Contractor of Record vs Employer of Record
If you're hiring internationally, you've probably heard both "Contractor of Record" (COR) and "Employer of Record" (EOR) thrown around. They sound similar, but they're fundamentally different models with different costs, risks, and use cases.
This guide breaks down the key differences so you can choose the right model for your team.
The core difference
The fundamental distinction comes down to employment status:
Contractor of Record (COR): Manages independent contractors who remain self-employed. The contractor is not your employee—they work for themselves and invoice you for services. The COR handles compliance, contracts, and payments, but the contractor maintains their independent status.
Employer of Record (EOR): Becomes the legal employer of full-time employees on your behalf. The EOR handles payroll, taxes, benefits, and compliance as if they were the employer, while you direct the day-to-day work. The worker is an employee, not a contractor.
Side-by-side comparison
| Factor | Contractor of Record (COR) | Employer of Record (EOR) |
|---|---|---|
| Employment status | Independent contractor (self-employed) | Full-time employee |
| Legal employer | Contractor is self-employed | EOR is the legal employer |
| Taxes | Contractor handles their own taxes | EOR withholds and remits employment taxes |
| Benefits | Contractor provides their own | EOR provides local benefits (health, pension, etc.) |
| Typical cost | $29-$99/month per contractor | $299-$685/month per employee |
| Speed to hire | 1-3 days | 5-14 days |
| Flexibility | High (project-based, hourly, milestone) | Lower (employment contracts, notice periods) |
| Control | Limited (contractor sets schedule) | High (you direct work, set hours) |
| Best for | Project work, specialized skills, flexible teams | Full-time roles, core team members, long-term hires |
Who pays what
With a COR:
- You pay: COR platform fee ($29-$99/month) + contractor's invoice amount
- Contractor pays: Their own income taxes, health insurance, retirement
- Total cost: Contractor rate + small platform fee
With an EOR:
- You pay: EOR platform fee ($299-$685/month) + employee's gross salary + employer taxes + benefits
- EOR pays: Employee net salary, withholds taxes, provides benefits
- Total cost: Salary + 20-40% in taxes/benefits + EOR fee
Example: Hiring a $5,000/month developer in Portugal:
- As contractor via COR: $5,000 + $49 COR fee = $5,049/month
- As employee via EOR: $5,000 + $1,500 taxes/benefits + $599 EOR fee = $7,099/month
The EOR route costs 40% more because you're providing employment benefits and paying employer taxes.
Decision framework
Use an EOR when:
- You need full-time employees with benefits
- The role requires high control and integration
- Local law requires employment status
- You want to offer health insurance, paid leave, etc.
- The person will work exclusively for you
Use a COR (or direct contractor management) when:
- You're hiring for project-based or specialized work
- The person works for multiple clients
- You need flexibility (hourly, milestone, retainer)
- You want to avoid employment overhead
- The contractor prefers to remain independent
Use both when:
- You have a core team (EOR) and project specialists (contractors)
- You're testing a market with contractors before hiring employees
- You need different engagement models for different roles
Misclassification risk
The biggest risk with COR is misclassification: treating someone as a contractor when they should legally be an employee.
Red flags that suggest you need an EOR instead of a COR:
- You set their work hours and schedule
- They work exclusively for you (no other clients)
- You provide equipment and tools
- They're integrated into your team like an employee
- The relationship is indefinite (not project-based)
If these apply, you likely need an EOR, not a COR. Misclassification can result in back taxes, penalties, and legal issues.
The third option: Direct contractor management
If you're working with true independent contractors, you might not need a COR or EOR at all. You can manage contractors directly:
- Issue your own contractor agreements
- Pay directly via Wise, PayPal, or Payoneer
- Track invoices and payments in a simple system
- Keep records for tax time
This is what Kontrable helps with: we organize your contractor relationships, track milestones and payments, and keep an audit trail—without becoming a middleman or charging per-contractor fees.
You pay contractors directly using your own accounts. We just help you stay organized.
Common questions
Can I switch from COR to EOR later?
Yes, but it requires ending the contractor relationship and starting a new employment relationship. The person would need to become your employee (via EOR), which means different terms, benefits, and legal protections.
Do CORs handle compliance?
CORs typically provide contractor agreement templates and help with documentation, but they don't take on employment liability because there's no employment relationship. The contractor remains self-employed.
Which is faster to set up?
COR is much faster (1-3 days) because you're just setting up a contractor relationship. EOR takes longer (5-14 days) because it involves employment contracts, benefits enrollment, and payroll setup.
Can I use Kontrable instead of a COR?
Yes. Kontrable helps you manage contractors directly without a middleman. You issue contracts, track milestones, and pay via your own Wise/PayPal/Payoneer accounts. We organize everything and keep records, but we don't become a COR or hold your money.
Next steps
If you're working with independent contractors and want to avoid COR or EOR fees, Kontrable offers a simpler path: organize contracts, track payments, and keep records—all for $99/month for up to 25 contractors.
No per-contractor fees. No middleman. Just clean contractor management.