EOR Costs Across Countries: Model the Total Cost of a Hire

Separate the cost into five layers, and ask for each one on every quote:

• Gross salary: what the employee is paid, usually in local currency.
• Employer contributions: social security, pension, health and unemployment charges that the employer pays on top of salary. Rates and salary caps differ widely across countries.
• Mandatory extras: items the country requires, such as an extra month of salary paid in the year, holiday pay, allowances or a required pension contribution.
• Provider fee: the monthly amount for the employer-of-record service, and any one-time onboarding or termination fees.
• Currency and payment costs: exchange rates and transfer fees if you pay in a different currency from the salary.

Some providers quote fee and salary together and let you see the statutory costs only on the invoice. Ask for the breakdown before signing.

Use one sheet with a column per country and these rows:

1. Annual gross salary in local currency and in your reporting currency.
2. Employer contribution rate or amount, from the provider's country guide, confirmed against government sources.
3. Mandatory extra payments, as an annual amount.
4. Paid leave and public holidays, since paid time off is a cost even if not a separate charge.
5. Provider fee times twelve, plus any setup fee.
6. Estimated severance or notice costs, as a reserve, if the provider passes them through.
7. Total annual cost and cost as a multiple of gross salary.

The multiple in the last row is the number to compare across countries and against a local entity or contractor arrangement. Update it whenever rates or exchange rates change materially.

Use hypothetical figures to see how the layers add up. Say you're considering an employee at $100,000 a year in salary, in a country where employer contributions and mandatory extras together add 20 percent of salary, and the provider's fee is $600 a month.

In this example, contributions and extras come to $20,000, and the fee is $7,200 across the year, so the total is $127,200. That's a multiple of about 1.27 times salary. Suppose the same role in another country carries a 35 percent burden and the same fee, the total would be $142,200. The fee is the same, but the difference comes from statutory costs.

Every figure above is made up for illustration. Replace them with current quotes and confirm the statutory numbers with the provider and, for larger commitments, a local advisor.

Countries fund pensions, healthcare and unemployment differently. Some put more on employers through payroll contributions, some fund more through general taxation, and some require extra payments such as an additional month of salary each year. Notice periods and severance rules also differ, which affects what you'd owe if the role ends.

Check the following when you compare countries:

• Whether social contributions have a salary cap, which changes the burden for high earners.
• Whether the country requires a mandatory extra month or a holiday bonus.
• What notice and severance rules apply, and whether the provider bills them when they occur or as an accrual.
• Whether there are mandatory benefits, such as private health cover or meal allowances, by local law or collective agreement.

Make sure the quote states which of these are included, and whether the numbers are estimates or fixed.

An EOR fits when you want to hire one or a few people in a country quickly, without setting up a local entity. It's a service you pay for each month, so the calculation shifts as headcount grows: at some point, a local entity may cost less than paying the provider's fee for many employees, though it brings its own setup and compliance work.

Contractors are cheaper in structure but carry misclassification risk if the person works like an employee. Screen each person for misclassification risk before choosing that route. For related comparisons, read this EOR provider comparison for tech startups, how to hire in another country without an entity, and handling multi-country payroll consolidations. To compare with domestic options, see PEO cost per employee, and for full hiring cost see the cost per hire calculator.