How to Avoid Hidden EOR Fees 

Posted on  Feb 06, 24 by Irina Dzhambazova

There are a few critical signs to look out for that indicate whether a prospective Employer of Record (EOR) is one that you can trust. And none is more representative than how they price and discuss their services.  

It can be difficult to put an exact price on the value of compliant, collaborative, and effective employment support. However, the fees EORs offer can vary widely from provider to provider — and are particularly dependent on your exact needs and demands. Factors like the number of employees you have, the range of regions you want to employ in, or any extra services you may require may have a large impact on how much you can expect to invest in the right EOR.

With that said, these prices should be upfront and clear to you from the outset. Otherwise, you may risk facing larger problems down the road that go beyond paying too much (or too little) for your international employment support. Here, we’re going to explain the costs of hidden or unexpected EOR fees, how you can avoid them, and the high value you receive from a transparently priced provider.

Understand what you’re paying for in the first place

At a base level, an EOR plays a major role in facilitating your business’ internal expansion by handling international employment and managing employees in countries where you don’t have a legal entity. However, there are a whole host of different services that your EOR is responsible for.

Before we go into how you can uncover hidden fees from an EOR, let’s take a look at the most common types of services that these charges often go towards.

What you can expect to pay for

There’s a variety of different fee structures that tend to be used by EOR providers. They typically range between offering:

  • A percentage of the salary of each employee they’re managing
  • A flat fee, regardless of the employee’s salary
  • Some combination of both

While multiple components go into the full scope of what an EOR can do for your business, standard services you can expect to see within a base fee include:

  • Employee onboarding: Handling the administrative process of bringing a new employee into your business, including contract management and ensuring compliance with local labour laws.
  • Payroll processing: Managing the calculation and distribution of employee salaries, including withholding taxes and other statutory deductions as per local regulations.
  • Tax administration: Calculating and withholding the correct amount of taxes from employee salaries and remitting these to the appropriate local tax authorities.
  • Basic HR services: Providing standard human resources support like managing employee records, overseeing time and attendance, and ensuring compliance with local employment laws.
  • Benefits management: Administering statutory benefits that are required by local law, such as health insurance, pension contributions, and other mandatory employee benefits — as well as those under your business’ specific benefits scheme.
  • Legal compliance: Ensuring that employment practices comply with local labour laws and regulations, which can include contract terms, working hours, minimum wage requirements, and termination procedures.
  • Contract management: Providing and managing employment contracts that comply with local laws, including any necessary amendments or updates to these contracts.

It’s important to note that these are essential services and don’t necessarily cover the more advanced support you may need out of your EOR. 

Other areas you may need ample, expert-led guidance on include visa and immigration support, employee termination assistance, specialised tax advice, and international payroll guidance.

This is where the dilemma of additional services comes into play — and often where fees end up getting hidden.

Where “hidden” fees come from

In a nutshell, hidden fees come about when an EOR isn’t being entirely transparent or proactive about its pricing models. For example, some providers charge different fees for different countries, which can be difficult to keep track of. Others stick to describing their fees in percentages, which aren’t always clear. 

This also ties into certain tasks that an EOR may deem additional or “ad-hoc” to their standard offers, like currency conversion fees, expedited service requests, or complex regulatory compliance issues in certain jurisdictions. These sorts of functions can easily build up and lead to you paying more than you would have estimated when you partnered with the EOR to begin with.

Let’s break down some common scenarios where this could happen (including instances we’ve seen for ourselves in the EOR space):

  • Hidden fees in currency exchange: Some EOR providers charge hidden fees through exchange rates, despite claiming otherwise. For example, a company invoicing in US dollars but paying employees in Euros would lead to two invoices in a month due to exchange rate fluctuations, complicating financial reconciliation for clients.
  • Tax incentives and processing fees: In countries like the Netherlands, which offer tax incentives for highly-skilled workers, some EORs charge for processing related forms, a service that typically requires minimal effort.
  • Immigration costs: EORs may add a margin to immigration-related costs. For instance, they might quote a higher price for UK immigration without providing a cost breakdown, suggesting the actual cost is lower than quoted.
  • Mandatory benefits misrepresentation: Some EORs add non-mandatory benefits as mandatory, misleading clients about employment costs. Examples include meal allowances in Portugal, which are not always obligatory.
  • Social charges and salary misunderstandings: Companies new to using EORs often face surprises due to unexplained social charges on top of employee gross salaries, significantly increasing employment costs.
  • Additional processing fees: EORs might charge extra for processing expenses, incorrectly apply social charges to business expenses, or mismanage benefits in kind.
  • Penalties for your EOR’s mistakes: Clients sometimes bear the cost of penalties due to the EOR's miscalculations in social charges.
  • Offboarding and transfer fees: EORs may charge for offboarding employees or transferring them to another entity or your entity. Minimum commitment periods and associated fees for early contract termination are also common.
  • Seat-based charges: Some EORs charge per 'seat', similar to software subscriptions, where clients continue to pay for a seat even if an employee leaves unless the seat is deactivated.
  • Skimming and mislabeling costs: EORs might add extra fees under vague labels like 'professional association' or 'overhead', which are not actual employer costs but are presented as such.
  • Compliance protection fees: Some EORs offer a compliance protection fee, which might only cover legal expenses and not other costs like reputational damage or court costs.

