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Employer of Record & PEO
Published:
September 23, 2026
Last updated:
When you hire through an Employer of Record (EOR), another organisation becomes your employee's legal employer. For compliance, it is important to know which organisation that is and how directly it answers to local authorities.
Some EORs own a registered entity in the country, while others contract a local partner to act as the employer. Both models are widely used, and both can be compliant. They differ in where accountability sits and how many parties stand between you and the legal employer.
The short answer: In a direct entity model, the EOR's own local company is the legal employer and holds the statutory registrations. In a partner model, a third party holds that role, and the EOR's accountability to you runs through its contract with that partner. The more links in the chain, the more it matters to know who does what.
1. The employment contract. The employee's contract names the legal employer. Local labour law puts statutory duties on that party, including correct wages, leave, working hours, termination procedures and final pay.
2. Statutory registrations. Social insurance, pension and tax filings are made under the legal employer's registration. If a contribution is late or miscalculated, the relevant authority deals with the registered employer.
3. The payment chain. Each handoff adds timing risk and counterparty risk. In a partner model, the EOR's ability to guarantee on-time statutory payments depends on the partner's processes and financial position.
4. Inspections, audits and disputes. When a labour office sends a query or an employee raises a claim, the legal employer responds. How fast and how well depends on whether that party has its own team in the market and how quickly information moves between the parties involved.
5. Employee data. Payroll requires identity documents, bank details and salary information. In a partner model, that data is shared with one more organisation, which adds a party subject to that market's data protection law.
An EOR takes on the legal employer's statutory obligations. Some responsibilities remain with the company directing the work, and the detail varies by market:
These points apply under both models. A clear structure makes it easier to see where each obligation sits.
AYP owns local entities in most major APAC markets. In each of these, AYP's entity is the legal employer, holds the statutory registrations and files directly with the authorities.
We confirm the employing entity for each market before you hire, so the accountability structure for every employee is clear from the start. Compliance across every market we operate in sits with us. Penalties arising from our work are paid by us, never billed to you. Three things make that commitment possible:
If something does go wrong, the sequence is the same in every market: our in-market team responds to the authority, we tell you what happened and what it affects, and we settle the penalty.
Find out more about our EOR services by booking a call with us today: [contact us]
Not by default. Compliance depends on the partner's processes and the EOR's oversight. A direct entity reduces the number of parties involved, which makes accountability simpler to trace.
No. The EOR carries the legal employer's statutory obligations. Responsibilities tied to how you direct the work and to your business activity in the market generally stay with you.
Ask whose name appears on the employment contract and which entity is registered with the local social insurance and tax authorities. A provider should be able to answer this for each country.
The registered legal employer is the party the authority pursues, since filings are made under its registration. Your contract with the EOR determines who bears the cost. Ask whether penalties and interest are absorbed by the provider or passed through on your invoice.
No. Rules differ by market, and several regulate labour dispatch, outsourcing or staffing through licensing requirements and restrictions on the roles that can be filled this way. Confirm the position market by market before you commit to a hiring plan.
Penalties arising from our work are paid by us and never billed to you. It applies to statutory filings, contributions and payroll payments we execute as the legal employer. It does not cover filings made on inaccurate information supplied to us, or your company's own tax position in a market.
