Companies are now becoming more and more aware of the advantages of hiring internationally; hence, many are trying to get new employees from abroad. However one of the main challenges that people hiring internationally face are the pay and the management of workers in foreign countries. If you do not have any legal entities in the country, working with an employer of record is surely one of the finest ways to leverage a global workforce. But what is EOR? Or in fact, how do you use EOR so that it becomes beneficial to your company? To understand the same here is a guide on what EOR is, its importance, and the benefits that you may get.
Table of Contents
- Employer of Record (EOR) Meaning
- What is an EOR?
- What are the benefits of using EOR?
- What are the Drawbacks of an Employer of Record
- What are the different types of EOR service providers?
- Evolution of Employer of Record (EOR) as a Business Model
- When should you use an EOR?
- What are the Services provided by an EOR?
- How much Does EOR costs?
- 5 Reasons to Choose EOR over Outsourcing
- Asanify EOR services
- Conclusion
- FAQs
Employer of Record (EOR) Meaning
An Employer of Record, or EOR, is a third-party organization that accepts on its balance sheet the legal responsibility of a company hiring its workers directly. That responsibility includes payroll, tax, benefits, and importantly, compliance with labor laws at the local level, which enables companies to hire people in multiple locations without having to set up a local entity.
What is an EOR?
An EOR, simply meaning Employer of Record is a service that is provided by one of the third party organizations. It helps you to hire people in other countries while acting as one of your legal local employers on your behalf. The EOR takes up all of the compliance and legal obligations while you get to maintain your day-to-day relationship with the team members as usual.
While usually EOR is used for international purposes, this does not stop them from functioning domestically as well. In a few of the countries such as Canada, the US, or Australia, there could be various employment and taxation requirements based on their regions. For this purpose, most organizations tend to take the help of EOR just to simplify the overall HR processes.
Furthermore, EOR takes up HR roles such as running payrolls, administrative duties, providing compliant benefits along managing taxation requirements. Well, one of the best parts of having an EOR on board is that you need not spend money, time, and resources trying to build the information in-house. Since all of the work is handled by the experts.
Suggested Read: Employer of Record India Cost: All That You Need to Know!
What are the benefits of using EOR
Given the wide scope of Employer of record internationally it is quite easy to see the benefits of choosing this option since it also helps fast-track and simplify the overall international hiring process. Here is a deeper dive into the benefits of EOR you get when you choose the same for your organization.
Simplified Hiring Process:
Imagine you are to hire two employees from two different countries, well in this case you would need individual payroll providers which means there will be two of the same along with two insurance vendors and two different agencies to conduct the employee’s background checks. This could mean the hiring cost could go twice while working with at least 6 different partners which is also excluding various other agencies.
This is exactly why EOR has become a one-stop solution for global employment. You invest in an EOR which will help minimize the complexity of the hiring process which involves handling multiple partners at once.
Compliance and Risk Management:
When you expand your services to more than one country it is possible that your overall compliance lead could also double up or it could be more well that is unless you are partnering up with an international EOR.
EOR also supports compliance monitoring which means you do not need to be an expert in international labor laws, business regulations, or minimum employee benefits to be able to run an internationally recognized organization. This expert team ensures that your business is always operating abroad even when you are not familiar with the laws in your new international markets. When you choose to rely on an EOR you also save up a lot of energy on researching the benefits and labor laws in your employees’ homeland.
Cost-Effective Solutions:
Trying to find yourself in the international market could be quite expensive. The costs associated with setting up a legal local entity and handling the administrative overhead could cripple up your entire budget planning. An EOR however provides you with a much more cost-effective option for expansion.
With EOR, it is also possible to employ international workers while not having to carry the expenses linked to traditional expansion methods such as entity establishment in a new country.
Access to Global Talent:
When you choose to work with an EOR you get a tremendous advantage, especially in terms of the diverse and expansive talent pool. EORs could also help recruit for your organization on your behalf no matter from which part of the globe you want the employee.
