Employer of Record in the Nordics

An Employer of Record (EOR) is a provider that becomes the legal employer of personnel working for a client company. The client company manages the employees’ day-to-day work, responsibilities, goals and performance, while the EOR manages the formal employment and agreed employer obligations.

The service enables companies to employ personnel in another country without first establishing their own local legal entity. The EOR provider employs the personnel through its local legal entity and manages employment agreements, payroll, tax withholding, employer contributions, benefits, insurance and agreed compliance obligations.

Using an EOR does not automatically eliminate every legal or tax risk. The client company’s activities and the employee’s role may still create obligations for the client company, including a potential permanent establishment risk, which should be assessed separately.

Services may include:

• Employee benefits administration
• Payroll administration
• Tax withholding and employer reporting
• Preparation and administration of local employment agreements
• General employment administration
• Acting as the legal employer
• Support and coordination relating to visas and work permits
• Communication and coordination with relevant authorities
• Guidance and administrative support regarding notice periods, terminations, severance pay and other employment-related matters

An EOR arrangement normally involves two separate agreements: a service agreement between the client company and the EOR provider, and a local employment agreement between the EOR provider and the employee.

The EOR becomes the legal employer and manages the formal employment, including payroll, tax withholding, employer contributions, benefits, insurance and agreed compliance obligations. The client company continues to manage the employee’s day-to-day work, responsibilities, goals and performance.

An EOR enables a company to hire employees in another country without first establishing its own local legal entity. The EOR provider becomes the employee’s legal employer and takes responsibility for the formal employment, including the employment agreement, payroll administration, tax withholding, employer contributions, benefits, insurance and agreed compliance obligations. The client company continues to manage the employee’s day-to-day work and remains responsible for tasks, goals and performance.

A PEO instead supports companies that already have a local legal entity or are correctly registered as an employer in the country. The client company remains the employee’s legal employer and retains ultimate employer responsibility, while the PEO provider acts as an external HR and payroll function. The service may include payroll administration, tax reporting, pensions, insurance, employee benefits, onboarding and ongoing HR administration.

The key difference is therefore who acts as the legal employer. With an EOR, the EOR provider is the legal employer. With a PEO, the client company remains the legal employer. An EOR is generally suitable for companies that want to begin hiring without their own local legal entity, while a PEO is suitable for companies that already have a local employing entity but need support with HR, payroll and local administration.

Assess your company’s needs and the services required for international recruitment. Create a shortlist of potential EOR providers and refine it by evaluating the pros and cons of each option.

Verify that the EOR has a permanent establishment in Sweden, such as BTR, rather than outsourcing its EOR services to a third party. Relying on a partner-dependent EOR can entail risks, such as limited control over costs and security. Since the EOR handles everything from onboarding to payroll on your company’s behalf, make sure they provide a positive experience for your employees. For example, do they respond quickly to enquiries and offer support when needed? Do they ensure salaries are paid on time? Is their onboarding process engaging and thorough?

Confirm that your EOR offers a competitive and fair compensation and benefits package to help attract and retain top talent. Work with the EOR to develop a benefits package that reflects the employee’s role, skills, experience and local employment regulations. Also ensure that the EOR prioritises security and compliance to protect your intellectual property and company data

The cost of using an EOR can vary depending on factors such as the services required, the location of your employees, and the number of people you plan to hire. Typically, prices range from USD 599 to sometimes over USD 2,000 per employee per month.

If you find EOR providers offering lower prices, make sure they offer the same level of security and compliance as more established providers.

When it comes to pricing, it is best to choose an EOR that offers a clear and fixed price for a comprehensive service package, including onboarding, benefits, taxes, payroll, compliance, and data protection.