What is an Employer of Record (EoR)?
Everything you need to know about working with an Employer of Record
When employing workers in a new country, businesses have a few options. For example, they might choose to expand and open a legal entity in that country. Another popular option is to engage an Employer of Record – but what is an Employer of Record (EoR)?
Fundamentally, it’s a way for businesses to take the headache out of international employment. An Employer of Record service provider can look after tasks like payroll processing, overseas employment laws, and ensuring local compliance.
With the global EoR market growing at 6.8 per cent annually, more companies than ever are using an Employer of Record to manage their international employees. Here, we’ll look at what is an Employer of Record exactly, and how hiring one can help you.
What is an EoR?
While taking a company global can be intimidating, engaging an Employer of Record service can lower the financial and administrative strain of hiring and managing international workers. In effect, it’s a third-party organisation that employs, pays, and takes on all the necessary human resources tasks for another company’s workers. These HR services can include:
- Employee onboarding
- Arranging employment contracts for international workers
- Handling overseas employee benefits
- Dealing with work permits when necessary.
The Employer of Record also helps businesses minimise compliance risks and support employees working abroad. With rising workforce trends like remote work and work from anywhere, using professional employment services have become a common practice for international companies worldwide.
Employer of Record meaning for businesses expanding overseas
Employer of Record is defined as a service that absorbs any necessary local employment and HR tasks. This allows growing businesses to focus on the day-to-day management of workers or their broader global projects. In that way, Employer of Record solutions assist organisations by employing their workers in countries where they lack a local entity.
When it comes to global business expansion or international employment, employee compliance is key. Professional employment services can give companies the peace of mind that all local regulations are being properly upheld. A global Employer of Record service can be utilised by businesses of any size, overseas or at home, and on long or short-term projects.
What are the key benefits of EoR services?
Using an Employer of Record allows companies to access local expertise. You’ll benefit from a team of dedicated experts with first-hand knowledge of employing overseas. You’ll also be supported by a network of local experts in global payroll, accountancy, legal employer responsibilities, and regulatory compliance.
Global expansion at your pace
Setting up a legal entity abroad can be a costly and time-consuming process. Meanwhile, transitioning staff into new markets quickly and simply can help overseas projects succeed. When companies utilise Employer of Record (EoR) services, onboarding is faster, immigration is accelerated, and the lengthy timescales of entity set-ups are avoided.
Look after and retain key staff
At a time when staff retention is more critical than ever, working with an Employer of Record can help you provide a great workplace experience. You’ll ensure a smooth onboarding with ongoing employee support. On top of this, your EoR handles tasks vital to staff wellbeing, like:
- Paying workers’ compensation correctly
- Support and retain workers looking to move to another country
- Looking after any perks, such as health insurance
- Handling any employee payroll taxes correctly.
In addition to the obvious cost savings of potential non-compliance fines; Employer of Record services allow companies to save by consolidating costs and ensures they don’t need to hire multiple local professionals like accountants or immigration lawyers. This may relate to:
- Payroll services
- Foreign exchange liabilities
This instead lets you focus time and funding on business operations that directly impact your bottom line.
Comply with local employment laws
With significant variations in local labour laws, global employment can be complex. Using an EoR service will ensure all international staff are working legally and compliantly in-country.
When should you engage a global Employer of Record?
To attract the best talent – wherever it is
The search for global talent has intensified in recent years. The new remote work era has moved hiring away from central office locations, allowing companies to source staff from anywhere. As an employer, now might be the perfect opportunity to gain a competitive advantage by tapping into the global talent pool – working with an Employer of Record makes this process a lot simpler.
To save time when hiring in multiple locations
Many factors should be considered when managing employment overseas. For example, if a company were to hire three employees located in different parts of the world, it would need to spend time and money researching the various laws and regulations required to set up in those countries in addition to the often lengthy set up processes themselves. In this case, working with local experts can save significant amounts of time.
To ensure compliance with local laws
Many companies may be naïve about the full extent of the legislation they need to comply with as it may be vastly different to their own experiences. From local payroll systems to varied visa programs and tax laws, companies should undertake thorough research to ensure full compliance in their employees’ country of work. An Employer of Record can help ease this burden with their expert local knowledge.
To expand in a cost-efficient way
Unfortunately for many employers, the costs involved in compliantly setting up in another country are inefficient and, often, impractical. An Employer of Record handles the HR responsibilities in a cost-efficient way, freeing the company to focus on the core tasks of its day-to-day business while gaining access to a broader international talent pool.
Are there other similar models?
PEO (Professional Employment Organisation)
The term Professional Employment Organisation is an ambiguous phrase that is often used incorrectly. It refers to two types of relationships between the solutions provider and their clients.
In the United States, for example, employment requirements and regulations vary between states. A domestic PEO enters a co-employment relationship with the employer, assuming the responsibility of administering payroll, benefits, and managing HR tasks in each state.
Another form of PEO describes a different type of relationship with the client, where the global solutions provider handles the employment of a client’s worker. The difference is the client will have sourced staff prior to engagement with their solutions provider and will continue to assume the responsibility throughout their working relationship. This is a form of co-employment.
GEO (Global Employer Organisation)
Whilst some consider “GEOs” and “EoRs” interchangeable; a GEO usually refers to an internal legal entity that act as an in-house service provider to enable cross-border employment and enhance local-compliance.
Co-employment describes the contractual agreement between a PEO (similar to the domestic US PEO model, not an EOR) and its client, whereby they share the responsibilities of the new employee. The co-employment contract allocates certain obligations to the client company, such as sourcing talent and daily management of the worker and their tasks. While the PEO is responsible for all the HR and administrative tasks such as payroll and benefit. Meanwhile, the client company continues to manage the daily tasks and performance reviews of the employee. Co-employment is predominantly practiced in the US; it’s heavily regulated in some countries and in others it can event be considered illegally.
How does engaging an Employer of Record work?
If you think an Employer of Record service is the correct choice for your business, an organisation such as Mauve Group contracts with the client company in master service agreement to provide EoR services to workers. Mauve then employs the worker through their local entity as the worker’s employer, providing them with an employment contract and enrolling them on local payroll.
The Employer of Record should have a Client Liaison team and on-the-ground staff to enrol the worker on the payroll, pay all necessary contributions to the authorities and remit all compensation to the employee. They should also offer the in-country worker ongoing support and regular check-ins. They advise on contract types and allowable terms as well as raising a fully compliant local agreement. Finally, for expatriates, the Employer of Record could also advise on issues of global visas and immigration and sponsor and apply on their behalf for visas or work permits if required..
Looking after your global workforce
So, what is an Employer of Record? It’s a third-party partner that helps you employ and payroll staff abroad, ensuring compliance with legal, tax and HR matters. Their in-country knowledge and presence can help save you time, effort and cost – all while keeping you compliant with local laws. For Employer of Record services with a human touch, speak to Mauve’s global experts today.
The information provided has been checked for accuracy as of the date of publication, and is intended as a general guide and for information purposes. It is subject to unanticipated and unexpected changes and does not constitute legal advice.