This will also help you overcome the geographic constraints that would have otherwise held back the highly skilled employees whom you could hire easily. Not to mention you will also have a culturally diverse team which could open you up to new ideas and innovations.
Also Read: EOR India- A Detailed Guide on Employer of Record
What are the Drawbacks of an Employer of Record?
Even though there are several advantages of EORs, there also exist certain disadvantages. Some of them include:
- Cost: Compared to traditional employment structures, an EOR may be costlier.
- Lack of Direct Control: Companies have less direct influence over employment practices and policies.
- Misalignment of the Process: The nature of the EOR will not necessarily align with the larger company culture or values.
- Dependency on EOR services: There would be a form of dependency on an EOR and their services for Human Resource functions.
- Complexity for Contractors: Of course, EOR services tend to be based on employees, which may introduce complexities when considering contractors.
What are the different types of EOR service providers
When it comes to the global expansion of your business not all of the EOR services are created equally.. Broadly speaking there are mainly two types of EORs that you can choose from. While each of them comes with its own set of quirks and perks, it is more based on what your needs are when it comes to choosing one out of the two.
Partner Dependent EOR service providers
Partner-dependent EORs could also be said like the social butterflies of the global employment world. They tend to collaborate with a lot of local partners in various countries to provide them with all the EOR services. This approach tends to have a lot of perks such as you get a wide reach across various markets. However, you need to be aware that it is not always sure what you will be getting in terms of service quality and pricing consistency.
Own Entity EOR Service Providers
On the other hand, if you are planning to get your own entity EOR could help build their own infrastructure in each country where they operate, Think of them as one of the chefs who control each and every ingredient of the global employment dish they will serve. This model tends to provide much more predictability and stability in terms of both service delivery and pricing which makes it one of the solid choices when it comes to a seamless global expansion.
Evolution of Employer of Record (EOR) as a Business Model
Business models arose due to globalization, where increasingly companies sought to expand around the world without the complexity of separate entities for local companies. The EOR services have been born as a response because until now, this process and related compliance aspects of hiring were made more straightforward, even for companies with an international headquarters. EOR services were designed initially for the home market but today offer a wider, even global solution, for companies to find and hire talent far beyond their home countries and manage their workforces efficiently on an international level.
When should you use an EOR
There are multiple cases where hiring employees with the help of Employer of record is one of the best options when it comes to the expansion of global business. This also includes where the business is not quite familiar with the employment laws where the employee might hail from. While it does allow employers to outsource talents they also act as a legal entity that helps you with compliance.
Expanding to New Markets:
Not every foreign market could turn out to be the best suited for a business’s product. So if you are trying to expand to new markets you might want to hire local employees which gives you more time to understand the local customer base and validate their market expectations before actually committing to it.
Hiring Remote Workers:
Skill shortages often tend organizations to try and look outside their local talent pool. This might lead to hiring employees from either one or two countries. Now this might need more expenses and the setting up of a local entity in both of these countries. In such cases, your organization might need an EOR that helps you do the same with almost half of the price involved.
Navigating Complex Employment Laws:
Hiring a new employee also means that you need to learn all about how taxes work in that country while also complying with a new set of employment laws. And given how complicated it could be, it is unrealistic to expect to navigate through all of them without any outside help. An EOR in turn helps you by understanding all the laws on your behalf and helps you navigate through these markets with much ease.
What are the Services Provided by the Employer of Record (EOR)?
Primarily, EORs provide services such as:
- Payroll Processing: Administration of employee wage and tax withholdings.
- Benefits Administration: Health insurance, retirement plans, etc.
- Compliance Management: Maintaining adherence to local labor regulations.
- Onboarding Employee: Receive new hires, guide through the hiring process, and orient new employees
- Risk Management: Employment-related risks and liabilities of employees.
How much Does EOR costs?
The EOR management fee varies significantly depending upon the country where you are hiring your employees, and also the number of employees you hire. The EOR management fee can go as high as USD 599 per employee per month, and there may also be several other cost heads like per transaction fee, compliance management fee, etc. Asanify offers a clear and transparent pricing structure with the EOR management fee being USD 199 per employee per month as an average.
