Employer of Record: myths and misconceptions

Employer of Record (EoR) services is an increasingly popular option for organisations seeking compliant employment and administration of workers – particularly overseas. As EoR grows in popularity in the wake of the pandemic, more and more companies are recognising its benefits.

This solution’s emphasis on cost-saving, efficiency, and localised support of workers when you cannot be there yourself, was a boon to many organisations in the challenging times of COVID-era restrictions. And it has continued to support businesses in the wave of remote working.

While it continues to grow in popularity, Employer of Record is not quite established itself within day-to-day corporate vocabulary and is an employment model still relatively in its infancy. So, naturally there are myths and misconceptions around EoR that can make companies hesitate to pursue it as an option when considering global expansion.

At Mauve, we’ve put our heads together to consider some of the myths surrounding the EoR model – sharing our own explanations to demystify the process and shine a light on the benefits it can provide to organisations of all sizes and sectors.

Myth 1: EoR solutions cost more than just setting up our own company

The initial outlay of registering a new company in a foreign country may seem low. But the ongoing running costs are a long-term financial commitment. Maintaining a company requires you to consider local staff salaries and benefits.

You’ll also have to factor in regular expenditure on essentials such as premises, banking, business insurances, corporate taxes, utilities, local professional services, and so on.

Without local knowledge, there is also the possibility of unexpected costs such as fines for non-compliance with local laws and late payment penalties.

An Employer of Record service means you simply pay a consolidated monthly margin to the EoR provider, which already has its own local company infrastructure in place and then takes on all employment duties in-country.

Mauve Group also operates an in-house Compliance team and has a network of local partners who will ensure compliant employment, whereas your organisation may not have these resources.

If you wish to explore a new market without the long-term commitment and costs of your own entity, Employer of Record is easily the better value option.

Myth 2: there are hidden charges associated with Employer of Record solutions

For Employer of Record solutions, Mauve Group charges a one-off setup fee and subsequent monthly margin based on the salary amount. EoR costs are consolidated within that monthly charge, so there are no hidden costs.

Full details of the solution are always included in the initial proposal document, giving clients a full understanding of the financial commitment before they sign off.

In delicate employment situations where external advice is needed to ensure absolute compliance, there may be one-off additional costs from external partners. In such instances, advice will only be pursued with full prior agreement from you.

Myth 3: Employer of Record solutions are only for long-term assignments

Employer of Record solutions can be an excellent long-term solution for companies needing to employ full-time, permanent staff. However, you can utilise this employment model for short or fixed-term employment solutions.

As previously mentioned, it can allow you to test the waters of a new market, without long-term commitment. If you want to secure a worker for a short-term or rolling project, EoR may be the answer here too.

Myth 4: EoR is only used for workers who are going overseas on an assignment

EoR is often used for expatriates assigned to an overseas location where their employers do not have an existing or functioning entity. This model can also employ workers in their home country.

If the client does not have an entity in the worker’s home country, EoR is often used to ensure compliant employment without the need for the client to set up locally themselves. We can also provide EoR in locations where the client does have an entity, in limited circumstances where this is deemed to be fully compliant.

Myth 5: my business is too small – EoR is probably only used by big multi-nationals

We understand that SMEs also require overseas employment support – globalisation is no longer just the realm of large corporate companies. Mauve Group itself started as a small enterprise which quickly grew by opening its services to the wider world – so, we have been there, too.

EoR solutions suit SMEs particularly well, as they provide access to the resources of an international company – without the financial and infrastructure requirements. Mauve Group’s EoR solutions do not have minimum headcounts; clients can secure our services for one worker or as many as they need.

Myth 6: EoR is a corporate solution, so wouldn’t suit the not-for-profit sector

Not-for-profit organisations make up a robust proportion of our client base. EoR suits this type of client, because it helps to optimise restricted budgets and also ensures the utmost compliance to give stakeholders confidence in the project.

Timescales for onboarding in-country are considerably reduced, allowing the client to get workers into country quickly and focus on the vital key work they are doing.

Myth 7: I will lose control over managing the worker if Mauve becomes their Employer of Record

An EoR solution doesn’t mean Mauve takes over all decision-making and management of the worker. Mauve works closely with you, the client, to carry out the administration of the worker’s employment, allowing you to manage your day-to-day tasks, as normal.

Mauve is on hand to ensure compliant decisions are made and should always be involved in situations such as terminations and disciplinaries as the local employer. Our approach is to avoid unbalanced relationships and welcome collaboration with the client.

Myth 8: Employer of Record isn’t a legal solution

In most countries, Employer of Record is a recognised legitimate employment model. It is true that some jurisdictions require special licenses or entity registrations in order to perform an Employer of Record solution legally – and Mauve Group holds all required licenses and registrations for its operational countries.

Mauve Group will never offer Employer of Record solutions that are not 100% compliant – for our security and that of our clients.

Myth 9: Employers of Record cut corners

Mauve Group prides itself on 100% compliance, 100% of the time. If an Employer of Record purports to have a 24-hour onboarding timeframe, this could mean that not all requirements are met when the worker commences their role in-country.

This risks leaving both the worker and their employer exposed. These unrealistic turnround times can hint at corners being cut. However at Mauve Group, we ensure that all required onboarding processes are complete before the employee starts work. Therefore, we continue to maintain total compliance at all times.

Myth 10: the Employer of Record won’t share the same company ethos as us

A good Employer of Record should take the time to get to know the client’s guiding values and company ethos, enabling them to offer a consistent service to the worker.

We also seek to share our family values with our clients, so they can ensure we are a good fit for their organisational strategy. Collaboration and communication take place in both directions to create a united partnership.

Myth 11: workers will feel uncomfortable about being employed by a third party

At Mauve Group, we take worker wellbeing extremely seriously and aim to build strong worker relationships throughout the employment. People are at the heart of any employment solution, and we value their personal and professional happiness highly.

Account Managers and Sales Support staff are on hand throughout the EoR setup process for any guidance the worker requires. Once the solution is established, our Client Liaison department or in-country representatives carry out regular check-ins. We also have enjoyed hosting a number of social events for workers over the past couple of years, including our Christmas Cocktail Party in London which we hope to host in other countries.

The proof of worker happiness is in their own positive stories. Many Mauve EoR workers go on to provide references and reviews on Trustpilot, in support of our service offering, and request us as an EoR provider when they move on to new contracts.

Considering an Employer of Record solution, or want more information about how it can support your specific circumstances? Contact us, today.