The Cost of Employer of Record Services: What Australian Businesses Should Expect
Pricing is usually the question that brings people to this article. And it’s a fair question to ask early — not because cost is the only thing that matters, but because if the numbers don’t make sense for your business, there’s no point going further.
The problem is that EOR pricing is genuinely difficult to compare across providers. Some publish rates openly. Many don’t. Some include everything in a single fee. Others layer additional costs on top of a headline number that looks attractive until you read the fine print.
This article explains how EOR pricing actually works, what should and shouldn’t be included, how the two main fee structures compare over time, and what the cost of offshore staffing via EOR looks like relative to hiring the same roles locally in Australia.
No vague ranges. No best-case scenarios. Just a practical picture of what to expect.
How EOR Pricing Works
An EOR arrangement involves two distinct cost components, even when they’re bundled into a single monthly figure:
- The employee’s compensation — the salary and statutory entitlements paid to your offshore team member in the Philippines. This includes their base salary, mandatory contributions to SSS (social security), PhilHealth (health insurance) and Pag-IBIG (housing fund), plus 13th month pay accrual. These are not negotiable — they’re legally required under Philippine employment law.
- The EOR management fee — the provider’s charge for managing the employment relationship. This covers payroll processing, compliance management, HR administration, employment contract maintenance and ongoing support. This is where providers differ significantly in both structure and amount.
When you receive a total monthly cost figure from an EOR provider, you should be able to ask: what portion is the employee’s compensation, and what portion is your management fee? A provider who can’t or won’t answer that question clearly is one worth being cautious about.
The Two Fee Structures — and Why the Difference Matters
EOR providers generally use one of two pricing models. The choice between them has a larger impact on your long-term cost than most businesses realise when they’re starting out.
| Fixed monthly fee | Percentage of salary | |
| How it’s calculated | A flat dollar amount per employee per month, regardless of salary | A percentage (typically 10–20%) of the employee’s total salary |
| Cost when you give a pay rise | Management fee stays the same | Management fee increases automatically |
| Predictability | Highly predictable — same fee each month | Variable — changes with salary movements |
| Better for long-term arrangements | Yes | Less so — cost compounds over time |
| Typical structure | Used by providers focused on transparent, long-term partnerships | Common in broader HR outsourcing models |
Here’s why this distinction matters more than it might initially seem.
Imagine you hire an offshore administration officer on a salary equivalent to $18,000 AUD per year. Over two years, you give them a well-earned pay rise to $22,000. Under a fixed fee model, your management cost doesn’t change. Under a percentage model at 15%, your management fee has grown from $2,700 to $3,300 per year — and will keep growing with every subsequent increase.
That’s not a catastrophic difference on one hire. Across a team of three or four people over several years, it starts to matter. It also creates a subtle disincentive to pay your team members well, which is the opposite of the kind of culture that produces good long-term working relationships.
What Should Be Included in an EOR Fee
A properly structured EOR arrangement should include all of the following in a single, predictable cost. If any of these appear as add-ons or are absent entirely from what a provider offers, ask why.
| Cost component | Included in a proper EOR fee? |
| Employee’s base salary (in PHP, paid in the Philippines) | ✓ Included |
| SSS contributions (employer and employee portions) | ✓ Included |
| PhilHealth contributions (employer and employee portions) | ✓ Included |
| Pag-IBIG contributions (employer and employee portions) | ✓ Included |
| 13th month pay accrual and payment in December | ✓ Included |
| Philippine income tax withholding | ✓ Included |
| Employment contract drafting and maintenance | ✓ Included |
| Payroll processing and payslip generation | ✓ Included |
| HR administration and employment records | ✓ Included |
| Ongoing compliance monitoring (Labour Code changes) | ✓ Included |
| Offboarding and separation management if required | ✓ Included |
| Equipment (laptop, peripherals) | ✗ Not included |
| Recruitment / candidate search fee (sometimes separate) | ✗ Not included |
| HMO or private health insurance upgrade (optional benefit) | ✗ Not included |
Equipment deserves a specific note. A laptop and monitor are not typically included in an EOR management fee — they’re a separate procurement decision. Some providers offer equipment procurement as an optional add-on service. Others leave it entirely with the client. Either way, factor this cost into your initial budget. A reasonable setup allowance for equipment in the Philippines is $800–$1,500 AUD depending on the role’s requirements.
What Does It Actually Cost? Indicative Ranges
With the caveats about individual circumstances clearly on the table, here is a practical reference for what all-inclusive EOR costs look like for common role types when hiring in the Philippines from Australia.
These figures include the employee’s total compensation (salary plus all statutory contributions and 13th month pay) plus a fixed EOR management fee. They do not include equipment or optional benefits.
| Role Type | EOR Total Cost (AUD/year) | Equivalent Australian Cost (AUD/year) |
| Administration / Data Entry | $18,000 – $24,000 | $65,000 – $75,000 |
| Student Services Coordinator | $20,000 – $26,000 | $68,000 – $80,000 |
| Compliance Administrator | $22,000 – $30,000 | $75,000 – $90,000 |
| Finance / Bookkeeping Support | $24,000 – $32,000 | $72,000 – $88,000 |
| Marketing Coordinator | $22,000 – $30,000 | $70,000 – $85,000 |
| Executive Assistant | $28,000 – $38,000 | $80,000 – $100,000 |
| Operations Support | $24,000 – $34,000 | $75,000 – $95,000 |
| Senior / Specialist Roles | $35,000 – $48,000 | $95,000 – $130,000+ |
Australian costs in the right column include base salary, superannuation at 11.5% and an allowance for leave entitlements. They do not include office space, equipment, recruitment fees or management overhead — all of which add further to the true local cost.
