Registered employers may be located in the same country as the business for which they employ workers or in another country with different labor laws.
An employer of record (EOR) is an entity that provides legal employment of workers on behalf of other companies. EOR is responsible for such aspects of employment:
- compliance;
- payroll;
- taxes;
- benefits.
How does an employer of record work?
The EOR does the expensive and challenging work of setting up companies worldwide. This includes banking, insurance, tax, HR, manufacturing, and contract requirements. They follow local labor laws to create an infrastructure for hiring and paying local workers.
Companies using EOR rely on the vendor to hire workers on your behalf. They also assume legal responsibility for complying with all local wage and employment laws. Registered employer:
- Engages local employees in compliance.
- employment contracts.
- Lists salaries, taxes, and benefits due.
- Supports staffing needs of employees within the country.
- Cost-effective means of managing payroll taxes.
EOR only handles HR and payroll for in-country employees. The client company manages employees’ day-to-day work, including performance reviews and termination decisions. You benefit from domestic employee contributions without putting your organization at risk.
What are some benefits of using EOR?
Below are some EOR provides for businesses:
- Compliance with HR operations
An EOR saves time and money in the hiring process by handling all the paperwork and bureaucratic jobs associated with hiring an employee. From local currency payroll to onboarding, services vary from provider to provider, so business owners must ensure a potential EOR offers everything they need before committing.
- Compliance with local labor laws.
An EOR can assist in meeting local regulatory requirements by having local experts handle all aspects of employment within the local jurisdiction.
- Flexibility of staffing.
EOR helps to increase a company’s flexibility during staffing. Businesses use EOR to hire international contractors on a temporary or project basis. This is useful for start-up companies.
- Cost savings
The cost of using an EOR is much less than the cost of setting up a business in a specific country. EOR services can save by allowing you to build teams worldwide. Paying team members from different countries can be more cost-effective since a decent salary for a worker in a particular country or city may be much lower than your business expects.
- Increased expansion time
The ease with which the right EOR can allow businesses to attract new team members and unlock a vast pool of talent worldwide means teams can scale faster.
- Access to the diverse talent pool
A diverse workforce is a better workforce, and creating a global team will naturally make your business more varied by adding a range of team members with different cultures and perspectives.
There are many benefits to using EOR, and you should carefully weigh the pros and cons before making a decision.
What to Look for in an Employer of a Recording Service Provider
The extent of the provider’s knowledge in the multiple countries you plan to expand is critical. One way to assess this is to find out how long the service provider has been in the country and whether it has a direct structure rather than relying on local partnerships. To understand the quality of the provider, you can answer the following questions.
Is the EOR provider in the country permanent?
Only a permanent legal entity can provide local billing and other comprehensive HR services. A permanent legal entity will also indicate the provider’s commitment to providing services in the country – it would only spend the time and effort required to establish the legal entity if the country was a priority.
What is the level of local knowledge among your staff?
The EOR provider must have local staff to manage the clients’ HR and payroll services fully. The best suppliers will also have years of experience in the country and numerous client examples to support their expertise. If your EOR provider has in-depth local knowledge, they may be able to handle your complex employment situations.
