Glossary

The vocabulary of Employer of Record contracts and international payroll, without the marketing gloss.

A

Annual leave accrual: The rate at which paid holiday builds up over the year, and the rules for carrying it over or paying it out on exit.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first
At-will employment: A doctrine allowing dismissal without cause, essentially unique to parts of the United States. Assume it does not apply anywhere else.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs

B

Benefits broker: An intermediary arranging insured benefits locally. EORs often use one, and the margin may sit inside your quoted cost.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework

C

Collective bargaining agreement: A sector or company level agreement that sets minimum pay, hours and conditions. It can override the contract and is easy to miss when hiring abroad.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs India
Cut-off date: The deadline for submitting variable pay data into a payroll run. Data that misses it usually lands in the next cycle rather than triggering a rerun.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist Philippines
Contractor: A self-employed individual or company engaged under a services contract. The engagement is only defensible if the reality matches the paperwork.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework
Contractor of Record: A service that contracts with your contractors, runs classification checks and handles invoicing and payment. It is not employment.; Owned entity or partner network: the question to ask first Employee misclassification risk explained
Co-employment: An arrangement where two organisations share employer responsibilities for the same worker, common to PEO models.; Owned entity or partner network: the question to ask first Employee misclassification risk explained India
Country risk rating: An internal assessment of how difficult and costly employment administration and termination are in a given country.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first

D

Deposit: Funds held by the provider to cover a payroll run or severance exposure. It affects working capital and is frequently overlooked in cost comparisons.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework
Data processing agreement: Contract terms governing how a provider handles personal data on your instruction, including transfers, retention and sub-processors.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs

E

Employer of Record: A company that legally employs staff in a country on your behalf, running contracts, payroll, tax and statutory benefits, while you direct the day to day work and pay a service fee.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework India
Employer burden: The statutory cost a company pays on top of gross salary, including pension, health and unemployment contributions. It typically ranges widely by country.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist
Entity transfer: Moving employees from an EOR to your own newly incorporated entity, preserving tenure and terms. Contract terms determine how painful it is.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs
Employment contract: The binding agreement between the legal employer and the employee, setting role, pay, hours, leave and termination terms.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs India
Employee of record file: The statutory documentation set an employer must hold, including contract, identity, right to work and payroll records.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs

F

FX markup: The margin a provider adds to the currency conversion rate when funding payroll in another currency. It is a real cost and often undisclosed.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first

G

Gross to net: The calculation that turns contractual gross pay into take-home pay after income tax withholding, employee social contributions and any voluntary deductions.; Owned entity or partner network: the question to ask first Employee misclassification risk explained Philippines
GDPR: The European data protection regulation governing personal data of people in the EU and UK equivalent regime, with strict rules on transfers.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist India
Gross salary: The contractual pay before employee deductions and before employer contributions are added. It is the base for most statutory calculations.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs Philippines
Global payroll: Consolidated payroll processing across countries for staff employed by your own entities. It is not the same as an EOR.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist Philippines

I

IP assignment: A contractual mechanism transferring intellectual property created by an employee to the client company. It must be valid under local law.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist
ISO 27001: An international standard for information security management systems. Certification means an audited management system, not a guarantee.; Owned entity or partner network: the question to ask first Employee misclassification risk explained
Invoice cycle: When and how the provider bills salary, contributions and fees. Advance billing has a working capital cost worth pricing in.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first Philippines
Indemnity: A contractual promise to cover defined losses. In EOR contracts the split of employment liability indemnities is the clause to read first.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework

M

Misclassification: Treating someone as a contractor when the working relationship meets the local test for employment. It exposes the hiring company to back taxes, contributions and penalties.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs
Minimum term: A contractual commitment to keep a service running for a set period. Twelve months is common in enterprise EOR contracts.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist Philippines

N

Notice period: The time between notifying an employee of termination and the end of employment. Statutory minimums usually rise with length of service.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework

O

Owned entity: A legal entity that the EOR itself controls and uses to employ your staff in that country. It keeps liability and process inside one organisation.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first
Off-cycle payment: A payment made outside the normal payroll run, often to fix an error or pay a leaver. Many providers charge for it.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs
Off-boarding fee: A charge applied when an employee leaves, sometimes in addition to statutory severance that you also fund.; Owned entity or partner network: the question to ask first Employee misclassification risk explained India
Overtime premium: The uplifted rate payable for hours beyond the standard week, or for work at night, on rest days or on public holidays.; Owned entity or partner network: the question to ask first Employee misclassification risk explained Philippines

