Breaking down EOR fees: What you're actually paying for

EOR pricing looks simple at first glance. You see "$49 per employee per month" and think you understand the cost. But that's just the base fee. The real cost includes platform charges, per-payment fees, foreign exchange markups, payment delays, and administrative overhead. For contractors (not employees), these fees add up to thousands of dollars per year—for services you don't need.

Understanding what you're actually paying helps you decide whether an EOR makes sense for your situation.

The fee components

Platform fee (per seat): $49-99 per person per month. This is the base charge for using the EOR platform. It covers payroll processing, benefits administration, compliance monitoring, and platform access. If you have 10 contractors at $49/month, that's $490/month or $5,880/year in platform fees alone. For employees needing payroll and benefits, this is reasonable. For contractors who handle their own taxes and benefits, you're paying for infrastructure you don't use.

Per-payout fees: $3-10 per payment. Some EORs charge additional fees for each payment beyond the monthly platform fee. If you pay contractors twice per month (once at milestone, once at completion), that's 2 fees per contractor per month. For 10 contractors with 2 payments each, that's $100-200 in additional monthly fees just for processing payments.

Foreign exchange markup: 1-3% above mid-market rate. EORs convert your USD or EUR into local currencies for payouts. They typically apply a markup of 1-3% above the actual mid-market exchange rate. This charge is hidden in the currency conversion—you won't see it as a separate line item. For $50,000/month in contractor payments with a 2% markup, that's $1,000 per month or $12,000 per year in hidden fees.

Payment delays: 3-5 business days from when you fund the payment until your contractor receives it. Your money sits in the EOR's account during this time. If you're paying $50,000/month, that's $50,000 in float. At 5% annual interest rates, that represents $208/month in opportunity cost—money you could have put to use elsewhere.

Setup and termination fees: $500-2,000 per country (one-time). Some EORs charge setup fees for each country or region you operate in. If you later terminate the relationship before a minimum contract period (usually 12 months), you might pay exit fees or forfeit prepaid amounts. Adding a new country can cost $1,000-2,000 even if you're only hiring one person there.

Administrative overhead: 2-5 hours per month in time investment. Even with an EOR handling payroll, you still need to approve invoices, review payroll runs, answer contractor questions, and coordinate with support. This administrative time has a cost. For 10 contractors at an average of 3 hours per month, that's $300/month or $3,600/year in internal labor (at $100/hour).

The real cost: A concrete example

Imagine you're managing 10 contractors. You're paying them $50,000 per month total ($5,000 per person average). Here's what the EOR costs add up to:

Through an EOR platform (Deel or Remote): Platform fees run $490 per month ($49 × 10 contractors). Per-payout fees add $100 per month (assuming $5 per payment × 2 payments per contractor). Foreign exchange markup at 2% equals $1,000 per month on $50,000 in payments. Payment delays represent $208/month in opportunity cost. Administrative overhead adds $300/month (3 hours at $100/hour). That totals $2,098 per month or approximately $25,000 per year in fees and costs.

Through direct management (bank transfer or Wise + contractor management software): Contractor management software costs $99/month (flat rate for up to 25 contractors). Wise transfer fees are roughly 0.5% of the transfer amount, equaling $250/month on $50,000 in payments. Administrative overhead drops to about $100/month (1 hour per month) because the process is simpler. That totals $449 per month or approximately $5,400 per year.

The difference: You save $1,649 per month or $19,788 per year by using direct contractor management instead of an EOR. Over 5 years, that's nearly $100,000 in savings.

For most teams with 5-30 contractors, this difference is substantial. The cost difference grows larger as the number of contractors increases.

What you're actually buying with an EOR

EORs provide genuine value—but for a specific use case: hiring employees in countries where you don't have a legal entity. Here's what an EOR provides and what you actually need for contractors:

What EORs handle (for employees): They process payroll with automatic tax withholding. They administer benefits like health insurance and retirement plans. They generate employment contracts and handle local employment compliance. They represent you as the local employer. They manage statutory employer contributions (social security, unemployment insurance, health fund payments). They handle termination procedures and severance according to local law.

What you actually need (for contractors): You need independent contractor agreements that specify scope of work, deliverables, and payment terms. You need to track milestones and invoices. You need to record payment proof and maintain an audit trail. You need to store tax forms (W-9 for US contractors, W-8BEN for international contractors, or local tax documentation). You need to generate 1099 forms at year-end (US only). You need a complete audit trail for accounting and tax purposes.

