US startups should compare employer of record services on the conversion itself: what the person costs as an employee, how much cash the provider holds before payday, how the switch date and IP are handled, and what leaving costs once you open your own entity. Past misclassification risk stays with you whichever provider you choose.
TL;DR
- An employer of record employs the converted contractor from the conversion date onward. Exposure from the contractor period stays with the company that engaged them.
- At the senior engineer averages in Kleos's 2026 salary data, employer contributions add nothing in Armenia, about $15,400 a year in Poland, $21,100 in Spain and $14,300 in Brazil.
- Most providers ask for a refundable deposit and fund payroll in advance: Remote invoices on the first business day of the month, Multiplier by the 7th, RemoFirst around the 15th.
- Kleos pays the employee first and invoices after, with 15 days to settle, from $200 a month per employee depending on country.
Provider terms checked on vendor pages, October 2026.
How should US startups compare employer of record services for contractor conversion?
Give every provider the same person, country, salary and start date, then compare seven things: the full employer cost, the deposit, when payroll must be funded, how the conversion is handled, what leaving costs, who carries an employment dispute, and who supports you. The monthly fee is one line in the first of these.
| What to compare | What to ask the provider | Why it matters at conversion |
|---|
| Full employer cost | Salary, employer contributions, benefits, your fee and FX, as one number for this person | Contributions often cost more than the fee itself |
| Deposit | How much, when, and when is it refunded? | It leaves your account before the first payday |
| Payroll funding | Do we pay before payday or after? | Prefunding ties up a month of payroll every month |
| Conversion mechanics | Can the contractor move to employment without onboarding again? | A clumsy switch costs you the person you are trying to keep |
| Exit terms | Minimum term, notice, and what happens if we open our own entity | Lock-in matters most to companies that plan to grow |
| Liability | Who carries an employment dispute, and what does the contract pass back to us? | The legal employer faces the claim; the agreement decides who pays |
| Support | A named person, or a ticket queue? | Conversion questions are specific to one person and one country |
On these seven points, Kleos publishes an all-in cost before the offer, a deposit refundable in full, payroll funded after payday, conversion without re-onboarding, no minimum term and a named support manager. As the legal employer, Kleos states that if an employment dispute arises, the contract sits with it, and so does the exposure.
Ask every provider for its answers in writing, for the exact country and salary. A quote built on an average does not match the first invoice.
Does converting a contractor through an EOR remove past misclassification risk?
No. An employer of record employs the person from the conversion date onward. Any exposure from the contractor period, such as unpaid employment taxes or employee rights the person should have had, stays with the company that engaged them.
For US federal employment tax, the IRS looks at the relationship rather than the label. Its common-law test groups the evidence into three categories: behavioral control, financial control and the relationship of the parties. The IRS states that a written contract calling the worker a contractor is not enough on its own to decide status. (As of October 2026.)
Outside the US, classification tests differ by country, but most look at how the work actually runs. Before converting, ask counsel whether the contractor period itself carries exposure, and settle that separately from choosing a provider. Global contractor management software covers how classification is tested.
How much more does a contractor cost as an employee?
The difference is employer contributions plus the EOR fee. For a senior software engineer at the averages in Kleos's 2026 salary data, contributions add nothing in Armenia, about $15,400 a year in Poland, $21,100 in Spain and $14,300 in Brazil, before the provider's fee.
| Country | Average senior engineer salary | Employer contributions | Extra cost per year as an employee |
|---|
| Armenia | $64,800 | None | $0 |
| United Kingdom | $80,800 | About 14% | $11,100 |
| Poland | $86,300 | About 18% | $15,400 |
| Spain | $80,300 | About 26% | $21,100 |
| Brazil | $40,000 | About 36% | $14,300 |
Source: Kleos HR team data, October 2025 to October 2026, converted at rates on 6 October 2026. Statutory employer contributions only; benefits and the EOR fee come on top.
Kleos states that employer costs commonly add around 20% to 35% to gross salary, which is why it quotes each case rather than an average. Senior software engineer salary by country, 2026 shows the full calculation for 15 countries.
How do you keep a contractor's take-home pay level after conversion?
Work backwards from what the person receives today. A contractor's invoice is gross income they pay their own taxes from; an employee's salary has income tax and employee contributions withheld before it arrives. Setting the new salary equal to the old invoice usually cuts take-home pay.
Ask each provider for the net pay at the proposed salary, then adjust until it matches or beats what the person earns now. Paid leave, health cover and pension contributions are part of what they gain, and worth showing in the offer. Kleos shows salary, employer taxes, benefits and its fee as one number before the offer goes out.
How do EOR deposits and payroll funding differ between providers?
Every other provider compared here invoices payroll before payday: Deel's EOR invoices are due five days after issue, Remote's pre-funding invoice goes out on the first business day, Multiplier's by the 7th, Oyster's around the 11th and RemoFirst's around the 15th. Kleos pays the employee first and invoices after, with 15 days to settle.
| Provider | EOR fee per employee per month | Deposit | When payroll is funded |
|---|
| Deel | From $599 | Billed separately; amount not published | Before payday: EOR invoices due five days after issue |
| Kleos | From $200, depending on country | Refundable in full; no large upfront deposit | After payday: invoiced once the employee is paid, 15 days to settle |
| Multiplier | From $459 on annual billing, $499 monthly | Required before the employment contract is signed; refunded within 60 days of the last working day | Before payday: funding invoice by the 7th of the payroll month |
| Oyster | From $699 | Refundable deposit at hire | Before payday: pre-funding invoice around the 11th, not disputable |
| Remote | $599 on annual billing, $699 monthly | Reserve invoice before onboarding, usually one month's total cost | Before payday: pre-funding invoice on the first business day, due in 14 days |
| RemoFirst | From $199, depending on country | Refunded after offboarding; amount not published | Before payday: invoiced around the 15th of each month |
Sources: help.letsdeel.com, usemultiplier.com/legal/eor-terms and help.usemultiplier.com, oysterhr.com/pricing and support.oysterhr.com, support.remote.com, remofirst.com/faq and knowledgebase.remofirst.com, kleos.io/pricing and kleos.io/solutions/employer-of-record, checked 16 October 2026.
