So, you’re looking for an Employer of Record (EOR) to help you hire a global team or expand your operations into new markets. Did you know that there are two primary types of EOR to choose from?
The first option is partner-based — like RemoFirst — and forms relationships with existing in-country partners to handle employment contracts, compliance, payroll, and employee benefits in a specific country. The second opens and owns entities in other countries instead of working with third parties.
Which one is best for your business? While we can’t answer that question for you, we’ll walk you through all the differences between partnering with an EOR that works with local partners versus one that owns its own entities so you can make the right decision for your business.
I'll also explain why the local partner model is more effective for ensuring compliance, employee experience, and invoicing accuracy.
1. Global Coverage
The reality of an owned-entity EOR is that it likely won’t be able to offer the extensive global coverage you get with EORS, which works with local partners. Depending on the country of operation, chances are high that you’ll still end up working with a third-party service provider.
That’s because, despite owning entities, core functions such as legal, accounting, and HR are frequently outsourced to local providers. This fragmentation can introduce inconsistencies in compliance and operational processes.
Even if the EOR decides to set up a full-stack legal entity, the process will require time and resources, and you would have to wait for its services to be available. After that, you’d be dealing with a new company and all the growing pains that come with it.
- Claim: Legacy EOR brands emphasize compliance by owning local entities.
- Reality: Owning an entity doesn’t automatically equate to compliance. Also, many entities are set up solely for EOR purposes without substantial business activities.
All of RemoFirst’s local partners have been operating for 15 to 20 years and processed more than $500M in global payroll. Needless to say, our partners have a wealth of experience and local expertise.
Plus, rather than spending millions of dollars building out local entities, we’ve invested in developing best-in-class service teams and an easy-to-use tech platform so that you and your employees have a consistent experience — regardless of where you’re hiring around the world.
And besides, owning an entity in a country is one thing — having local staff and expertise is an entirely different level of capabilities and customer experience.
The Truth Behind Owned Entities
In fact, most EORs that tout their owned entities have employees in very few locations.
A well-known EOR (that shall remain unnamed) that promotes its owned-entity model has local staff in fewer than 20 countries. What local support can you expect in the other 100+ countries?
By contrast, an EOR that works with global partners allows for greater flexibility and scalability. The local partner model provides greater reach, tailored solutions, and adaptable services to meet the needs of businesses and international employees in different countries.
RemoFirst ensures quality of service for our customers by only collaborating with thoroughly vetted, long-standing local partners.
These partners are comprised of well-established but small, locally-owned businesses and have a history of successful business operations and well-established processes in their regions.
2. Compliance
Every country has its own employment laws, and ensuring compliance in every country where you hire employees is essential — failure to do so can lead to hefty fines and even jail time.
These EOR entities frequently lack real experience in running day-to-day operations. As a result, they may miss subtle errors, making compliance and efficiency issues harder to detect.
Entities established only for payroll purposes often struggle with audits. The lack of genuine business operations, such as generating profits or handling local costs, can raise red flags during audits.
Unlike entities established purely for EOR purposes, our partners are embedded within their local markets and conduct actual business, offering services beyond payroll, ensuring they have the experience to handle complex compliance requirements.
Some countries even have local laws and restrictions around EORs. For example, in Germany, companies are only permitted to hire someone on behalf of another company under the AÜG (“Arbeitnehmerüberlassungsgesetz”), which limits employee contracts to 18 months.
Trust in Local Partners
Whether it’s the AÜG license in Germany or the State of California’s employee misclassification laws, we trust local experts to ensure RemoFirst and our clients are in compliance. If our local partner operates solely in Germany or in the United States, you can imagine how important it is to them to remain compliant with local laws.
Even though an EOR relies on local partners for advice on local regulatory compliance, it retains control over compliance and employee management.
For example, RemoFirst holds regular check-ins with local partners to ensure we’re aligned on customer needs, service-level agreements, and any legislative or regulatory challenges impacting the local employment landscape.
All of our partners have passed rigorous audits and operate with strong, established systems that ensure smooth local compliance. These systems include everything from tax compliance to labor law adherence, providing our clients with a more reliable and secure experience.
3. Mitigating Risk Through Diversification
Relying solely on one owned-entity provider that relies exclusively on their own infrastructure can expose your business to potential risks if something goes wrong.
Because a partner-model EOR collaborates with local entities across multiple regions, they can leverage alternative options if a particular partner fails to meet expectations or experiences operational difficulties.
For instance, RemoFirst has a preferred partner in each country but maintains relationships with multiple partners as a contingency.
Additionally, if a business has a complex or custom need, we’ll work with our team of local experts to find a solution. If they can’t find one, we can reach out to another partner capable of creating one.
With established local businesses handling operations, there is also better risk management for legal and operational challenges. This proactive approach reduces the likelihood of compliance issues or legal disputes.
4. Cost Effectiveness
One of the biggest arguments in favor of owned-entity EORs is that they are less expensive, but that is simply not true.
In fact, establishing entities and putting local infrastructure in place is incredibly expensive — and those costs are passed on to clients.
RemoFirst is often 30-50% cheaper than competitors who have established their own entities.
And because we haven’t spent millions establishing local entities, we can pass those savings on to our customers. It also frees up more cash to invest in our technology platform and customer success efforts.
Don’t get us wrong, partnering with local companies does come with costs, which RemoFirst is absorbing.
This shows our commitment to delivering quality service over turning a maximum profit. We aim to support our clients over the long run by being a reliable partner for employing your international staff.
5. A More Comprehensive Network of Local Expertise
While owned-entity providers may have expertise in a specific jurisdiction where they have established entities, they may lack the same breadth of knowledge and resources in other regions.
For instance, an EOR may have a large team in Spain but no team in Turkey — just a legal entity.
In this case, compliance expertise and knowledge of the nuances of the local market, regulations, business customs, and cultural practices may be strong in one country but weak in another.
By partnering with trusted and vetted local companies instead of third-party providers, RemoFirst’s model ensures that our services are consistent across regions. This reduces the risks of miscommunication or delays in employee and client services.
Working with a partner model also provides your employees access to local teams, their expertise and support, and the ability to communicate in their own language.
6. A Single Point of Contact
You might think that an entity-owned EOR automatically means more streamlined operations with a single point of contact, but this is not always true. Some owned-entity providers may have a centralized customer support team, while others may not.
Ultimately, the best way to ensure you have a single point of contact for all your needs is to select an EOR with a clear and well-defined customer support process.
Without dedicated, on-the-ground support from an established company, employees face delays in resolving issues, contributing to inefficiencies in day-to-day operations.
RemoFirst ensures that every client has a centralized dashboard and one point of contact for all of their global employees so that working with our network of international partners is streamlined and efficient.
Our global coordination team works closely with local partners, ensuring employees receive immediate assistance. This approach minimizes the bottlenecks that arise from fragmented support structures.
7. Flexibility and Tailored Solutions
Working with local partners and drawing on their expertise in all aspects of compliance, such as local tax laws, we can provide tailored solutions for our clients. As a result, our clients can offer bespoke employment packages that attract the best talent.
Partnering with established local providers means RemoFirst can quickly adapt to changes in local regulations or client needs, offering greater flexibility than legacy EOR brands with rigid structures.
Ultimately, working with a network of local partners gives RemoFirst access to the most up-to-date local expertise and allows us to invest in robust services and support, offering a dedicated account management team and an easy-to-use platform to ensure timely responses and quick resolution.
Book a demo and learn more about the benefits of partnering with RemoFirst as your EOR provider.