, and compliance with local employment laws.
Why did EOR become popular?
While EOR is often associated with startups and fast-growing technology companies, the rise of EOR is closely tied to the way work has changed.
Businesses are expanding into new markets more quickly, remote work has widened access to talent, and skills shortages have pushed organisations to look beyond their traditional hiring locations. As a result, companies increasingly needed a way to employ people globally without establishing a legal entity in every country where they wanted to hire.
This is particularly true in the UK, where domestic recruitment has hit a historic bottleneck. According to the British Chambers of Commerce (BCC) Q1 2026 Quarterly Recruitment Outlook, 71% of UK businesses attempting to recruit reported significant hiring difficulties. At the same time, 73% of UK firms cited labour costs as their single biggest cost pressure, while 58% have kept training and upskilling budgets entirely unchanged. Stuck between rising local wage demands and flatlining training budgets, UK businesses are increasingly looking across borders to find pre-skilled, cost-effective talent.
When to use an EOR
One of the most common use cases for an EOR is hiring talent in a new market. A company may find the ideal candidate in another country but have no legal entity there. Instead of delaying the hire for weeks or months to set up a local entity, or passing on a strong candidate, a company can use an EOR to employ them legally.
Organisations also use an EOR when testing new markets. Instead of committing to the cost and administrative burden of opening a local entity, a business can hire a small team, learn about the market, and decide whether further investment makes sense.
Mergers and acquisitions (M&A) are another scenario where EOR can be useful. Following an acquisition- or as part of a broader effort to simplify a company's structure- organisations may decide to close or consolidate locations. Traditionally, this is a slow, expensive process, but by shifting local staff to an EOR, leadership can instantly switch off costly administrative overhead and bypass time-consuming offboarding, accelerating their path to savings. This approach preserves vital institutional knowledge and ensures seamless business continuity, allowing core operations to run uninterrupted while the physical footprint shrinks.
Access to specialist skills is another major driver. Many organisations are competing for talent in areas such as technology, AI, engineering, cybersecurity, and digital transformation. The skills they need may not be available locally, making cross-border hiring increasingly important.
This digital skills deficit is heavily concentrated. Data from the Department for Science, Innovation and Technology (DSIT) reveals that 97% of UK businesses report at least one AI skills gap, with 57% facing severe technical deficiencies in programming and machine learning. Compounding this, 60% of these expert-level vacancies are clustered exclusively in London and the South East. For regional UK companies, using an EOR is a vital tool for accessing technical talent globally without battling hyper-inflated London salaries.
EOR can also support companies that are building distributed teams across multiple countries while maintaining a consistent employment experience, aligning with broader global mobility shifts. The Boston Consulting Group (BCG) Top Talent Tracker notes that while physical relocation has slowed down globally, virtual talent mobility has surged, meaning top global talent is increasingly looking to work for prestigious British firms via remote, compliant setups rather than uprooting their lives.
EOR can also support workforce agility and resilience. Business priorities can change quickly as market conditions, regulation, technology, and talent availability shift. In that environment, organisations often need more options than hiring, redundancies, or opening and closing offices.
An EOR gives businesses another way to access skills, enter new markets, support distributed teams, or retain employees during periods of change without immediately committing to a permanent local presence.
The benefits go beyond hiring
Speed is the most obvious advantage of EOR. Companies can achieve their business goals faster without spending months establishing a legal entity first. Compliance is another major upside. An EOR helps organisations hire internationally without having to navigate unfamiliar employment laws on their own, whilst ensuring compliance with complex local tax and employment status regulations (such as IR35 rules in the UK).
There are operational benefits as well. Managing contracts, payroll, taxes, pensions, benefits, and employment paperwork across several countries takes time, expertise, and constant attention to changing local laws. An EOR can handle much of that work locally, freeing HR teams to focus on employees rather than administration.
Offboarding is another benefit that is often overlooked. Notice periods, redundancy, dismissal rules, final pay, and employee protections vary by country. An EOR can help ensure notice periods, statutory redundancy payments, final pay, and dismissal requirements are handled in line with local laws.
Choosing the right EOR
Once an organisation decides an EOR is the right approach, the next step is choosing the right provider.
HR and People leaders should consider how easy the platform is to use. The right EOR should reduce friction across the entire employee lifecycle, from onboarding and payroll to contract management, compliance updates and employee support. AI-powered tools can help by surfacing the right information faster, automating repetitive tasks and giving HR teams clearer visibility across markets, so they can spend less time chasing answers and more time supporting their people. Other factors to consider include local expertise, compliance capabilities, payroll and pensions administration, employee support, pricing and coverage in the markets where the business plans to hire.
A strong EOR partner should feel like an extension of the HR team, helping you and your organisation to hire and employ people compliantly while providing a positive experience for supported employees wherever they are.
