Everything You Need to Know About Employer of Record (EOR)

You’re an employer who wants to go global. It’s a competitive world, and you want the ability to hire remotely in different countries and find the best talent. You find the perfect candidate and then realize that your payroll provider does not support hiring abroad.

When you start hiring employees outside of your home country you have to factor in taxes and legal compliances in your employee’s country.

For example, how do you handle tax registration and payroll processing? How do you manage employment contracts, benefits, and social contributions?

The solution for most companies involves opting for an Employer of Record (EOR) service. We’ve outlined the essential information you need to know, as well as the benefits you can expect from this kind of service.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is an organization that helps companies expand internationally by hiring and paying employees on behalf of another company. EORs assume the responsibility for all formal employment tasks, including onboarding processes and compliance documentation.

Simply put, using an Employer of Record (EOR) allows companies to legally and efficiently engage with workers in other countries without having to set up a local entity or risk violating local employment laws.

EORs can help you customize the employment contract to reflect important considerations for you and your business — for example, you can ensure your intellectual property is fully protected through robust IP protections in your employment contract.

How Does an Employer of Record work?

An Employer of Record (EOR) works by reducing the risk of compliance violations. The employer is still in charge of the employee's day-to-day operations (such as tasks, meetings, performance reviews, and termination decisions), while the EOR handles the administrative burden of managing a foreign workforce.

This model has become more popular with the rise of remote work. These are some services your EOR may provide:

1.Onboarding

EORs offers full-service employee onboarding. They help employees get up and running by creating contracts, acquiring signatures, collecting all the necessary paperwork and tax forms, and adding the new employee to your payroll. Some companies will also offer services such as issuing equipment and obtaining work Visas as part of their Onboarding.

2. Payroll management

An EOR will handle payroll processing, tax, and benefits enrollment, as well as other administrative functions associated with hiring employees in a new country. They also support international payments, ensuring your team receives payments consistently, accurately, and compliantly across time zones and countries.

3. International benefits

Offering benefits is one of the best ways to attract and retain top talent. An Employer of Record (EOR) helps foreign employees who need different benefits based on their location.

The EOR partners with benefits providers around the globe to administer mandatory and non-mandatory employee benefits like health insurance (medical, dental, and vision), social security, unemployment insurance, sick leave, wellness programs, work-from-home allowances, financial benefits (international pension plans and 401(k) retirement), and more.

4. A single point of contact

Most EORs will appoint you a representative that your company can contact with urgent needs or questions about staffing in your new location. They act as your resource for all things pertaining to your international employee hiring and benefits, so it’s one less thing to worry about as you expand into new markets.

5. Immigration Compliance

If you don’t have a local entity in the country where you are hiring, you're better off working with an EOR. It's easier to get work visas when you use your EOR’s team of legal experts and HR pros who know the ins and outs of each country.

They will set you up for success right from the start to prevent risk, fines, and prevent lawsuits later on by staying up-to-date with changing global regulations.

Benefits of using an Employer of Record

You can think of your Employer of Record (EOR) as a managed service provider (MSP) for HR – handling everything from recruiting and hiring to payroll, benefits, taxes, and more.

These are some of the benefits of working with an EOR versus owning your own legal entity in each country.

Speed

With an EOR, you can outsource all your HR needs and leave the details in the hands of someone who knows all the ins and outs of hiring in each country. Setting up an entity and your own local bank accounts can take months.

EOR’s can help you hire talent in a matter of days with less paperwork or legal requirements from your end.

Cost reduction 

An EOR is a great option for employers who want to save money on hiring costs. It’s expensive to set up entities, manage compliance filings, and hire lawyers & accountants in each country.

Some types of entities even require significant capital deposits and hiring local director services. Instead, you shift the burden of this cost to the EOR and let them manage that cost and complexity on your behalf.

Having the EOR hire your employees and act as their employer also means you won't need to incorporate in that country before testing a potential market.

Oversight 

If you are expanding into several locations at once, your team is too busy to keep track of employment compliance in an ever-changing regulatory landscape.

Your EOR will provide you with global (and regional) expertise, and should provide tech-enabled solutions to view your global workforce without having to reach out to multiple providers across multiple time zones and languages.

They have the capability to run background checks and ensure full compliance with all local requirements: taxes, social security, workers’ compensation, minimum wage, termination requirements, employee benefits, etc.

What to Look for in an Employer of Record

Not every Employer of Record (EOR) is made equal. You should do your due diligence to make sure the one you choose is reputable and that they understand how to operate in your country of interest. You should also be able to clearly understand what you’re paying for.

Some EORs will hide costs in their fees, so you want to engage with a provider that will be transparent in their billing practices.

Some other factors to consider when choosing an EOR are their industry knowledge and experience, the quality of the employees they recruit, and the services they provide.

An EOR that has access to all three markets – local, regional and global – is best placed to offer you the flexibility and support you need when expanding your business into multiple countries or regions.

Additionally, you should take into account their features and benefits; for example, Remofirst is available in 150+ countries and has all the features you need to run your global business via an intuitive human resources information system (HRIS) platform.

Who is an Employer of Record Service for?

This solution is typically used when a company is expanding into new markets and has to hire international employees, or is hiring remote workers. While remote work has been increasing in popularity over the past few years, some companies don't want to deal with the additional tax and legal hassles that come with hiring remote workers.

That's where an Employer of Record (EOR) can help.

Partnering with an EOR will allow your company to hire globally, penetrate new markets, sponsor work visas, and more, without the complications of managing international human resources.

How Much Does an Employer of Record Service Cost?

The exact cost of an Employer of Record will vary based on the number of employees and the locations you are hiring in. However, these costs will almost always be lower than what you'd pay for a full-service human resources solution.

Remofirst for example offers a comprehensive service starting at $199 per employee per month (and $0 for contractors). They offer the best price on the market — if you find a better price, we will match it! If you’d like to know more, you can book a demo with Remofirst today and start hiring tomorrow.

Final Thoughts

Ultimately, if you’re looking for an easier way to manage global hiring and employee benefits, there’s no substitute for an Employer of Record (EOR) company.

Using an EOR should simplify everything: you can save on taxes, work with a trusted partner, and enjoy the peace of mind that comes from offloading the administrative burden of international hiring.

If you didn’t find the answer you were looking for, please reach out to Remofirst, and they will be happy to assist!

This post was originally published on Remofirst.