Is your Employer of Record’s onboarding process above board?

When a company hires a new employee using an Employer of Record (EoR), the EoR undertakes the worker’s entire onboarding process while keeping the worker and employer compliant every step of the way. But before we take a look at how to spot signs of non-compliance, here’s a quick reminder of what an EoR is.

What is an Employer of Record?

An Employer of Record (EoR) is a third-party organisation that employs and manages compliance and HR support for an organisation’s workers. The EoR manages worker onboarding, contracts, benefits, and visa and immigration support.

The benefits of using an EoR

Access to world-class expertise

Engaging an EoR means that organisations have access to vital local expertise. A team of experts armed with all necessary information pertaining to complex local employment regulations will manage the onboarding and ongoing support of workers. This team will include experts in compliance, global payroll, and more.

Efficiency

Establishing an entity abroad can be time consuming and expensive. Using an EoR service means that organisations can avoid this arduous process, while efficiently and cost-effectively onboarding staff abroad.

Cost-effectiveness

Engaging an EoR means that organisations can combine costs such as immigration support, taxation advice, and payroll services. This approach can prove more cost-effective, as opposed to hiring, paying, and liaising with separate service providers to conduct services. This is in addition to avoiding the costs that can be incurred by non-compliance.

Compliance

Global compliance is crucial when hiring abroad. Local labour laws differ greatly between countries and territories, rendering global employment an extremely complex landscape. Engaging an EoR allows organisations to mitigate compliance risk and, therefore, avoid serious penalties for non-compliance.

Penalties for non-compliant EoRs

Some EoR providers may value perceived speed and efficiency over a thoroughly compliant onboarding process – leaving both the employer and employee vulnerable.

If a company or an organisation is found to be non-compliant with local employment regulations, it can face serious penalties. These include financial penalties such as large fines, and also more severe consequences such as entity closure, legal proceedings, and reputational damage.

In the UK, misclassification of workers can lead to organisations and workers failing to meet IR35 requirements. Employees found to be working prior to the completion of the onboarding process also risk losing their worker status.

In 2023, nearly 200 companies in Canada were fined for employment non-compliance, while new laws introduced in New Zealand at the start of 2024 dictate that employers can be fined 3,000 NZD per migrant employee found to be working outside of the terms of their visa.

What to look out for when choosing an EoR

To ensure you are appropriately and adequately protected and supported during and after the onboarding process, it is crucial to look out for the following indicators of non-compliance.

Oversimplification and unrealistic timeframes

Any diligently undertaken task takes time. The same principle applies to onboarding workers 100% compliantly. If an Employer of Record offers a 24-hour onboarding timeframe, this may indicate that certain requirements are yet to be met by the time the employee commences work – leaving both employer and worker exposed.

Quick turnarounds can indicate that corners are being cut, as collecting and consolidating all employee data and fully onboarding all data on to the various systems including payroll, benefit plans etc., takes time in order to be thoroughly executed.

Omission of legal requirements

Failing to complete legal requirements - such as right to work checks and advising the employee about the workplace pension process - is a red flag.

For example, right to work checks are compulsory for every UK employer. That means that employers must perform basic checks to verify that the employee has permission to accept and perform the role in question.

It’s important to note that right to work checks must be carried out for every single employee, as singling out certain employees may lead to instances of unlawful discrimination.

In the UK, it is mandatory that a new employee is advised of their workplace pension and the opting-in and opting-out processes. If an EoR fails to complete right to work checks or to advise workers of the workplace pension and processes, this could be an indication that they are non-compliant.

Few or no questions before or during the onboarding process

When a worker is joining a company, the employer or Employer of Record should require, at a minimum, proof of nationality, right to work clearance, and any information pertinent to visa applications.

If this information is not immediately requested, this could indicate that the EoR may be attempting to complete the necessary onboarding processes after the worker has commenced work. This can lead to incorrect or incomplete onboarding, leaving the worker without a contract or other necessary employment documentation for prolonged periods, and the employer exposed to legal issues.

Encouraging workers to register as self-employed

If an EoR encourages the worker to register as self-employed, it is likely that this is so you can be treated as an independent contractor, rather than an employee who is entitled to certain rights and benefits.

Hiring a full-time employee as an independent contractor means that the EoR does not have to pay any of the taxes and insurances incurred by hiring a full-time salaried worker.

Misclassifying workers is illegal and if a worker is found to be misclassified, the employer can be subject to large fines and the revocation of their sponsorship license, meaning that the worker risks losing their employment and visa.

How Mauve Group can help

Mauve Group has 28+ years of experience, with an international network across 150+ countries, and vast cross-industry expertise. We have partnered with 2,250+ organisations across 70 industries.

Our people-led approach and flexible, bespoke solutions support businesses of all sizes to address their challenges, allowing businesses to seamlessly expand and thrive beyond their home markets.

Whether you’re an SME or multi-national corporation, with either a short-term or a long-term project in mind, our global EoR service provides everything you need to expand your business globally.

Partner with Mauve to compliantly empower your workforce from anywhere. Contact our team today.