VA GUIDE SERIES: What Is an Employer of Record? A VA’s Plain-English Guide
13 min read
If you are a Filipino VA, or a client who works with one, you may have heard "Employer of Record" without a clear explanation. This guide answers what an Employer of Record is, how the arrangement works, and how it compares with contracting, so you can decide whether it is worth a conversation.
Key Takeaways
- An Employer of Record (EOR) is a local company that formally employs a worker for a client and handles agreed employment administration. The client usually directs the daily work.
- EOR is one option beside independent contracting and direct employment. None is best for everyone, and classification depends on the real working relationship and the law.
- A change in structure can affect gross pay, take-home pay, contributions and benefits, so compare the whole package.
- Private HMO and other extras are not automatic with EOR. Ask for them in writing.
What is an Employer of Record?
Picture a business owner in Australia who has worked with a Filipino VA for two years and now wants a formal employment relationship. Three questions follow. Who employs the VA in the Philippines? Who runs payroll? Who handles the paperwork? An Employer of Record is one way to answer all three.
The exact split depends on the service agreement and applicable law, and this definition does not settle every question about employment classification. An EOR is also more than a payroll company. It is the worker's formal employer, with the local responsibilities that come with that role.
What an EOR is not:
- The same as hiring an independent contractor.
- Simply a payment intermediary.
- A recruitment agency, although providers may work with recruitment partners.
- A sign that every working relationship should become employment.
- A way around an existing agency contract or other legal obligations.
- An automatic source of private benefits such as HMO.
How does EOR work?
Three parties are involved, and each has a different job. Here is a simplified view of how EOR works in the Philippines.
In words: the client tells the EOR what role it needs and funds the arrangement. The EOR employs the worker, pays them through payroll and handles agreed administration. The worker does the job for the client. Not every decision belongs to just one party. Who decides what depends on the contract, the law and the situation.
Who does what? A simple responsibility comparison
This table shows what typically happens under the agreed arrangement and subject to applicable law. It does not mean the client has no responsibilities after hiring through an EOR, or that an EOR takes on every employment duty.
| Area | Client (typically) | EOR (typically) | Employee |
|---|---|---|---|
| Day-to-day work priorities | Sets them | Not usually involved | Carries them out |
| Employment agreement | Agrees the role and terms | Issues and administers it | Reviews and signs |
| Payroll processing | Funds the agreed cost | Processes payroll | Receives salary |
| Statutory deductions and contributions | Funds employer-side costs | Computes, deducts and remits, subject to law | Has the employee share deducted |
| Leave administration | Plans work coverage | Records leave under the agreement and law | Requests leave |
| HR and employee concerns | Responds as agreed | Usual first contact for employment matters | Raises concerns |
| Performance discussions | Usually leads on work performance | Supports formal steps as agreed | Takes part |
| Changes to salary or working arrangements | Proposes or approves | Documents and applies them | Agrees in writing |
| Offboarding and final pay | Coordinates handover | Administers the process and final pay, subject to law | Completes handover |
Swipe sideways to see every column on a small screen.
EOR vs. independent contractor vs. direct employment
Independent contractor. The client engages a service provider under a contractor arrangement, usually paid by invoice or agreed commercial payments. The legal classification depends on the facts and the law, not on the title in the contract.
EOR employment. The worker is formally employed by the EOR under the agreed arrangement while working with the client. The EOR handles agreed local employment administration.
Direct employment. The client employs the worker through its own Philippine legal entity and manages all the matching employment responsibilities.
| Independent contractor | EOR employment | Direct employment | |
|---|---|---|---|
| Who employs the worker | No employer. Engaged under a service agreement. | The EOR provider, under the agreed arrangement. | The client's own Philippine entity. |
| How pay is administered | Invoices or agreed payments. | Salary through payroll. | Salary through the client's payroll. |
| Local employment admin | Mostly the contractor. | The EOR, within its agreed scope. | The client. |
| Statutory benefits | Usually arranged and paid by the contractor, where applicable. | Handled through payroll, as applicable. | Handled by the client's entity. |
| What the client sets up | An agreement and a payment process. | A service agreement, funding and daily direction. | An entity, government registrations, payroll, filings and HR. |
| What the worker should clarify | Own tax, contributions, notice and benefits. | Gross vs. take-home pay, benefits in writing, term and notice, who handles what. | The same questions, plus who handles HR. |
| May be worth exploring when | The work is genuinely independent and flexibility matters. | The client wants formal employment without its own entity. | The client already has, or plans, a Philippine entity and a larger team. |
Swipe sideways to see every column on a small screen.
