What is an Employer of Record (EOR)?

When a company hires an employee, it takes on all the duties, expenses, and obligations related to having that person on staff. This is a challenging and complex process, especially for multinational corporations managing international staff. 

The solution? EORs.

An EOR, or an Employer of Record, is a third party organization that specializes in handling all the legal and operational requirements of building a global workforce for its client companies. Thus, traditional employment responsibilities like management of payroll and taxation, employee benefits, and other such administrative and legal obligations are undertaken by the EOR.

Functions of an EOR

A global Employer of Record enables businesses to hire professionals throughout the world without the need to establish a local entity, or running the risk of breaking regional labor regulations. In short, an EOR is like a  multinational HR company that is familiar with the intricate payroll rules and labor laws of the locations where personnel are situated.

A global EOR handles the regulatory and legal requirements for migration, recruitment, compensation, and perks when a company wants to hire across multiple countries. While the EOR is the  employee’s official and registered employer, you continue to have control over daily management activities including pay, job responsibilities, projects, and performance evaluation.

A global EOR helps you ~

• Create and update employment contracts that comply with local laws
• Pay salaries in a different country through their own local bank accounts
• Oversee all salary and tax deductions and compliance
• Pay international employees in their local currency and provide a full range of legal benefits
• Ensure adherence to all company policies and guidelines
• Provide updates on local labor laws and regulations and streamline planning
• Help in the integration of the new talent with the parent company

Benefits of an EOR

A worldwide EOR partner has several advantages for businesses. It enables companies to recruit the best talent from any location, and support them in accordance with their local and cultural requirements. A lot of businesses lack the resources or in-depth knowledge necessary to employ legally in international locations; EORs, thanks to their local presence and experts, are able to fill these gaps.  

Let’s see some of the benefits of engaging an EOR

Reduced risk of violating laws

Depending on the nation, hiring internationally has  multiple legal implications. For instance, tax rates vary widely across the world, and every country has its own set of legal and regulatory compliances, making it difficult to stay on top of all obligations. To guarantee that their customers comply with various laws governing taxation, employee welfare, and retirement benefits, EOR businesses keep up with changes in these laws and advice their clients accordingly.

Cost and time effective

Once they engage an EOR, companies are no longer required to set up a legal entity in the foreign country, thus saving up on the cost of registration, opening up of a bank account and other such formalities. Additionally, hiring through an EOR gives enterprises access to talent that is available at highly competitive cost. 

Easier onboarding

EORs are able to ensure smoother onboarding as they are already aware of the various cultural, economical and legal requirements of hiring in the employee’s home country. They undertake the task of background verification and documentation, setting up of statutory benefits, as well as management of payroll and taxation, thus delivering a smoother overall onboarding experience for the employee as well as the employer. 

Scalability

For administrative and tax considerations, several nations demand that foreign businesses or investors form a corporation domestically. Since an Employer of Record serves as the local registered entity, it removes the need to set up a new company.

An EOR enables you to make and implement quick decisions in terms of hiring, operations and expansion, thus ensuring a high level of scalability. The fact that the existing EOR is in charge of all legal compliance, rules, and administrative tasks, however, may be where the true value resides, freeing them to concentrate on scalability and expansion.

How to choose the right EOR

Even though an EOR partner will assist in achieving hiring and management goals for remote teams, selecting the right one is key. Here are a few things to keep in mind.

Transparency

Choose a worldwide Employer of Record that is open about their cost when comparing different firms. In addition to their original quotations, they could also charge setup costs, taxes, or termination fees. Additionally, they may subsequently add undeclared costs and markups, which would alter your budget and have an impact on several divisions of your company. Ask potential EORs to explain all aspects of their price up front.

Track record

To find out whether current customers are satisfied with the EOR’s services, read reviews on independent websites and contact references. Asking a prospective partner for references with companies that share your company’s objectives and traits, such as budget, sector, and the sorts of people they work with, is also helpful.

Choose a service provider who has handled EOR work and complied with international requirements. 

Accurate quotes

Choose a provider who is knowledgeable and truthful on employer burden charges. The company must include in additional social contributions such as medical insurance, social welfare, and paid leave off when determining payroll expenditures. Your EOR partner must provide you precise prices on these criteria because these employer constraints vary by market.

EORs bill different amounts for their services. Before you sign any contract, be sure the business is honest about the costs. 

Global presence

With different parts of the world emerging as talent hubs, global teams today are seldom restricted to a few countries. Your primary reason for engaging an EOR is access to talent in multiple countries, which is why it is imperative to ensure that your EOR partner has a global presence. Check the list of 50+ countries where Talent500 can help you build your teams here.

Support

Pick a responsive partner who is proactive at responding to the needs of your team and leadership, as the EOR will act as the primary link between you and your distributed workforce. Ensure that your EOR partner assigns a client account manager that responds to inquiries from your team promptly, onboards new supported personnel, and takes into consideration regional time differences, cultural differences and languages.

Each expansion into a new overseas market has its own set of complications that need an expert staff. At Talent500, we understand that the transition to location independent working is a multi-layered process involving numerous stakeholders and factors. Our team of experts and network of highly skilled professionals are here to help you build your global team in over 50 countries. Ready to take the first step? Set up a consultation with our team here.