P

Professional Employer Organisation: A co-employment arrangement, usually domestic, where the provider shares employer duties with your existing entity. It does not remove the need for a local entity.; Owned entity or partner network: the question to ask first Employee misclassification risk explained Philippines
Permanent establishment: A taxable presence a company creates in a country through its activity there. It can trigger corporate tax registration and filing obligations regardless of the employment route used.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist
Partner entity: A third-party local employer the EOR contracts with to employ your staff. It adds a link to the chain and usually reduces control over process and data.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework India
Probation period: An initial period with shorter notice and simpler dismissal. It must be set in the contract from the start and is capped by statute in most countries.; Owned entity or partner network: the question to ask first Employee misclassification risk explained
Payroll cycle: The recurring schedule on which employees are paid, commonly monthly or twice monthly, with a fixed data cut-off before each run.; Owned entity or partner network: the question to ask first Employee misclassification risk explained India
Parental leave: Statutory leave around the birth or adoption of a child. Funding is often split between the state and the employer.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs Philippines
Public holiday: A statutory non-working day. Counts vary by region within a country, which affects cost and coverage planning.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework India
Payroll funding: The cash you must place with the provider before each run. Timing rules determine how early your money leaves your account.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs India
Payslip: The statutory statement of pay and deductions issued to the employee. Format and language requirements are set locally.; Owned entity or partner network: the question to ask first Employee misclassification risk explained

R

Right to work: The legal entitlement of an individual to work in a country. It must be verified before employment starts and is documented by the employer.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first India
Redundancy: Termination because a role is no longer needed. Most countries require selection criteria, consultation and statutory payments.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework India
Restrictive covenant: A post-employment restriction such as non-compete or non-solicit. Enforceability varies sharply and some countries require paid compensation.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist

S

Severance: A payment due on termination, usually calculated on tenure and final salary. In many countries it is statutory and cannot be contracted away.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first Philippines
Statutory benefit: A benefit required by law, such as pension enrolment, paid leave or medical cover. It is distinct from supplementary benefits offered to compete for talent.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first Philippines
Supplementary benefit: A non-mandatory benefit such as private medical cover, life assurance or a meal allowance, offered to match local market expectations.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework
Sponsorship licence: Official permission for an employer to sponsor foreign workers. Not every EOR entity holds one, which limits who they can hire.; Owned entity or partner network: the question to ask first Employee misclassification risk explained
Sub-processor: A third party a provider uses to process personal data. In partner-model EOR arrangements, the local employer is one.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first India
SOC 2: An audit report on a service organisation's controls for security and related criteria. It indicates process maturity, not legal compliance.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework Philippines
Statutory sick pay: Pay an employer must provide during illness, usually for a capped period and at a defined rate, sometimes reclaimable from the state.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist India
Settlement agreement: A contract ending employment with agreed terms and a waiver of claims. It often requires independent legal advice to be valid.; Owned entity or partner network: the question to ask first Employee misclassification risk explained Philippines
Statutory filing: Periodic reports submitted to tax and social security authorities. In EOR arrangements these are filed under the employer's registrations.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist
Service agreement: The commercial contract between your company and the EOR, covering fees, liability, indemnities, data terms and exit.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first Philippines

T

Thirteenth month: A mandatory or customary additional month of salary, usually paid at year end or split across the year. It is a real cost, not a bonus you can withdraw.; Employee misclassification risk explained How EOR pricing really works, including the hidden costs India
Total employer cost: Gross salary plus employer contributions plus mandatory allowances plus the provider fee. It is the only number worth comparing across countries.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first

U

Unfair dismissal: A claim that a termination lacked a lawful reason or a fair process. Remedies can include reinstatement as well as compensation.; The 25-point EOR due diligence checklist Owned entity or partner network: the question to ask first

W

Works council: An elected body representing employees at an establishment. Where one exists, it has consultation or co-determination rights over certain employment decisions.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist
Work permit: Government authorisation for a foreign national to work in a country, usually tied to a sponsoring employer holding a licence.; How EOR pricing really works, including the hidden costs EOR vs setting up an entity: a decision framework Philippines
Working time directive: Rules capping weekly hours and mandating rest periods. Opt-outs exist in some jurisdictions but are tightly framed.; EOR vs setting up an entity: a decision framework The 25-point EOR due diligence checklist