Classification depends on the real working relationship. Philippine courts look at who hires, who pays, who can dismiss and who controls how the work is done, and control is treated as the most important factor. So a contract title alone settles nothing. This also means an EOR is not always necessary for a foreign client to engage a Filipino contractor, and contractor arrangements are not all inappropriate. For your own case, ask DOLE or a labor lawyer.
What changes for a Filipino VA under EOR?
Moving from contracting to employment changes how the relationship is documented and paid. Many VAs ask what this looks like in practice. The details depend on your actual employment terms and applicable law, but the usual shape is below.
Employees covered by the law are also entitled to 13th-month pay, which in the private sector applies to rank-and-file employees who worked at least one month in the year.
You receive an agreement setting out your role, pay and responsibilities, not just a service agreement.
Salary arrives through payroll, with applicable statutory deductions and contributions to SSS, PhilHealth and Pag-IBIG.
Employment records and leave are administered under your agreement and the law, and HR can answer employment questions.
Pay changes, role changes and the end of the relationship follow a documented process, including final pay.
Compare the whole arrangement, not only gross salary. Employment can raise, lower or leave unchanged your take-home pay, because contributions, tax treatment and benefits all change. Gross compensation may be set differently too. For tax questions, check the BIR or a tax professional.
What about HMO, healthcare and other benefits?
Two things often get mixed up. Statutory benefits are required for covered employees and include SSS, PhilHealth, Pag-IBIG and 13th-month pay. Private benefits such as HMO, a healthcare allowance, insurance or equipment exist only if they are offered and agreed.
EOR employment involves the statutory side within the arrangement. It does not guarantee private HMO. Ask for the benefit details, eligibility conditions, who pays what and the terms in writing.
For plan options, start with our HMO guide for Filipino VAs. Then read Prepaid vs. Individual HMO: what to check before paying, and see how to ask your client for HMO benefits. Choosing EOR does not by itself solve a VA's healthcare needs.
Is EOR right for me? A quick self-check
Now that you know the three arrangements, answer five questions to see a sensible next step.
How much does EOR cost?
The total cost is more than the service fee. It generally combines the agreed salary, employer-side statutory costs, the EOR's service fee, any agreed benefits and other agreed charges.
For reference, Zero-Ten Park's service page lists a standard rate of US$230 per employee per month, separate from salary and statutory contributions. Its wiki also describes three pre-funded accounts and a standard 12-month commitment period. Rates and terms change, so confirm the current figures before deciding.
For clients: ask any provider for a written breakdown showing:
- Gross salary.
- Employer-side statutory costs, where applicable.
- The EOR service fee.
- Any additional benefits and other agreed charges.
- How payroll and billing are administered.
For VAs: gross salary, take-home pay and the client's total employment cost are three different figures. In the provider's worked example, a ₱40,000 gross salary comes to about ₱34,432 take-home, while the client's recurring monthly total is about ₱61,892, before a one-time initial invoice. These are illustrative 2026 estimates. Real figures vary with salary and contribution tables.
Want to see how the numbers would look for one hire? You can book a short consultation, or simply keep reading.
Book a consultationHow to bring up EOR with your client
Raise it as a question, not a request. Choose a calm moment, say what you are curious about and make clear you are happy to continue as you are. There is no need to suggest your client has done anything wrong.
Before you send anything, review your contract and any agency terms, because some agency agreements limit direct arrangements. If that applies, read our guide to working directly with a client first.
