The advertised price of an Employer of Record is the service fee, and it is usually the smallest part of what you will actually pay. Understanding the full cost means adding the statutory employer burden for the country, which varies enormously between markets.
What makes up the total
- Gross salary agreed with the employee
- Mandatory employer contributions: social security, pension, health insurance, unemployment and similar
- Accruing statutory liabilities such as severance, gratuity or thirteenth-month pay
- Mandatory benefits, which in some countries include supplementary health cover
- The provider's service fee, charged either as a flat monthly amount or a percentage of salary
- Occasional extras: onboarding, deposits, currency conversion, offboarding
Flat fee versus percentage
A flat monthly fee per employee is predictable and generally favours higher salaries. A percentage of payroll scales with what you pay, which can become expensive for senior hires. Neither is inherently better, but they are not comparable without running your actual salary figures through both.
Questions worth asking
- Is a deposit or advance funding required, and how much?
- Which statutory accruals are held by the provider, and are they refunded if unused?
- What triggers a fee beyond the headline monthly rate?
- How is currency conversion priced?
- What are the notice terms and offboarding costs?
Why it matters when hiring internationally
Employer burden can range from a few percent of salary to well over a third depending on the country, which dwarfs the differences between providers' fees. Comparing providers on fee alone, without modelling the country cost, optimises the smallest variable in the calculation.