Why choose EOR as a key strategy for 2025

The Employer of Record is a service, by means of which through a company based in the country where the employee is going to work, being able to hire directly the workers in that country according to the local regulations. Hence it is known as a legal employer, because it is in charge only of the legal aspects of the worker. All decisions related to work, tasks, organization, equipment, etc. are agreed between the company and the employee.
With the increase of teleworkers worldwide, more and more companies are resorting to this formula to hiring employees on a delocalized basis. Companies have the possibility of hiring professionals based in other countries, exponentially increasing the pool of candidates for a job, while allowing them to maintain the current team in a delocalized manner. Likewise, it avoids the creation of offices in other countries and allows opening new business opportunities thanks to the presence of workers in these countries.
This opens new opportunities for business expansion, as well as possibilities to introduce new team members operating from different parts of the world. However, this brings some legal challenges when it comes to hiring international employees, as each country has its own local labor policy. However, the solution lies in the Employer of Record Service.
An EOR is a service that takes care of hiring and remunerating one or more permanent employees on behalf of another company.
This allows companies to work legally with employees from a foreign country, without having to create a legal entity locally. Basically, relying on the services of an EOR allows you to hire legally and smoothly any person, anywhere in the world, in full compliance with the labor and social security requirements of each country.

How does an EOR work?

The functioning of an Employer of Record is very simple, and we will explain it with an example:
Tax enforcement and control policies are expected to intensify throughout 2025, with more measures to combat tax evasion, such as controlling company monetary movements and implementing anti-money laundering laws. This will likely include more digital systems for tracking transactions and ensuring compliance with tax obligations. Additionally, international agreements and the possible revision of double taxation treaties may impact companies operating abroad.

2. Leveraging Tax Incentives

El Salvador’s government offers tax incentives to promote investment in strategic sectors. In 2025, these incentives remain key to maximizing tax benefits, including:

“The robotics company Portrait has 50 employees in France.
One of its employees, Maria, has submitted a proposal to the company to telecommute from Madrid. The company, after studying her proposal, has accepted it and Maria, from January 1 of the following year, will work remotely from Spain indefinitely.
The company is analyzing how to make the transfer, what regulations exist and the associated costs. The first thing they have seen is the need to have a head office in Spain, something that has a high cost for them. After discarding this option, the second thing they have evaluated is the possibility of collaborating with an Employer of Record that they have discovered in Spain.
The Employer of Record allows them to have Maria hired and comply with all the obligations in Spain without the need to have a head office. It would be the Employer of Record who would hire Maria and would be in charge of the management of her payroll (payroll payment and declaration to the Spanish authorities).
The conditions of her contract (salary, allowances, working hours, social benefits, etc.) would be agreed between Maria and Portrait.
Maria would not have to have any relationship with her Employer of Record beyond receiving her salary. She would continue to work for Portrait as before, arranging her work directly with them.
As for the Employer of Record, they would be responsible for paying Maria’s social security contributions to the Spanish Social Security, as well as handling any sick leave or other similar issues. To perform this work, the Employer of Record would charge Portrait a commission for its management services.”

Therefore, the EOR, can be responsible for the following personnel operations:

• Comply with all labor, tax and Social Security obligations. Manage payments and taxes thereon.
• Process timesheets.
• Create, maintain and finalize employment contracts.
• Integrate new employees into the company.
• Maintain insurance.
• Perform various background checks.
• Administer benefits and manage workers’ compensation, health insurance.

In which cases choosing to hire the services of EOR is a key strategic decision in 2025:

1. If The company considers it not feasible to open a new headquarters.
   Opening a local legal entity can be expensive and take a long time to start operating. In some countries, it can take months (or years) and cost an investment of over $100,000 USD and up. Unless it makes financial sense for your company, an EOR is a simple and cost-effective solution to hire international workers quickly and easily. For a simple flat fee per worker, you can have fully integrated employees in a matter of days.
2. If you need to hire international workers for non-contract or freelance work (no subordinate relationship).
   Although you can rely on international freelancers, not everything can be considered contract work. If you misclassify employees as self-employed, you expose yourself to fines, penalties or other serious consequences. In these cases, an EOR is an excellent option.
3. If a current employee is relocating for personal or professional reasons and is part of the talent pool.
   With the rise of remote work, employees are less and less tied to a physical location. Today, workers can move freely around the world without having to give up their job. EOR is a quick and easy way to retain employees who want to relocate. With an EOR, you can even hire digital nomads who are constantly traveling from one country to another.
4. If you are concerned about worker classification
   More and more countries are taking active measures against employee misclassification, and companies need to be careful and ethical in classifying employees properly. That said, definitions and application vary from country to country. A reputable EOR will have local experts to help you classify employees and freelancers appropriately to mitigate any risk of misclassification.
5. If you need to protect your Intellectual Property around the world
   When working with international employees and freelancers, your intellectual property may be exposed to new risks if you are not careful. EORs with proprietary entities offer superior IP protection, which can give you peace of mind when expanding your global team.
6. If you do not have experience and detailed knowledge of international employment and tax laws.
   Hiring an employee in a new country entail having to learn how taxes work in that country, as well as adjusting to a completely different set of employment laws. Given how complicated these laws can be, it is unrealistic to expect to navigate them all without outside help. EOR interprets these laws for you and can help you navigate new employment markets with ease.

What does an EOR agreement include?

An EOR agreement usually includes several components:

• The assignment of the worker’s legal employment to the EOR.
• The transfer of the IP created by the employee from the EOR to your company.
• The employee’s salary.
• The employee’s benefits.
• Any mandatory social contributions, such as social security.
• The terms of payment.
• The duration of the agreement.

It is important to note that some EORs may ask you to sign an exclusivity clause binding you to several years with that supplier. These clauses could be very detrimental to your business if the chosen supplier does not meet your expectations, as they will prevent you from switching to another supplier.
That’s why it’s important that you choose a provider that does not include exclusivity clauses or long-term commitments in its EOR agreements, giving you the freedom to choose what’s best for your business.
Your EOR takes care of everything related to your employees’ payroll, including the deduction of taxes and mandatory social contributions, as well as contributions for benefits such as private health insurance. In addition to payroll, EORs also handle benefits, local tax reporting and regulatory compliance.

Conclusion

Choosing to recruit in a foreign country through an Employer of Record is a sound strategic approach for companies looking to expand their global presence without complications and associated costs. By partnering with an EOR, you can unlock the potential of new markets and navigate all the hassles of hiring in a foreign country while ensuring full compliance with local laws.
Exact EOR costs may vary depending on the services and countries involved. In general, EOR services are quoted as a percentage of the salary of the workers you hire in a foreign country and employ through EOR.
Immigration policies and regulations are constantly changing and there is increasing government scrutiny for granting work permits, visas and business activity permits. Complying is the main challenge for multinationals. Skirting immigration regulations can have catastrophic consequences for companies and their employees.
Our team of legal, management and tax experts offer a full range of international employment and global recruitment solutions, including international market entry consulting and tailored services to meet your unique needs, all provided when and where you need them.