5 Reasons to Choose EOR Over Outsourcing
- Protection from Compliance: An EOR is familiar with local labor laws and totally eliminates legal risks.
- Market Entry in a Flash: EOR can bring about quicker hiring in new geographies without having a local entity.
- Total Employment Solution: EOR provides all employment services, not just recruitment.
- Access to Local Expertise: EOR gives you the key to local employment practices and culture.
- Focus on Core Business: In this manner of EOR, organizations can focus on their core business rather than the intricacies of HR.
Asanify EOR services
Well, we at Asanify do understand how complicated it is to go through all of the employment laws and the compliance with them. This is exactly why we bring to your top EOR services that not only help employers for a smooth hire but also only the best for the employees. When we say the best for employees we ensure that there is a smooth onboarding and the best benefits in the industry. Here are a few of the perks you get when you go ahead and choose Asanify as your EOR partner:
- You get to start within just 24 hours
- 100 percent payroll compliance while also getting tips on tax-saving options for employees
- Best of best health insurance covers for employees
- An account manager who will be completely dedicated to your requirements 24*7
- Saving almost up to 3% of your payroll cost with our FX rates
Apart from this you also get a fully automated HRMS that is designed such that it maximizes remote employee productivity.
Suggested Read: Employer of Record Services India: The Ultimate Guide
Conclusion
While expanding your market globally might seem like an exciting endeavor, it sure comes along with some risks and some important rules that need to be followed. This is exactly why EOR is one of the best solutions when it comes to hiring internationally. With EOR one thing you can rest assured is that you won’t have to take the burden of the rules of various countries, since everything will be handled on your behalf.
Especially when it is the first time you are trying to get connected with the remote employee it could get a bit tricky. EOR on the other hand could help you do that with much ease hence ensuring you get your much-deserved success even when you go exploring new boundaries.
FAQs
Well the major difference between PEO and EOR is that PEO tends to act as a co-employer whereas on the other hand, EOR is nothing but a legal employer, especially in a global market.
EOR services can process payroll by handling multiple clients and hence providing different pay stacks for all of the clients.
Yes since EOR acts as your legal employer it is definitely one of the services that you can use legally.
When choosing the right EOR service provider you might want to consider a few different things such as follows:
1. Whether your business goals align with EOR
2. Ease of building a remote team
3. Professional experience
4. Legal and compliance experience
5. Experience in various industries
6. Localization and cultural awareness
While Employer of record services benefit almost all industries here are the top 5 industries that could benefit the most while using these services:
1. Pharmaceuticals
2. Technology
3. Renewable and non-renewable energy generation
4. Manufacturing and construction
5. Services and retail market
The use of an EOR in India could be attractive to businesses because it offers a simplified compliance with local labor laws, payroll and benefits administration, and fast market entry with no setup of a local entity.
EOR services in India are legal. They follow the labor laws and regulations of the local state so that they can comply with such responsibilities but still manage your employee-related worries.
An Employer of Record India is a third-party organization that legally employs workers for a company to handle payroll, compliance, benefits, and other HR functions while the client manages day-to-day work.
The benefits are as follows:
Compliance Management: There is full compliance with the labor laws of the country.
Faster Hiring: Employees onboard much faster
Reduced Administrative Burden: Payroll and benefits management easy.
Access to Local Talent: Hiring within the country gets easy.
Risk Mitigation: Handling of legal and financial liabilities.
It processes payroll, administers benefits, ensures tax compliance, handles onboarding, and ensures local employment laws and regulations.
In all cases, using an EOR is easier and faster compared to opening a local entity, which requires long, complicated legal and administrative procedures.
Yes, the EOR companies are structural arrangements to ensure compliance with the local employment laws of a country, thus ensuring that the companies adhere to the stipulations.
Although the EOR entity has formal responsibility for performing duties of legal employment, the day-to-day management of the employee’s work assignment falls upon the client company.
Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant or Labour Law expert for specific guidance.