If you're working with true independent contractors, you don't need payroll processing, benefits administration, or local entity representation. You're simply paying invoices for completed work and maintaining organized records.

Hidden costs and fine print

Many EOR contracts contain terms that add to the total cost. Minimum commitments often lock you in for 12 months. If you decide to leave before the commitment period ends, you pay termination fees or forfeit prepaid amounts. Adding contractors in a new country might trigger per-country setup fees ($500-2,000), even for a single contractor. Currency conversion rates are often locked in when you fund the payment, not when it's actually sent. If exchange rates move against you, you pay more. Premium support services (dedicated account managers, priority support, custom integrations) typically cost extra on top of the base fee.

Understanding these hidden costs helps you calculate the true total cost of ownership.

Common questions about EOR pricing

Why do EORs charge per-seat fees even for contractors?

Most EOR platforms are built for employee hiring. They charge per-seat because they're providing payroll processing, benefits administration, and employment compliance. But contractors don't need these services. They handle their own taxes and benefits. EORs charge the same rate because their pricing model doesn't distinguish between employees and contractors. For contractors, you're overpaying for services you don't use.

What are "local employer costs" in EOR pricing?

Local employer costs are mandatory contributions required by local law—social security, health insurance, pension funds, unemployment insurance, and similar mandatory benefits. These only apply to employees, not contractors. If an EOR is quoting you "local employer costs" for contractors, they're classifying them incorrectly as employees.

Can I negotiate EOR fees?

Sometimes, but usually only at higher volumes. If you're hiring 50+ employees, you might negotiate better rates. For small teams with 5-25 people, you're typically paying standard pricing. This is one reason direct contractor management is attractive—you're not buying expensive infrastructure, so there's less to negotiate.

Should I expect setup fees?

Some EORs include setup costs in the monthly fee. Others charge $500-2,000 per country. Always ask explicitly about setup fees, termination fees, and minimum contract lengths before signing. These terms can significantly affect your total cost.

Why are payment delays longer with EORs?

EORs hold your money for 3-5 business days before sending it to contractors. This isn't malicious—it's because they're managing complex payroll, tax withholding, and regulatory compliance across multiple countries. Direct payment via bank transfer or Wise reaches contractors in 1-2 days because you're sending money directly without intermediaries.

The cost calculation formula

If you want to estimate whether an EOR makes sense for your situation, you can calculate the true cost:

EOR total monthly cost: (Number of contractors × $49-99 platform fee) + (Number of monthly payments × $3-10 per-payment fee) + (Total monthly payout amount × 1-3% FX markup) + (Administrative time in hours × your hourly rate)

Direct management total monthly cost: (Contractor management software, typically $50-150/month) + (Total monthly payout amount × 0.5-1% transfer fee for Wise or bank) + (Administrative time in hours × your hourly rate, usually lower)

Monthly savings: EOR cost minus direct management cost

For most teams with contractors, the direct management approach is significantly cheaper.

When an EOR actually makes financial sense

EORs aren't expensive for no reason. If you're hiring full-time employees who need payroll, benefits, and compliance management, the EOR cost is justified. The per-employee cost ($49-99/month) is reasonable for the services provided.

EORs also make sense if you're hiring employees in many countries and want to avoid setting up subsidiaries (which costs $10,000-50,000 per country). The EOR cost compounds, but setting up multiple subsidiaries is more expensive.

But if you're working with 5-30 independent contractors across different countries, and they handle their own taxes, an EOR is an expensive mismatch. You're paying employee-level pricing for contractor-level work.

The decision comes down to what you're actually hiring: employees or contractors.

The bottom line

EOR pricing looks simple until you add up all the fees. A $49 monthly per-person fee becomes $2,000+ per month when you factor in per-payment charges, foreign exchange markups, payment delays, administrative overhead, and setup fees.

For employees, this cost makes sense. They need payroll, tax withholding, benefits, and local compliance.

For contractors, these fees are completely unnecessary. Contractors handle their own taxes, provide their own benefits, and don't require local entity representation. Using an EOR for contractors means paying employee-level pricing for services you don't need.

Understanding exactly what you're paying for—and what you're actually using—helps you make the right decision. For most teams with contractors, direct management using bank transfers or Wise, combined with contractor management software, costs significantly less while providing the same or better results.