Here’s the dilemma: you want to hire the perfect developer in Dublin. But how do you actually hire them without setting up a legal entity in their country?
This used to mean months of paperwork, lawyers in multiple time zones, and compliance nightmares that made you question if that perfect hire was worth it. Enter the Employer of Record (EOR)—your legal hiring partner who’s already set up shop in the countries where you want to hire.
Here’s the promise: You find the talent. They handle everything else—payroll, benefits, taxes, compliance. No legal entities needed. No six-month setup process. Just “yes, we want to hire them,” and it’s done.
But the EOR market has become crowded with providers who talk a good game yet deliver something entirely different. Some bury costs in contract footnotes. Others treat transparency like a trade secret.
The difference between the right EOR and the wrong one isn’t just about money—though hidden fees can certainly sting. It’s about whether your global expansion accelerates your business or becomes the thing that slows it down. Whether your new hires are compliantly paid on time or your company is hit with employee misclassification penalties.
You know that sinking feeling when a deal looks too good to be true? It usually is. Especially when you’re trusting someone else to handle your payroll and keep you compliant in countries you’ve never operated in.
The real skill isn’t finding the cheapest EOR—it’s knowing which questions to ask before you hand over responsibility for your team. Because once you’ve signed that contract and your people are depending on those paychecks, switching providers gets messy fast.
So how do you spot trouble before it finds you? How do you tell the difference between competitive pricing and corners being cut? That’s what you need to figure out before you commit.
7 Costly EOR risks for employers
The promise of seamless global hiring can quickly turn into a costly lesson when the wrong EOR partner enters the picture. Smart employers know that not all risks are created equal—some drain budgets while others can derail entire expansion plans.
“Trust is everything,” says Francoise Brougher, Pebl’s CEO. “When you work with an Employer of Record, you’re not just outsourcing payroll or benefits. You’re putting your people—your talent, your culture, your global ambitions—in someone else’s hands,” she adds.
With that input in mind, here are seven common risks of working with EORs and how to mitigate them.
1. Hidden fees that erode budget predictability
The “low” monthly rate is attractive until the first invoice arrives loaded with extras. Setup fees, offboarding charges, and foreign exchange markups can transform that budget-friendly solution into a financial surprise.
These costs often hide in contract footnotes under vague language like “additional administrative charges may apply” or “processing fees.” The lack of transparency makes financial planning nearly impossible. Your CFO deserves better than guessing games when forecasting international payroll costs.
2. Rigid or locked-in payment terms
Long-term contracts with auto-renewal clauses can trap growing companies in arrangements that no longer serve their needs. Payment minimums and upfront commitments limit the agility that makes startups competitive in the first place.
When business priorities shift or team sizes fluctuate, inflexible terms become expensive anchors. The EOR that seemed perfect for a five-person team might suffocate a fifty-person operation. Smart contracts should grow with your business, not constrain it.
3. Limited local expertise or legal coverage
Some EOR providers talk a big game about global coverage, but outsource critical functions to third parties with minimal oversight. When labor law changes in Germany or tax requirements shift in Brazil, you need partners with boots on the ground—not middlemen playing telephone.
Inadequate local knowledge puts compliance at risk and creates gaps in employment contracts, benefits administration, and termination procedures. The consequences extend beyond fines. Your reputation in new markets depends on getting these fundamentals right from day one.
4. Lack of data visibility and control
Real-time access to payroll data, employment agreements, and compliance reporting should be standard—not a premium feature. Some EOR providers treat this essential information like classified, leaving employers in operational blind spots.
Without clear visibility into how compliance is managed or where your employment data lives, you’re flying blind. This lack of control becomes especially problematic during audits or when switching providers. Your people data belongs to your business, not locked in someone else’s system.
5. Inability to scale across countries or roles
Limited country coverage forces growing companies into patchwork solutions with multiple EOR providers. Managing payroll across three different platforms defeats the purpose of choosing an EOR in the first place.
Industry specialization matters too. Not all EORs support knowledge workers, remote roles, or contractor-to-employee transitions effectively. Outgrowing your provider creates expensive switching costs and business disruption right when momentum matters most.
6. Poor employee experience
Delayed payments and unclear onboarding processes reflect poorly on your employer brand, not the EOR’s. When your Berlin-based developer calls about missing benefits or your São Paulo sales manager struggles with payroll questions, they see your company name on their employment contract.
Research shows that 42% of employees experiencing a negative work culture consider leaving their jobs, compared to just 9% in positive environments. EOR-related friction can quickly sour the employee experience. Cultural and language support gaps make remote team building even harder than it already is.
7. Data security and privacy vulnerabilities
EOR relationships require sharing sensitive financial, personal, and benefits information across borders. Each additional data touchpoint creates potential security vulnerabilities that cybercriminals love to exploit.
Non-compliance with regional data protection requirements like GDPR can result in fines reaching millions of dollars. Your EOR should maintain certifications like SOC 2 Type 2, ISO27001, and ISO27018—not treat security as an afterthought. When data breaches happen, your company name appears in the headlines, not theirs.
What to look for (and what should send you running)
The good news is that smart evaluation upfront can save you from most EOR headaches down the road. The key lies in asking the right questions before you sign anything—not after the first invoice arrives with surprise charges.
- Ask for complete pricing breakdowns upfront. Don’t accept vague estimates or “starting at” pricing that leaves room for interpretation. Request a detailed breakdown that includes setup costs, monthly fees, foreign exchange rates, payroll processing charges, and termination fees.
- Review contract terms and renewal clauses with legal counsel. Pay special attention to auto-renewal language, minimum commitments, and termination notice periods. The best EOR partnerships offer flexible terms that can adapt as your business evolves.
- Confirm who owns compliance responsibility and how it’s managed. Ask whether they handle compliance directly or outsource to third parties. Request documentation of their compliance monitoring processes and how they stay current with changing labor laws across different countries.
- Understand exactly how your data is stored, accessed, and reported. Demand clarity on data ownership, security certifications, and your ability to export information if you switch providers. Real-time access to payroll data and employment records should be standard, not a premium feature.
- Request case studies and references from companies similar to yours. Speak directly with current clients about their experience, especially around scaling challenges and customer support responsiveness. Ask about any hidden costs or unexpected issues they encountered.
- Test their customer support and response times during the evaluation process. The speed and quality of pre-sales support often predict the post-contract experience. If they’re hard to reach during courtship, imagine the frustration when you need urgent payroll assistance.
- Verify their technology is compatible with your existing HR systems. Seamless data flow between platforms reduces administrative overhead and minimizes errors. Ask for a technical demonstration rather than accepting marketing promises about “easy integration.”
How Pebl mitigates EOR risk
Here’s the thing about Pebl: we tell you what everything costs upfront. No “by the way” charges three months in. No premium fees for basic compliance work. No discovering that benefits administration costs extra after you’ve already made the hire. Just one clear price that actually includes everything you need to employ someone legally.
Plus, our Employer of Record service combines global legal expertise across 185+ countries with flexible, scalable support that adapts to your growth without locking you into rigid contracts or minimum commitments.
According to Brougher, “We take immense pride in helping organizations hire the best talent, fast and fearlessly. We answer your questions accurately, from onboarding to offboarding, when you have to. You’re the boss—we’re your HR/Legal co-pilot.” Get in touch to see how quickly your global hiring can take off.
This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.
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Topic:
Employer of Record