For a startup, the funding model matters as much as the fee. A deposit plus a month of prefunded payroll can tie up two months of employment cost per person before anyone is paid.
What should happen on the conversion date?
The contractor agreement ends and the employment contract starts, ideally with no gap between them. The final contractor invoice covers work up to the switch date, and the first payroll covers work after it. Rights in work done before the switch stay under the contractor agreement.
Three things commonly go wrong:
- Rights in earlier work. Code, art or designs produced as a contractor stay under the contractor agreement, so that agreement needs its own assignment. In the EU, article 2(3) of Directive 2009/24/EC gives the employer rights in software an employee writes only from the start of employment.
- Seniority. Contractor time usually does not count. In the UK, section 212(1) of the Employment Rights Act 1996 counts only weeks worked under a contract of employment. (As of October 2026.)
- Re-onboarding. Some setups treat the person as a new hire from scratch, with new identity checks and documents.
Kleos runs contractor-of-record and employer of record on one platform. It states that a contractor converts to full-time employment without re-onboarding, and charges no onboarding fee. What happens when a contractor abroad becomes an employee covers what changes for the person.
What happens when you open your own entity later?
The employment with the employer of record ends under local rules, and the person signs a new contract with your entity. Check before signing whether the provider sets a minimum term, a notice period or a fee for moving employees out, because these decide what growing out of the EOR costs.
Companies that hire through an employer of record often use it as a bridge: they employ a few people in a country through the EOR and open their own entity once headcount there justifies it. If that is your plan, the exit terms matter as much as the monthly fee.
Kleos has no setup fee and no minimum term.
What is the best employer of record for entity-less expansion?
The one that covers your countries, carries the employment through its own entities where you hire most, and keeps contractors and employees on one platform. Published fees run from $199 a month at RemoFirst and $200 at Kleos to $699 at Oyster, with Deel from $599.
Five providers are compared here:
- Deel: contractors and employees on one platform, employment in 150+ countries with owned entities in 130+, from $599 a month
- Kleos: contractor-of-record and employer of record on one platform, employment in 200+ countries through its own entities in core markets and vetted local partners elsewhere, from $200 a month, payroll funded after payday
- Multiplier: employment in 160+ countries, which Multiplier states it runs through its own entities, from $459 on annual billing
- Remote: employment in 90+ countries, all through entities Remote states it owns, $599 on annual billing
- RemoFirst: employment in 185+ countries, the lowest published starting price, from $199 a month
How to choose an employer of record compares eight providers on fees and entity model.
What if the contractor works in the United States?
An international employer of record is usually the wrong tool. A contractor based in the US becomes a W-2 employee, either through your own US entity or through a professional employer organization (PEO), which co-employs the person alongside your company.
The EOR comparison in this guide applies to contractors working outside the US, in countries where your startup has no entity. State rules on classification and payroll registration apply on top of the federal test for US-based workers.
Frequently asked questions
Does an EOR remove past misclassification risk when converting a contractor?
No. An employer of record employs the person from the conversion date onward. Exposure from the contractor period stays with the company that engaged them. The IRS looks at behavioral control, financial control and the relationship of the parties, and states that a contract label alone does not decide a worker's status.
How much more does it cost to employ a contractor through an EOR?
Employer contributions plus the EOR fee. At the senior engineer averages in Kleos's 2026 salary data, that is nothing extra in Armenia, about $15,400 a year in Poland, $21,100 in Spain and $14,300 in Brazil. Published EOR fees run from $199 to $699 a month per employee.
Do EOR providers require a deposit?
Most do. Remote collects a reserve before onboarding, usually one month's total cost. Multiplier requires a deposit before signing the employment contract and refunds it within 60 days of the last working day. Oyster and RemoFirst take refundable deposits, and Deel bills deposits separately. Kleos states its deposit is refundable in full, with no large upfront deposit.
Do you pay an EOR before or after payday?
Usually before. Deel's EOR invoices are due five days after issue, Remote invoices on the first business day of the month, Multiplier by the 7th and RemoFirst around the 15th. Kleos pays the employee first and invoices afterwards, with 15 days to settle.
Who owns work a contractor did before becoming an employee?
Whoever the contractor agreement says. Rights in work done before the conversion stay under that agreement, so it needs its own assignment. Under EU law, rights in software an employee writes go to the employer only from the start of employment.
What is the best employer of record for entity-less expansion?
The one that covers your countries through its own entities where you hire most and keeps contractors and employees on one platform. Published fees run from $199 a month at RemoFirst and $200 at Kleos to $699 at Oyster, with Deel from $599.
Can Kleos convert a contractor to an employee?
Yes. Kleos runs contractor-of-record and employer of record on one platform and states that a contractor converts to full-time employment without re-onboarding. Employer of record starts from $200 a month per employee, depending on country, with no setup fee, no onboarding fee and no minimum term.
Pick one contractor you plan to convert, and ask each provider on your shortlist for that person's fully loaded monthly cost, deposit and payroll funding date.
Last updated: October 2026.
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