Employer Of Record What Is It And What Does It Mean For Global Employers

Employer Of Record: What Is It And What Does It Mean For Global Employers?

Moving into the global market is an obvious and smart strategy for every business on the way to success. Hiring international talent is an innovative method of getting onto new foreign markets, and global Employer of Records (EORs) can provide you with help on this pathway. In this guideline, the function of the Employer of Record (EOR) and the way to make use of the EOR to reach your global expansion goals including the benefits of an international EOR will be explained.

Employer Of Record Meaning

An employer of record (EOR) is a third-party agency that acts as a legal employer for your workforce and most importantly assumes all the legal obligations on behalf of your company. An EOR company effectively becomes the human resource department, providing employee onboarding, compensation, and employee management while giving you the authority to maintain and conduct your operations on a day-to-day basis.

What Is The Meaning Of A Global Employer Of Record?

A global EOR which is also known as a global employment organization is a legal tool that enables companies to legally hire people all over the globe without having to form up a local entity or risk being punished for breaking local labor laws. Imagine an international HRO as your company’s HR department that has the cumulative knowledge of labor laws and the sometimes complicated payroll regulations of each market where your workforce is based.

What Is The Duty Of The Employer Of Record?

Basically, employer of record provides an opportunity for a company without setting up a foreign legal entity to employ skilled workers from the global labor market legally and while avoiding labor law violations in each of the local employment markets.

Global EORs fulfill the compliance and rules of immigration, employment, payroll, and benefits on your behalf for your global workforce. As the global EOR will be the legal and registered employer of the supported employee, you retain the responsibility for the day-to-day management assignments, including the control over compensation, assigning duties, project tasks, and performance management. 

These are some of the services that a global EOR typically provides : 

  • Handles employment contract drafting and ensures their compliance with the local law.
  • Takes care of payroll, taxes withheld, and all benefits.
  • Pays assisting workers on schedule
  • Provides comprehensive and statutory benefits.
  • Ensures offboarding and termination compliance
  • Continues to support local labor laws and regulations

Benefits Of An Employer Of Record

The major advantage of a global EOR partner for a company is that it allows the company to save resources. Many companies, especially small and medium-sized enterprises, don’t have the necessary time or skill to get legally hired into a foreign country and would equally not know how to support the employee based on their location needs. This is why EOR allows you to hire top talent from anywhere and provide the needed support for them to comply with local regulations. The global EOR not only helps you but also both parties.

  • Recruit talents quickly and efficiently 
  • Cost savings compared to entity setup 
  • Keep talent and provide comprehensive benefits packages 
  • Maintain compliance with employment contracts and adapt labor regulations 
  • Get continuous HR assistance

When To Choose An Employer Of Record

An employer of record is a great help when balancing a distributed workforce and understanding globalization. A global EOR allows businesses to:

Explore new markets

If your business is targeting a new market with global expansion goals but the business does not have plans to set up an entity, an EOR will provide you with a compliant way of testing out for a new market without entity establishment commitment. Through EOR, your business can hire the team quickly in new markets and locate new revenue streams. Furthermore, the organization can be able to reach out to new customers. 

Acquire And Retain The Best Employees

The convenience of no commute or work schedule is surely a benefit that is highly liked in the modern labor market. The competition for highly skilled talent is ongoing and it is becoming more of a trend for companies to adopt remote workforce options. Furthermore, this type of hiring also gives you the advantage of selecting your candidates from the global talent pool, which helps you to narrow down the list of potential employees precisely to those that have the necessary skills.

Through EOR, global organizations can hire from anywhere and get the best out of it. Consequently, when employees feel or need to relocate, a global EOR can save you top talents without setting up an entity.

Hire Employees During Entity Set-Up

Create an entity that give you an opportunity to hire at a local level and lets you look at the international market as well, however, the process of establishing an entity and understanding the country’s laws may take too long, too much effort, and money. An EOR can act as a transitional resource, ready to engage in the hiring process and guide the business through the requirements as you take care of perfecting all the necessities.

Avoid Misclassification Of Contractors 

Apart from hiring international employees or setting up a business in another country, contracting is also a choice. The majority of firms opt for a cheaper alternative to their domestic talent with the help of contractors nowadays. Nevertheless, as the business goes on to grow steadily, the chance of worker misclassification may arise. The international model of EOR can be useful to a company that takes the contractors as an employee leaving no option for compliance risks.

Read How Chinese Companies Can Access Malaysian Talent

How To Choose An Employer Of Record Partner

Here are some important considerations to make when you choose an EOR partner : 

  • Transparent pricing. Choose an employer of record that has a transparent payment system without any hidden charges or fees that ensure that you have enough money to work comfortably with your remote workers. 
  • Accurate employer burden calculations. Consider a provider that is well-informed and precise about the different kinds of employer burden costs. With regard to payroll expenses, apart from the base cost of wages or salaries, employers need to consider other social charges, like employee health insurance, social security, and paid vacation. Employer obligations can be different between markets therefore it is important that the EOR company that you choose gives you quotations that are accurate to avoid surcharges and high expenses. 
  • Worldwide market access to the markets you need. Ensure that the partner you choose has a deep understanding and experience within the market you are operating. Laboring with an inexperienced partner gives you a loss of time and money. Also, it can put you a risk of violating local labor regulations.
  • Responsiveness and support. According to this, it is best to connect with a partner who will react to you and your team promptly. On your behalf, your EOR partner will be communicating with the workers you presently have and the new people joining your organization. Be sure that your EOR partner has assigned a client account manager who quickly answers the questions of your team and processes the onboarding of a new supported employee and local time zones and languages.
  • Independent third-party validation. Look for a partner that was recognized as an industry leader by the relevant authorities and independent third-party sources. Unlike biased reports, unbiased discrimination reports from the industry can be carried out by analysts whose research and the views of the customers are in-depth. Analyzing such reports will provide you with useful information that you will use to pinpoint the best EOR that offers the best services for growing and supporting your global workforce. 

Read How to choose the right PEO or EOR for your business

Employer Of Record Vs. Professional Employer Organization: What’s The Difference?

The main difference between an EOR and a PEO associated with the distributed workforce is that an EOR is the company’s legal employer while a PEO works as the company’s co-employer.

An EOR deals with all human resources tasks like onboarding, payroll maintenance, tax, and benefits, whereas a PEO works with small and medium-sized businesses to supply them with necessary human resource services.

Employer Of Record Vs. Staffing Agency: What’s The Difference?

The function of a staffing agency is different from an EOR because it typically recruits candidates to meet staff’s short-term needs. A staffing agency or firm screens and hires workers and then matches them to businesses to fill staffing gaps, work shortages, or specialized projects.

How FastLane Group Can Help?

No international expansion is without its complexity and need for an experienced team. FastLane Group can act as your Global Employer of Record (EOR)  and PEO service provider, and go an extra mile to make sure you and your international employees have the best support. Our experience and personalized support allow you to hire the best people fast and in the labor market and its associated regulatory framework.

We provide a complete line of global workforce products that deal with risk management, localization, and compliance while you concentrate on business expansion.  Contact us today.