3 Main reasons to use Employer of Record

By definition, an Employer of Record (EOR) is an arrangement that acts as a “go-between” for the client company and the employee. Unless you have used an EOR in the past, it can seem daunting to get on board with the concept and what it entails. 

Let’s look at it this way – if an organization plans to expand operations in a country where they have no footprint, it can be difficult to stay on top of things with complex local regulations, taxes, and employer benefits. The easiest solution is to hire a third-party organization to take responsibility for paying employees. The hired organization will also be responsible for handling payroll, taxes, insurance, benefits, and visa and sponsorship applications.

EORs give companies easy access to new markets by simplifying HR-related operations, while overall supervision and management controls remain with said company, and not the external partner. When an organization partners with an EOR, the EOR becomes the registered employer of the company’s workers, and provides the company with a legal entity to manage payroll, taxation, insurance, employer benefits and all other legal and regulatory compliance in the host country.

Does your company need EOR services?

The primary goal of using an EOR is to overcome the regulatory and financial hurdles when expanding and hiring in a new country. Every country has its own employment, payroll, and work permit requirements for foreign companies. Dealing with local laws and regulations can be a major challenge to global business expansion.

Unless you are a large enterprise that can afford to invest time and capital into the incorporation, registration, and setting up a legal entity, an EOR is an ideal alternative. It is a tool devised to provide companies a chance to enter a new market even with limited HR resources.

An Employer of Record solution is available for almost any country and is often included as the core of a comprehensive GEO (Global Employment Organization) solution. As an EOR ensures full compliance with the laws of the host country, and works with both local workforces as well as expats.

What are the benefits of using an EOR?

The benefits of an EOR go beyond just providing easy access to a competitive markets with complex cost, payroll, and compliance policies.

No need for local incorporation 

As mentioned above, not every company has the resources to set up a local entity via incorporation. The entire process of incorporation and registration is time-consuming, expensive, and complicated. Plus, when entering a new market, it is beneficial to explore future growth prospects before setting up a foreign subsidiary. An EOR offers the best alternative as it provides an already existing legal entity in the host country that can handle hiring, payroll, employment, and immigration. As the EOR partner has the expertise to ensure full compliance with local laws, running smooth operations in the host country becomes infinitely easier.

Immigration compliance

Regardless of the country, there are regular changes and updates to a country’s immigration policies and rules. Additionally, the increased scrutiny of work permits by foreign governments makes it challenging for multinational corporations to comply with the local laws and regulations. As immigration violations can have lasting (and damaging) consequences for any company, one way to avoid this would be to use an EOR. With an EOR, companies can manage remote payroll issues, avoid overuse of business visas, and eliminate the risk of multiple entries into the country.

Running a local payroll in the host country

Most countries have a restriction against ‘remote payroll’, i.e., remitting of salaries by the home country payroll. This is why they make it mandatory for foreign entities to run payroll in compliance with local standards, with a registered legal entity. When companies use an EOR, they do not need to take on the additional burden of calculating and withholding statutory deductions from pay such as taxes, pensions, and health insurance. The EOR takes care of these critical details, so the company can focus only on growth and smooth operations.

If you are planning to expand business operations internationally, an EOR can help you deploy services quickly without risking non-compliance with local laws in 50+ countries. Our team of experts at Talent500 can help you with this. Set up a consultation here.