In the last few years it has become commonplace for companies to seek out talent in different countries. For some businesses, the appeal is the opportunity to access a much larger group of qualified candidates. Hiring workers in other countries also gives employers a chance to test the waters in a region where they’re considering expanding business operations.
A global Employer of Record (EOR) can simplify the process for companies who want to bring talent on board in countries where they don’t have a physical entity. EORs can handle the recruitment and hiring of employees, as well as human resource tasks such as payroll, taxes, and benefits. An EOR also ensures compliance with local laws and regulations, enabling companies to focus on their core business and avoid the hassle of needing to learn local labor laws.
Using an EOR vs. Establishing a Legal Entity
For companies seeking to become a global employer, there are basically two options: partner with a remote EOR or set up your own legal entity. Here’s an overview of what each path entails, from costs to scalability, to help you make the best choice for your global expansion goals.
Key considerations when using Employer of Record services:
- Time to Market Entry: Allows companies to quickly enter new markets without the need for a physical presence, often in less than 24 hours.
- Initial and Ongoing Costs: Lower initial costs with predictable monthly fees reduces setup expenses and complexities in global markets.
- Compliance and Payroll: EOR handles all local compliance, payroll processing, taxes, and global HR benefits — minimizing administrative burden.
- Scalability: Easily scalable based on global business growth needs without the need for complex adjustments.
- Risk Management: Mitigates legal and compliance risks as the EOR is the legal employer of any international employees.
Related: Learn how Employers of Record compare to Professional Employer Organizations.
Now let’s look at the same considerations for companies establishing a legal entity in a new country:
- Time to Market Entry: Establishing a local entity is a time-consuming process, typically taking several months to a year or more.
- Initial and Ongoing Costs: High initial setup costs, plus ongoing operational expenses for legal, HR, and administrative tasks.
- Compliance and Payroll: Company is responsible for compliance with local laws, requiring expertise in local legal and tax regulations.
- Scalability: Scaling up requires navigating additional legal, administrative, and financial hurdles.
- Risk Management: All regulatory risks related to legal compliance and financial liabilities in the new market are assumed by the company.
Top 5 Benefits of Using an Employer of Record
Companies that want to grow a global workforce without the expenses, time, and liability concerns associated with opening a legal entity in another country can benefit from outsourcing international HR functions to an EOR.
Other benefits of working with an EOR include:
1. Streamlined Hiring Process
Leveraging the services of an EOR can simplify the entire staffing and onboarding process of an international workforce. For example, if a company based in the United States wants to hire staff in India, an EOR can handle all of the logistics — from sending out work equipment, to obtaining any necessary visas.
The EOR then becomes the official employer of any India-based employees, and ensures that all local employment regulations are followed. If a company doesn’t already have a specific person they want to hire for a role, an EOR can also help with recruitment efforts.
For companies that want to hire contractors, an EOR can help companies avoid misclassification issues, and ensure that all contractors are paid correctly.
2. Maintains Legal Compliance Worldwide
Because of the differences in employment laws from country to country, making sure your company meets every legal requirement can be challenging when expanding internationally. For instance, in France, employees are limited to a 35-hour workweek, while in the U.S, the standard is 40 hours per week.
An EOR ensures regulatory compliance by remaining up-to-date on local labor laws, tax requirements, and employment regulations to minimize legal risks with country-specific requirements for:
- Employment contracts
- Employee benefits
- Payroll
- Social security contributions
- Taxes
- Time off
3. Simplified Global Payroll
EORs can relieve the complexity of paying a global team by taking on payroll management duties. This includes calculating and processing salaries in different currencies, handling tax deductions, and ensuring all payroll procedures comply with local tax laws, which can vary widely by country.
Another noteworthy advantage of an EOR is the mitigation of risks associated with foreign currency transactions and cross border payments. By handling payroll in different currencies, an EOR can manage exchange rate fluctuations — streamlining the payment procedures and ensuring compliant compensation for employees worldwide.
4. Competitive Benefits Packages
EORs can draw on their local market expertise to provide competitive benefits packages that are tailored to the unique needs of each country’s employees. This includes healthcare plans, paid time off, retirement plans, and more.
The EOR will ensure that benefit packages are compliant with both local regulations and employee expectations, and handle all benefits administration tasks. An EOR platform will also allow companies to manage employee time-off requests, yearly bonuses, financial benefits, and more, improving the employee experience.
5. Lower Setup Costs
Engaging an EOR can significantly reduce both the initial and ongoing expenses related to global expansion. Instead of establishing a new corporate office or subsidiary, an EOR allows companies to quickly hire in new markets with minimal financial resources.
This approach not only speeds market entry, it also provides a consistent and predictable cost structure, making it an economically attractive option for companies planning to scale globally without the added risk and uncertainties of establishing a foreign subsidiary.
It’s important to note that while EORs are generally more cost-effective than establishing a new subsidiary, not all EORs charge the same rates. Many require a commitment of hundreds, or even thousands of dollars per employee. The pricing for RemoFirst, on the other hand, starts at only $199 per employee, per month.
When Should a Company Work with an EOR?
While there may be times an EOR partner isn’t the most economical choice — such as an enterprise-level company planning on hiring hundreds of employees in a new country — it still remains the best option for businesses looking to start small in a new country.
Partnering with an EOR like RemoFirst can help companies facilitate quicker entry into new markets, access a wider talent pool, and minimize legal risks.
FAQs
Is an EOR appropriate for businesses of all sizes?
Yes, an EOR offers scalable solutions for global expansion and simplifies international employment for startups and large corporations. An EOR also allows companies to access global talent and navigate legal complexities without establishing an official local presence.
Do EORs help businesses navigate hiring challenges in any country?
EORs manage legal, payroll, and compliance issues, allowing companies to hire in multiple countries without the associated complexities. For example, RemoFirst enables companies to hire in more than 180 countries.
What industries can benefit from EOR services?
EOR services are versatile and can benefit a wide range of industries, including technology, finance, healthcare, education, and creative sectors.
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