ACurious and low-pressure (chat)
Why it works: It is short, makes no claims about the current arrangement and leaves the choice open.
BLong-term working relationship (email)
Why it works: It invites a conversation, names EOR as one option and promises nothing.
If healthcare is your main reason for asking, see how to ask your client for HMO benefits, which has more sample messages.
How Zero-Ten Park fits into the picture
Zero-Ten Park is a Cebu co-working space and a Philippine EOR provider. Its published scope covers employee onboarding and legal employment, payroll computation and tax filing, government statutory benefit compliance and HR support, subject to the current service agreement. That is how this provider works. Other providers may differ, so compare scope in writing.
- No guarantee of compliance in every situation, and no removal of all employer responsibilities or business risk.
- No automatic HMO or other extra benefits. Those are agreed case by case.
- No power to override an existing agency contract.
- No guaranteed cost saving or tax outcome.
The right arrangement depends on the client's needs, the worker's circumstances, the existing contract and applicable law. To learn more, see the EOR service page and the EOR wiki. If your team also wants a place to work in the Philippines, the EOR + Workspace option may be relevant. Otherwise, you can skip it.
Frequently asked questions
What is an Employer of Record in simple terms?
An Employer of Record (EOR) is a company that formally employs a worker on behalf of another business and handles agreed local employment tasks, such as the employment agreement, payroll and statutory contributions. The business directs the daily work. The exact split depends on the service agreement and applicable law.
Is an EOR the same as a recruitment agency or payroll company?
No. A recruitment agency finds candidates, and a payroll company processes pay for someone else's employees. An EOR is the formal employer, so it also issues the employment agreement and handles agreed local employment administration. Some EOR providers work alongside recruitment partners, so check what each provider offers.
Does an EOR automatically provide HMO coverage?
No. EOR employment involves statutory benefits under the arrangement and applicable law, but private HMO is separate. Zero-Ten Park's published EOR scope does not list HMO as automatic, so any HMO or other extra benefit has to be agreed and confirmed in writing.
Can a Filipino VA ask their client to switch from contracting to EOR employment?
Yes, you can raise it as a conversation, as long as you accept that the answer may be no. Review your contract first, including any agency terms, and compare take-home pay, benefits and obligations before changing anything. Staying an independent contractor is also a valid choice.
Does an international client need to establish a Philippine company to hire through an EOR?
In an EOR arrangement the worker is employed by the provider's local entity, so the client does not need its own Philippine entity for that employment, according to Zero-Ten Park's published model. Whether a particular overseas business needs any other local registration depends on its facts and the law, so ask a qualified professional.
One option, not the only one
EOR is one way to set up a formal employment relationship in the Philippines without the client necessarily operating through its own Philippine entity. Whether it fits depends on the client's goals, the actual working arrangement, costs, contract obligations and applicable law.
VAs: understand your options, then start a thoughtful conversation with your client. Clients: if you are planning on hiring employees in the Philippines, see whether a local employment partner fits your plans.
Sources
Reviewed October 27, 2026. Rules, rates and fees change, so verify with the official sources.
- Zero-Ten Park, Employer of Record service page (last modified September 2, 2026): EOR model, scope and listed standard rate.
- Zero-Ten Park, EOR wiki (last modified September 4, 2026): who directs the work, statutory benefits administered, funds, commitment period and worked cost example.
- Supreme Court of the Philippines E-Library, decision applying the four-fold test: elements of an employer-employee relationship, with control as the most important.
- Social Security System, official website, and PTV News report on SSS employer obligations under RA 11199: registration, deduction and remittance of contributions.
- PhilHealth, official website, and Pag-IBIG Fund, official website: current contribution rules.
- Philippine News Agency, report on DOLE Labor Advisory No. 25, series of 2023: coverage and computation of 13th-month pay.
- Bureau of Internal Revenue, official website, for tax treatment of compensation and professional income.
- Department of Labor and Employment, official website, for guidance on employment relationships and labor standards.
General educational information only. Not legal, tax, financial or insurance advice. The appropriate employment arrangement depends on the facts and applicable law.