The gap is not marginal. For most role types, offshore EOR costs sit at roughly 25–35% of the equivalent Australian hire. For a business running three or four support roles, the annual difference can fund a senior Australian position or represent a meaningful improvement in operating margin.
EOR vs Direct Hire: The Real Cost Comparison
The comparison above shows headline numbers. The real picture is wider.
When Australian businesses calculate the true cost of a local hire, they often focus on salary and super. The costs that don’t show up in that calculation include:
- Recruitment fees — typically 12–18% of first-year salary for agency placements
- Payroll tax — applicable in most states above certain payroll thresholds
- Workers’ compensation insurance premiums
- Office space and desk costs — conservative estimates put this at $8,000–$15,000 per person per year in a commercial tenancy
- Equipment — laptop, monitor, peripherals, software licences
- Training and onboarding time — often underestimated at two to four weeks of reduced productivity
- Management overhead — the time your senior staff spend managing, reviewing and supporting a new local hire
None of these appear in an EOR arrangement for an offshore team member, or appear at a fraction of the cost. The equipment is still required. The onboarding time still exists. But payroll tax, office space, workers’ compensation and recruitment fees are either absent or substantially reduced.
The result is that the true total cost of a local hire is often 30–40% higher than the headline salary figure. The true total cost of an EOR arrangement is closer to the number on the invoice — what you see is what you pay.
Hidden Costs to Watch For
Not all EOR providers are equally transparent. A few cost elements that occasionally appear outside a headline fee are worth asking about specifically before you commit:
- Recruitment fees. Some EOR providers include candidate search in their service. Others charge a separate placement fee — typically equivalent to one to two months of the total monthly cost — on top of the ongoing management fee. Ask upfront whether recruitment is included or additional.
- Onboarding or setup fees. Some providers charge a one-off setup fee to establish a new engagement. This is not universal, but it’s worth asking about — particularly if you’re comparing providers on monthly cost alone.
- Exit or offboarding fees. If the arrangement ends, some providers charge for managing the separation process. Others include it as part of the service. Given that Philippine employment law requires careful management of termination, this is a cost that should be accounted for in any fair comparison.
- Currency risk. EOR fees quoted in AUD are typically stable from your perspective. Fees quoted in USD or PHP will fluctuate with exchange rates. Understand which currency your invoice will be in and whether there’s any built-in currency adjustment mechanism.
How to Get a Transparent Quote
The best way to get a reliable cost figure is to come to a provider conversation with a specific brief. The more clearly you can describe the role — the tasks, the systems, the hours, the level of experience needed — the more accurate the cost estimate will be.
A provider who quotes you a range before asking anything about your requirements is probably working from a generic price list rather than a proper assessment of your needs. That’s not necessarily dishonest, but it means the number you’re given is not the number you’ll end up paying.
Ask the provider to give you a total monthly cost that includes:
- The employee’s full compensation (salary plus all statutory contributions and 13th month pay)
- The management fee — and whether it’s fixed or percentage-based
- Any additional services you require (recruitment, equipment, HMO)
- What is explicitly not included, so there are no surprises later
If you’d like to understand how the arrangement works before thinking about cost, our article on how EOR services work step by step covers the full process.
If you’re ready to get a straight answer on what an EOR arrangement would cost for your specific situation, the Magna team is available for that conversation. We’ll give you a clear, itemised figure — not a range that requires three follow-up calls to pin down.
Frequently Asked Questions
Why won’t most EOR providers publish their prices?
Most EOR providers don’t publish pricing because costs vary significantly by role, seniority, location within the Philippines, and the scope of services required. A fixed price list would either over-quote simple arrangements or under-quote complex ones. That said, transparency on request is a reasonable expectation — any provider unwilling to give you a clear, itemised cost estimate before you commit is one worth approaching cautiously.
Is the EOR fee charged per person or per month?
EOR management fees are almost always charged per person, per month. The total monthly invoice for a single offshore team member covers that person’s full compensation plus the management fee. If you add a second team member, a second monthly fee applies. Some providers offer reduced per-person fees for larger teams — worth asking about if you’re planning to grow.
What is 13th month pay and how does it affect my costs?
13th month pay is a legally mandated entitlement in the Philippines — equivalent to one twelfth of the employee’s annual basic salary, paid no later than 24 December each year. It’s not a discretionary bonus. A good EOR provider accrues this monthly as part of your total cost, so there’s no large lump sum surprise in December. If a provider isn’t accruing it monthly, ask how they manage the December payment.
Do I pay the employee directly or through the EOR?
You pay the EOR — not the employee directly. The EOR receives your monthly payment, deducts the relevant taxes and contributions, and pays the employee their net salary in Philippine pesos. You never deal with Philippine payroll mechanics, currency conversion or tax withholding directly. That’s the point of the arrangement.
What happens to costs if the Philippine peso exchange rate changes?
If your EOR fee is quoted and invoiced in Australian dollars, exchange rate movements are the EOR’s concern, not yours. Your monthly cost stays stable. If your fee is quoted in USD or PHP, fluctuations will affect your AUD cost. At Magna, we invoice in AUD — what you’re quoted is what you pay, regardless of currency movements.
Is there a minimum contract period?
This varies by provider. Some require a minimum six or twelve-month commitment. Others operate on rolling monthly arrangements with a standard notice period. Minimum terms aren’t inherently unreasonable — it takes time to onboard a team member properly and realise the value of the arrangement — but they should be clearly stated upfront. Ask specifically what the exit terms are, including the notice period and any fees associated with ending the arrangement.
How does the cost change as my offshore team grows?
Each additional team member adds another monthly fee to your total. The per-person cost typically stays consistent — though some providers offer a modest reduction for larger teams. The management complexity on your side increases too, which is worth accounting for in your planning. Three offshore team members well-managed is better than five managed poorly.