You’re an employer who wants to go global. You know that it's a competitive business world, and to succeed, you need to be able to hire the best talent, wherever they are in the world. So, you find the perfect candidate, but then realize that your payroll provider does not support hiring abroad.
When you start hiring employees outside of your home country you have to factor in taxes and legal compliances in your employee’s country.
For example, how do you handle tax registration and payroll processing? How do you manage employment contracts, benefits, and social contributions?
The solution for most companies involves opting for an Employer of Record (EOR) service. But what does Employer of Record mean, and what does the service entail?
In this guide, we outline the essential information you need to know about Employers of Record, as well as the benefits you can expect from this kind of service.
Employer of Record (EOR): What Does it Mean?
An Employer of Record is an organization that helps companies expand internationally by assuming the responsibility of hiring and managing employees on behalf of those companies. EORs take on all the formal employment tasks, including onboarding processes and compliance documentation.
Simply put, using an Employer of Record allows companies to legally and efficiently engage with workers in other countries without having to set up a local legal entity or risk violating local employment laws.
EORs can help you customize the employment contract to reflect important considerations for you and your business. For example, you can ensure your intellectual property is fully protected through robust IP protections.
How does an Employer of Record work?
An Employer of Record works by reducing the risk of compliance violations. The employer is still in charge of the employee's day-to-day operations (such as tasks, meetings, performance reviews, and termination decisions), while the EOR handles the administrative burden of managing a foreign workforce.
The EOR model has become more popular with the rise of remote work as it helps companies navigate the challenges of remote work and compliance in different countries. These are some of the services an EOR may provide:
1. Onboarding
EORs offer full-service employee onboarding. They help employees get up and running by creating contracts, acquiring signatures, collecting all the necessary paperwork and tax forms, and adding new employees to the company’s payroll.
Some Employers of Record will also offer services such as issuing equipment and obtaining work visas as part of their onboarding.
2. Payroll Management
An EOR will handle payroll processing, tax and benefits enrollment, as well as other administrative functions associated with hiring employees in a new country.
They also support international payments as part of managing workers’ compensation, ensuring your team receives payments consistently, accurately, and compliantly across time zones and countries.
3. International Benefits
Offering benefits is one of the best ways to attract and retain an excellent talent pool. An Employer of Record helps foreign employees who need different benefits based on their location.
The EOR partners with benefits providers around the globe to administer mandatory and non-mandatory employee benefits like health insurance (medical, dental, and vision), social security, unemployment insurance, sick leave, wellness programs, work-from-home allowances, financial benefits (international pension plans and 401(k) retirement), and more.
4. A Single Point Of Contact
Most EORs will appoint a representative that your company can contact with urgent needs or questions about staffing in your new location. They act as your resource for all things pertaining to your international employee’s hiring and benefits, so it’s one less thing to worry about as you expand into new markets.
5. Immigration Compliance
If you don’t have a local entity in the country where you are hiring, you're better off working with an EOR. It's easier to get work visas and work permits when you use your EOR’s team of legal experts and HR pros who know the ins and outs of each country.
They will set you up for success right from the start, preventing risk, fines, and lawsuits by staying up-to-date with changing global regulations.
Who is an Employer of Record Service For?
EOR services are typically used when a company is expanding into new markets and has to hire international employees, or is hiring remote workers.
While remote work has been increasing in popularity over the past few years, some companies don't want to deal with the additional tax and legal hassles that come with hiring remote workers. That's where an Employer of Record can help.
Partnering with an EOR will allow your company to hire globally, penetrate new markets, sponsor work visas, and more, without the complications of managing international human resources.
What to Look For in EOR Services
You can think of your Employer of Record as a managed service provider (MSP) for HR — handling everything from recruiting and hiring to payroll, benefits, and taxes. However, not every EOR is made equal.
You should do your due diligence to make sure you choose the right one. Some of the top factors to consider when choosing an EOR include:
Legal and Regulatory Compliance
It’s important to confirm that the EOR possesses in-depth knowledge of local employment laws, regulations, and compliance requirements. You can do this by verifying their licensing, certifications, and accreditations as an EOR.
Additionally, you should evaluate their track record in adhering to legal and tax obligations, as well as minimizing the risks associated with labor laws, taxation, and employee benefits.
Geographic Coverage and Expertise
Assess the EOR's geographical reach and determine if it aligns with your business expansion plans. Consider their experience and understanding of specific markets, including local employment practices, cultural nuances, and the complex legal and regulatory landscapes in different jurisdictions.
Service Offerings and Customization Options
Evaluate the range of services provided by the EOR, such as payroll management, benefits administration, HR support, and compliance assistance.
You also need to determine if the EOR offers tailored solutions to meet your specific business needs and industry requirements, plus the scalability of their services to accommodate your company's growth and changing demands.
Reputation and Client References
Research the EOR's reputation in the industry, including their track record, longevity, and client satisfaction levels. Seek client references or testimonials to gain insights into their performance, reliability, and responsiveness.
Also, check for reviews or ratings on reputable platforms and engage in discussions with industry peers to gather feedback on their experiences with a particular EOR.
Pricing Transparency
You should also be able to clearly understand what you’re paying for. Some EORs will hide costs in their fees, so you want to engage with a provider that will be transparent in their billing practices.
This leads to an important question…
How Much Does an Employer of Record Service Cost?
The exact cost of an Employer of Record will vary based on the number of employees and the locations you are hiring in. However, these costs will almost always be lower than what you'd pay for a full-service human resources solution.
RemoFirst offers a comprehensive service starting at $199 per employee per month (and $25 for independent contractors). We offer the best price on the market — if you find a better price, we will match it! If you’d like to know more, you can book a demo with RemoFirst today and start hiring tomorrow.
Is an EOR the Same AS a PEO?
An Employer of Record (EOR) and a Professional Employer Organization (PEO) both provide services that help companies manage and take care of their distributed teams.
However, their main difference is that while an EOR establishes a legal employer-employee relationship with the workers they hire on behalf of the client company, a PEO operates under a co-employment relationship with the client company.
Since an EOR acts as the legal employer, companies can employ workers in different countries without needing to set up a local entity.
In contrast, a PEO forms a relationship between the client company, the employee, and the PEO, requiring the client company to have a local legal entity in the desired country or region for hiring purposes.
With an EOR, the responsibility for compliance with labor laws rests with the EOR, as they become the legal employer on paper. In the case of a PEO, the client company retains sole responsibility for complying with local labor laws
Global Employer of Record: International Workforce Management Made Easy
Ultimately, if you’re looking for an easier way to manage global hiring and employee benefits, there’s no substitute for an Employer of Record company. Using an EOR should simplify everything: you can save on taxes, work with a trusted partner, and enjoy the peace of mind that comes from offloading the administrative burden of international hiring.
Thinking of partnering with an Employer of Record to simplify international hiring? Here are the questions you’ll need to ask before choosing a service provider.
