An employer of record (EOR) is a company that legally employs workers on behalf of another business, usually in a country where that business has no registered entity. The EOR signs the employment contract, sponsors the work visa, runs payroll, and carries the labor-law liability. The client company decides what the employee actually does all day.
The arrangement splits employment in two. On paper, the EOR is the employer: its name is on the contract, the visa, and the social insurance registration. In practice, the employee works for you. You interview them, set their salary, assign their work, and decide who gets promoted.
Each month you receive one invoice covering salary, government contributions, and the EOR’s service fee. The EOR pays the employee, files with the authorities, and keeps the employment compliant with local labor law. When the law changes, that becomes the EOR’s problem to solve, not yours.
In the GCC you cannot hire a foreign employee without a locally registered company to sponsor their residence visa. That rule holds in all six countries. Saudi Arabia ties every expat’s iqama to a sponsoring entity, and the UAE does the same through MOHRE’s work permit system.
Setting up that entity means a trade license, capital requirements, an office lease, and a string of government registrations. Most companies need three to six months before they can legally put a single person on payroll. An EOR that already owns entities in the region can onboard the same hire in a few weeks, because the infrastructure already exists.
There is a second reason: quotas. Saudi Arabia’s Nitaqat program requires companies to employ a minimum share of Saudi nationals, and a new foreign entity with three expat hires and no Saudis can fail that test on day one. Under an EOR, those obligations sit with the provider’s entity, not yours.
An EOR is not a PEO. A professional employer organization works alongside your existing local entity and handles HR administration under it. If you have no company in the country, a PEO cannot help you and an EOR can. The full comparison is in EOR vs PEO.
It is also not a recruitment agency. An EOR employs people you have already chosen. Some providers, Masdar included, offer staff outsourcing as a separate service when you need the sourcing handled too.
A German engineering firm wins a two-year project in Riyadh and needs five site engineers there by next quarter. Incorporating in Saudi Arabia would take months and leave them with an entity to liquidate when the project ends. Instead, the engineers are employed through an EOR's Saudi entity. Iqamas are issued in weeks, payroll runs through the Wage Protection System, and when the project closes, so do the contracts. No entity, no wind-down.
Yes, provided the provider owns licensed entities in each country and employs your workers under them. What is not legal is keeping staff on visit visas or routing them through unlicensed intermediaries. That shortcut exposes both companies to fines and bans under MHRSD and MOHRE rules.
Legally, the EOR: its name is on the contract and the visa. Operationally, you: the employee reports to your managers and follows your direction. Both facts are written into the service agreement.
Most providers charge a flat monthly fee per employee or a percentage of gross salary. Either way it usually lands well below the running cost of an entity, which carries license renewals, audit fees, PRO staff, and locked-up capital.
One to four weeks in most GCC countries. Visa processing is the main variable, not paperwork on the EOR's side.