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EOR Glossary

Plain-English definitions of EOR, payroll, and global employment terms.

A

Assignment Letter

A formal document outlining the terms, compensation, and duration of an employee's international work assignment and how it relates to EOR hiring.

B

Background Check

Pre-employment screening of a candidate's identity, criminal record, employment history, and credentials — with rules that vary significantly by country.

C

Co-Employment

An arrangement where two companies share employer responsibilities for the same worker, most commonly seen in PEO relationships.

Contractor Misclassification

Treating a worker as an independent contractor when the nature of the work relationship qualifies them as an employee under local law.

D

Deemed Employment

A legal concept where a worker classified as a contractor is treated as an employee based on actual working conditions.

Double Taxation

When the same income is taxed by two countries, typically the employee's country of residence and the country where work is performed.

E

Employer of Record

A third-party company that legally employs workers on behalf of another business in countries where that business has no entity.

Entity Setup

The process of incorporating a legal business entity in a foreign country to hire employees, sign contracts, and operate locally.

F

Fixed-Term Contract

An employment agreement with a defined end date, subject to strict renewal limits and conversion rules in most countries.

G

Global Employment Organization (GEO)

A legacy term often used interchangeably with EOR to describe third-party global employment infrastructure.

Global Payroll

The process of paying employees and contractors across multiple countries while complying with each jurisdiction's tax, labor, and reporting requirements.

H

Host Country

The country where an employee physically works and where local employment law, tax obligations, and social security contributions apply.

I

Immigration Compliance

The set of legal requirements employers must meet when hiring foreign nationals, including work permits, visa sponsorship, and right-to-work verification.

J

Job Classification

The categorization of a worker's role that determines their legal employment status, benefit entitlements, and applicable labor protections.

L

Local Employment Contract

An employment agreement that complies with the labor laws of the country where the employee works, covering terms that local law mandates.

M

Mandatory Benefits

Benefits that employers are legally required to provide by the host country's labor law, including paid leave, social security, and health insurance.

N

Non-Compete Agreement

A contractual clause restricting an employee from joining or starting a competing business after leaving, with enforceability that varies widely by country.

O

Offboarding

The process of terminating an employment relationship in compliance with local labor law, including notice periods, severance, and final settlements.

P

Permanent Establishment

A tax concept where a company's activities in a foreign country create enough presence to trigger local corporate tax obligations.

Professional Employer Organization (PEO)

A company that co-employs workers alongside your business, sharing employer responsibilities within a country where you already have an entity.

Q

Qualifying Period

The minimum length of employment before a worker becomes eligible for certain benefits or legal protections, such as unfair dismissal claims.

R

Right to Work

A person's legal entitlement to be employed in a specific country, determined by citizenship, residency status, or a valid work permit.

S

Secondment

A temporary assignment where an employee works for another entity or location while remaining employed by their original employer.

Shadow Payroll

A reporting payroll process used to calculate and report tax/social obligations in a host country when salary is paid elsewhere.

Social Security Totalization Agreement

A bilateral treaty between two countries that prevents workers from paying social security taxes in both countries simultaneously.

Split Payroll

A payroll arrangement where one employee's compensation is divided across two payrolls or jurisdictions.

Statutory Benefits

Employee benefits that are legally required by a country's labor laws, including social security, health insurance, pension contributions, and paid leave.

T

Tax Equalization

A policy where the employer ensures an internationally assigned employee pays the same effective tax rate as they would in their home country.

U

Umbrella Company

A payroll and employment administration model, commonly used for contractors in domestic markets such as the UK.

Unfair Dismissal

A termination that a court or tribunal finds legally unjustified, exposing the employer to reinstatement orders, compensation, or penalties.

V

Visa Sponsorship

The process where an employer applies for work authorization on behalf of a foreign national, taking on legal obligations as the sponsoring entity.

W

Work Permit

A government-issued authorization allowing a foreign national to work legally in a specific country, typically tied to a sponsoring employer.

Y

Year-End Reporting

The mandatory tax filings, social security reconciliations, and employee documentation that employers must submit at the end of each fiscal year.

Z

Zero-Hour Contract

An employment agreement where the employer is not obligated to provide minimum working hours and the worker is not obligated to accept offered work.