And that’s just the tip of the iceberg. There are multiple ways you risk being overcharged when you partner with an EOR that isn’t fully clear about how they charge their services.

Questions to ask and actions to take to uncover hidden fees 

Thorough research and interviewing are incredibly important before you choose an EOR. You’re never going to know how truly effective a provider is until you’re actively working with them — so you want to make sure that you’re doing your due diligence.

That’s especially important to do when you’re trying to understand the full scope of services and associated costs of working with an EOR. Asking your potential EOR clear, direct questions on their fees, services, and support ensures that you won’t have any surprises after signing the contract.

So essential questions you should be asking include:

  • Scope of services: "Can you provide a detailed breakdown of what services are included in your base fee and what services are considered additional?"
  • Fee structure: "How is your fee structure determined? Is it a flat fee, a percentage of employee salaries, or based on other factors?"
  • Additional costs: "Are there any circumstances under which I might incur additional fees? Can you provide examples of such situations?"
  • Contract terms: "What are the terms of the contract, particularly regarding termination or changes in service needs? Are there any penalties or fees for early termination?"

In an ideal world, any EOR you pose the above questions to will be ready with clear-cut answers. But, there are a host of red flags to watch out for if you end up receiving:

  • Vague responses: Watch out for providers that aren’t clear about specific fee details or give evasive answers to your direct questions about costs.
  • Lack of customisation: A one-size-fits-all approach may sound transparent… but it more likely points to an EOR that won’t consider your business’s specific needs and provide adequate support.
  • Overpromising: Be especially careful if an EOR is promising you exceptionally low fees or services that seem too good to be true. It could be a warning sign that you’re partnering with an EOR that:
    • Isn’t operating compliantly.
    • Doesn’t have high expertise on international employment best practices.
    • May tie you to an annual or biannual contract with no ability to pull out of it in the event you’re unhappy with their services.

The long-term implications of hidden fees

With the above in mind, it’s important to remember that an EOR is ultimately responsible for providing you support and clarity — rather than having to make you work for it. If you’re not immediately clear on an EOR’s pricing from their website alone, then it’s a glaring sign that they may not be the right one for your business.

At Boundless, for example, we developed a menu of services to give our clients a total picture of our ranging fees. Experience taught us that our different clients will have different needs and it would only make sense to package those differing services. We also understood that, as our clients’ team sizes grow, so do the needs and risks attached. So, while we offer advice based on the number of people that will be employed upon signing, we eliminate the need for a client to tie themselves to a specific package that’s purely based on size by also offering add-on services — including consultations.

Prioritise an EOR that’s transparent

Uncovering and avoiding hidden EOR costs shouldn’t be a job that sits solely with you. The right EOR will take responsibility for giving you pricing quotes that are:

  • Clearly delineated by tiers, packages, or a menu of services
  • Transparently priced and built to your business needs
  • Comprehensive and encompass high-quality standards in compliance and international employment

If there’s one role that should sit with you, it’s to seek out a dependable and unambiguous EOR to partner with. And if you want an example of what an upfront fee model looks like, take a look at our recently revamped Pricing structure.
If you have any more questions on the world of EORs (pricing-related or not!), don’t hesitate to book a chat.

The making available of information to you on this site by Boundless shall not create a legal, confidential or other relationship between you and Boundless and does not constitute the provision of legal, tax, commercial or other professional advice by Boundless. You acknowledge and agree that any information on this site has not been prepared with your specific circumstances in mind, may not be suitable for use in your business, and does not constitute advice intended for reliance. You assume all risk and liability that may result from any such reliance on the information and you should seek independent advice from a lawyer or tax professional in the relevant jurisdiction(s) before doing so.

Written by Irina Dzhambazova

Irina Dzhambazova is the editor of this publication and leads many of the marketing efforts behind Boundless. Previously she crafted stories at SaaStock and Dublin Globe and travelled the world capturing case studies of companies using the Kanban Method. Throughout this experience, she was almost always "the remote worker" and knows a thing or two about the potential and challenges of this way of working.

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