What is an Employer of Record?
Everything you need to know about Employer of Record
An Employer of Record is an intermediary organisation that hires, pays, and takes on all the necessary HR tasks for another company’s workers. With the rise of new workforce trends such as remote work and work from anywhere – the use of professional employment services has become a common practice for international companies.
As office spaces transition around the world to optional bases rather than mandatory workspaces, Employer of Record solutions can be beneficial to companies at home or abroad. Simply, Employer of Record services ensure that businesses stay compliant, and employees are supported when working abroad. Taking a company global can be an intimidating feat but engaging an employer of record service can lessen costs and ease the administrative strain of hiring and managing international workers.
How does an Employer of Record work?
Employer of Record solutions support organisations by compliantly employing their workers in countries where their own local entity is lacking. An Employer of Record service absorbs the necessary local employment and HR tasks, allowing expanding businesses to focus on the day-to-day management of workers or their broader global projects.
This global service can be utilised by businesses of any size, overseas or at home, and on long or short-time projects. When it comes to global employment or entering new international markets, employee compliance is key. Professional employment services can give companies the peace of mind that all local regulations are being properly upheld.
If your business requires an employment solution, an organisation such as Mauve Group will set up a Service Agreement with a client in order to share the employer responsibilities. After this, the client maintains control over the daily management of employees – while Mauve Group takes on the local payroll, tax, social security, and HR tasks. Our dedicated Client Liaison team and on-the-ground staff will perform in-country worker support and regular check-ins. Our contracts department will also advise on a suitable contract for the worker’s assignment and raise a fully compliant local contract. If Employer of Record is being utilised abroad, Mauve Group’s Employer of Record solutions can advise of international immigration and visas.
What are the key benefits?
Using an Employer of Record allows companies to access local expertise. Mauve Group has a team of dedicated experts with first-hand knowledge of employing overseas, supported by a market-leading network of local experts in fields such as accountancy, legal, and compliance.
Transitioning staff into new markets quickly and simply can help overseas projects get off the ground. When companies utilise an Employer of Record service, onboarding is faster, immigration is accelerated, and the lengthy timescales of entity set-ups are avoided. Setting up a legal entity abroad can be a costly and time-consuming process. Hiring your workers through an Employer of Record service bypasses the need for this completely – making global projects financially viable no matter the company size.
Engaging a third-party employment agency also reduces cost and mitigates risk. Employer of Record services further allows companies to save on the costs related to payroll and taxation, foreign exchange, and immigration. With large variations in local labour laws, global employment can be complex. Using a global employment service will ensure all international staff are working legally and compliantly in-country.
When should you engage an Employer of Record?
Following the economic hit faced by businesses globally, the competitive search for global talent has intensified. As an employer, now may feel like the perfect opportunity to gain a competitive advantage and tap into the global talent pool. In a new remote work era, hiring internationally can seem simple without the requirement of office space; however, many factors should still 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 three individual countries. From local payroll systems to varied visa programs and tax laws, companies should undertake thorough research to ensure full compliance in their employees’ home countries.
Unfortunately for many employers, the cost and time it takes to compliantly set up in another country are inefficient and unpractical – this is when you should engage an Employer of Record. An Employer of Record handles the HR complications at an affordable price, providing the company time and money to focus on the core tasks of its day-to-day business while ultimately gaining access to a wider international talent pool.
Breaking Down Similar Models
PEO (Professional Employment Organisation)
The term “Professional Employment Organisation” or “Professional Employment Outsourcing” is an ambiguous phrase that is often used incorrectly. It refers to two types of relationships between the global solutions provider and their clients.
In the United States, employment requirements and regulations vary between states. To facilitate the complications of meeting the local rules for each state, a PEO denotes an organisation that enters a co-employment relationship with the employer. They will then assume the responsibility of administrating payroll and benefits and managing HR tasks – allowing the employer more time to manage daily employee-related responsibilities.
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 type of service is otherwise referred to as co-employment or an Employer of Record.
GEO (Global Employer Organisation)
A Global Employer Organisation is a third-party entity that utilises an Employer of Record to hire employees overseas, without the need for its own subsidiary in the foreign country. The use of a GEO streamlines the onboarding process of new employees while ensuring compliance in the host country.
The term GEO is often used interchangeably with Employer of Record because they both hire employees on behalf of the client, assuming legal responsibility for new employees. However, the GEO only becomes an Employer of Record once it has hired an employee and the contract is signed. Once this occurs, the client’s worker is legally tied to the GEO, despite responding to the business needs of the GEO’s client company.
Co-employment describes the contractual agreement between a PEO and its client, whereby they share the responsibilities of the new employee. Although the new hire is legally employed by the client company, the PEO handles administrative tasks, such as payroll and benefits. Meanwhile, the client company continues to manage the daily tasks and performance reviews of the employee.
Interested in engaging an Employer of Record service for your business? Access hiring support that meets your efficiency needs with a human touch – speak to Mauve’s global experts here.