When you use an Employer of Record (EOR) service, your employment costs include employer-paid taxes, social contributions, statutory benefits, and other required employer contributions. These costs are collectively reflected in your Employer Liability amount.
What is Employer Liability?
Employer Liability represents the estimated employer-paid costs associated with employing your workers in a particular country.
Rather than passing through every employer contribution as an exact line-item amount each pay period, EOR providers typically apply a flat employer liability percentage to help account for normal fluctuations in these costs.
Your applicable employer liability rate and structure are outlined in your Statement of Work (SOW).
How is the Employer Liability percentage applied?
Your Employer Liability percentage is applied as part of the calculation of your employment costs and is reflected on your Cash Requirements invoices.
The percentage is designed to provide a predictable way to account for employer contributions that may vary over time. It is not intended to represent an exact reimbursement of each individual employer tax or contribution in every pay period.
For example, if your SOW specifies an employer liability rate of 20%, the applicable employer liability amount will generally be calculated using that rate against the relevant payroll amount.
Example:
Gross payroll: $5,000
Employer liability rate: 20%
Employer liability: $1,000
Total payroll and employer liability: $6,000
The actual calculation may vary depending on the country, applicable employment rules, and the terms of your SOW.
Why can employer liability costs fluctuate?
Employer-paid costs can change even when an employee's salary stays the same. Factors that may affect the underlying costs include:
Tax and contribution thresholds — Some employer contributions change once an employee's earnings reach a particular threshold.
Contribution caps — Certain taxes or social contributions may only apply up to a statutory maximum.
Benefits — Employer-provided or statutory benefits can affect the overall employer cost.
Regulatory changes — Governments may change tax rates, contribution requirements, thresholds, or other employment obligations.
Employee-specific circumstances — The applicable employer contributions can vary based on factors such as compensation and local requirements.
Because of these variables, the actual employer costs underlying the liability percentage may differ from one payroll period to another.
Why use a flat percentage?
A flat employer liability percentage provides a more consistent and predictable approach to estimating employer-paid costs while accounting for normal fluctuations in statutory contributions and other employment costs.
This approach is standard across the EOR industry. The percentage is intended to cover expected variations in employer contributions, rather than serve as an exact line-by-line pass-through of every contribution in each payroll period.
Where can I find my employer liability rate?
Your employer liability rate and the applicable calculation structure are specified in your Statement of Work (SOW) for each country. The resulting employer liability amount is reflected on your Cash Requirements invoices and Employee Summary Reports.
If you have questions about the rate applicable to a specific country or employee, refer to your SOW or contact your Globalli Account Manager.