I’ve seen a rise in interest in Deel.com, Remote.com, and other EOR (Employee of Record) platforms lately, measured by the emails I get from readers and the many folks who bring it during the consulting calls.

These platforms have risen in popularity given they market themselves as a way to free you from the legal hurdle. But is it always the case?

Sadly, it is not.

First, what is an Employer of Record (EOR)?

Let’s start with the pain these companies are trying to solve.

If you are a company with international talents (can be full-time employees, contractors, freelancers, etc…), it’s challenging to stay 100% compliant in all the countries you’re hiring from.

Since the beginning, these companies avoided the compliance problem by using a simple trick:

1. The company creates a contract explaining that it pays you a gross salary
2. The contractor/freelancer is responsible for any taxes in their country of residence

This created pressure on the freelancers/contractors to figure things out on their own. Most, given how laws are hard to grasp, are working illegally.

This is why I started the blog you’re reading right now! I wanted to help Moroccans navigate the legal labyrinth of working online from Morocco.

But then, even when companies were offloading these decisions to freelancers, it reached a point where it wasn’t enough. Some countries, like India and Spain, have a threshold on how many freelancers you can work with. Past that threshold, you need to create a legal entity and hire those as employees.

It was hard for these companies to create branches everywhere and employ these freelancers. This needs resources, time, and money. And even if they did, the ROI (Return On Investment) is zero, it’s mainly a legal requirement.

But every problem is an opportunity for a business.

What if they can find a local company to “hire” those freelancers and take care of the legal side? While they pay the freelancers + a fee for the service?

Congratulations! You figured out the EOR model. This is how Deel, Remote.com, and other companies operate.

Well, almost!

EOR or not EOR

As a recap, an EOR company is supposed to employ a freelancer to take care of the legal side, while the international company provides the pay + a fee.

But, as an international company, why would I hire these freelancers if I don’t need to? Can’t I use the old model? Just pay them directly and avoid the extra fees.

From a legal perspective, they can. And this created a new niche for these EOR companies. Now they can provide two services:

1. The hiring of freelancers, or the reason why they were created in the first place
2. A proxy to pay your freelancers without hiring them

But what is the added value in this new proxy offering?

It’s simple: ease of use. Instead of paying each freelancer individually with a wire transfer, these companies take care of that. Then, you’ll get one big invoice with all the pay slips so you pay once.

This is where the confusion starts.

You think you’re legal until you realize you’re not

Most of the confusion comes from these two services.

As these companies market themselves as an Employee Of Record, most freelancers think they are working legally given they are using these platforms.

Incorrect. It depends on which service you’re using.

If you’re indeed an employee with a local company, then you’re legal. If you’re considered a freelancer, and these companies are only a proxy for payment, then you’re not working legally.

If this applies to you, then it’s time to learn about your options on this page. You can also get my ebook Make it Legal to learn more in detail.