Employer of Record (EOR) is a third-party company that legally employs workers on behalf of another organization.
In practice, the EOR becomes the official employer for legal and administrative purposes, while the client company directs the employee’s day-to-day work and performance.
Key implications
- Employment contract is issued under the EOR entity
- EOR carries statutory employer liability
- EOR runs payroll and taxes under its own entity
- Client directs the work, but does not appear as employer of record
- No need for you to establish a local legal entity
Professional Employer Organization (PEO) is a co-employment model that operates only if you already have a legal entity in that jurisdiction.
Key implications
- You remain the legal employer
- PEO handles HR admin (payroll, benefits, compliance support)
- Employment contract typically still references your company
- PEO does not replace your legal employer status
Executive Comparison
| Dimension | EOR | PEO |
| Legal employer | EOR | Your organization |
| Requires local entity | No | Yes |
| Employment contract | EOR’s name | Your company’s name |
| Payroll liability | EOR | Shared / you |
| Compliance exposure | Mostly EOR | Shared |
| Ideal scenario | Global expansion | HR efficiency domestically |
For W-2 and 941
In the EOR model inside the United States, the Employer of Record is the legal employer, therefore the EOR is the party that must issue and file the U.S. payroll-related tax documents, including:
Form W-2
- issued under the EOR’s FEIN
- provided to the employee and filed with the IRS
- because the EOR is the statutory employer for wage and tax purposes
Form 941 (Quarterly Federal Tax Return)
- filed under the EOR’s federal employer identification number
- the EOR reports federal income tax withholding, Social Security, Medicare, etc.
The EOR files and signs both W-2 and 941 because they are the official employer-of-record in the U.S. payroll system.
Your company directs the work (operational control), but the EOR owns the payroll compliance obligation and is recognized by the IRS as the employer for those employees. In the other words, if the worker is paid through an EOR, the W-2 and 941 legally belong under the EOR’s EIN, not yours.
Companies that use an EOR typically prepare internal headcount or management reports to monitor cost per employee, but they do not record these costs as payroll because they are not the legal employer and therefore cannot issue any payroll forms (such as W-2, Form 941, or state payroll tax filings).
Can an EOR Sponsor a work visa?
Yes, an Employer of Record (EOR) can sponsor a work visa on behalf of its clients’ employees. By acting as the legal employer, the EOR assumes responsibility for visa sponsorship, including managing the application process, ensuring compliance with immigration laws, and handling necessary documentation.
When EOR can sponsor a U.S. visa
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- If the EOR is a properly-registered U.S. entity with legal status to employ people in the U.S.
- If they file the required paperwork (e.g. Labor Condition Application (LCA) and petition such as Form I-129 for visa types like H‑1B visa) and meet the regulatory criteria (specialty occupation, prevailing wage, employer-employee relationship, control over employment) as required by USCIS and the U.S. Department of Labor.
- If the EOR demonstrates the “employer-employee relationship” — i.e. authority to hire/fire/pay/supervise the employee.
Important caveats / limitations
- All standard visa-sponsorship compliance rules apply: role must qualify (e.g. “specialty occupation” for H-1B), prevailing wage must be met or exceeded, and all documentation/regulatory filings must be correctly made.
- Not all EOR providers may meet all requirements (legal entity status, compliance history, ability to fulfill employer obligations under U.S. immigration law). So it’s essential to verify that the EOR is capable and willing to act as petitioning employer.
- Using an EOR for visa sponsorship doesn’t guarantee success: even if paperwork is filed, visa approval still depends on meeting all substantive requirements (occupation qualification, prevailing wage, valid employer-employee relationship, etc.).
But when the goal is to relocate someone to the U.S. under L-1 (or certain other U.S. visa categories), you generally need a direct corporate relationship (parent/subsidiary/affiliate) between the non-U.S. employer and the U.S. employer. An EOR-only arrangement probably won’t satisfy those requirements.
Therefore: if your entity structure does not meet the legal relationship tests required by U.S. immigration law, an EOR should not be relied on to sponsor an L-1 or similar visa.
Who will be the Petitioner?
If an individual is on an EOR payroll in the United States, the statutory employer in the eyes of the IRS and USCIS is the EOR, not your company. Therefore, the party eligible to act as the visa sponsor (petitioning employer) would normally be the EOR, because they are the entity actually paying wages, withholding taxes, and carrying employer-of-record obligations under U.S. law.
However, saying that the visa “must” be filed through the EOR is not technically accurate in every scenario—rather, it depends on who is the legal employer at the time of filing.
Scenario A – Employee is hired via EOR
- EOR pays wages
- EOR handles payroll tax
- EOR controls statutory employment
- EOR therefore meets the definition of “U.S. employer” for petition purposes
In this situation, the EOR—not your company—is the proper visa sponsor, because your company is merely the end-client or worksite supervisor.
Scenario B – You want to be the visa sponsor
Then you must:
- employ the person directly,
- run payroll under your own FEIN,
- assume federal and state employer obligations,
- establish the employer–employee relationship required by USCIS,
- file the LCA and petition under your own entity.
In other words, you must transition the worker off the EOR and onto your direct payroll before you can act as the petitioning employer.
Key legal principle
US immigration rules require the visa sponsor to be the actual U.S. employer for payroll and employment-law purposes. Merely giving day-to-day work direction does not make your company the legal employer, and is not sufficient for sponsorship.
Visa sponsorship in the U.S. must be filed by the statutory employer—the entity that genuinely pays wages and withholds payroll taxes.
Strategic takeaway
In practice, many multinational companies use an EOR as a temporary solution during early phases (e.g., remote hiring or market testing), and then transition the talent into direct employment before initiating the immigration process, so that the company—not the EOR—can serve as the visa sponsor.
Can an EOR sponsor an L or E work visa?
Key U.S. visa classes such as the L-1 require that the employer petitioning for the visa be a “qualifying organization” — i.e., a company that is a parent, branch, affiliate, or subsidiary of the overseas employer.
If the “employer” on record is just an EOR and not the actual corporate entity that has a “qualifying relationship,” that fails the L-1 requirement (because the EOR is a separate legal entity, not the overseas affiliate). Indeed, practitioners caution that L-1 via EOR-only employment often fails.
For visa types requiring specific employer-employee relationships (specialty occupations, intra-company transfers, treaty statuses, etc.), immigration authorities may reject applications if the sponsor does not meet structural or legal relationship requirements.
Practical conclusion
Using an EOR is usually safe and effective for hiring remote or overseas talent under local work-permit regimes — especially when the talent remains abroad.
Additional Source: https://employerrecords.com/can-an-employer-of-record-eor-sponsor-a-work-visa