As anyone who has hired an employee will tell you, there is an overwhelming amount to consider when exploring how best to employ talent to an organization, one common phrase that will enter the dialogue is “employer of record”. Choosing an employer of record option explores differences between 1) outsourcing talent solutions, 2) engaging contract employee relationships, or 3) hiring fully under your established legal entity. Not to mention considerations of where you intend your talent to be working – domestically or internationally.
However, there are alternatives to this traditional method of employing your talent. You can directly outsource tactical employment liabilities by leveraging an employer of record. Many industries offer different levels employer of record services such as PEO, ASO, BPO, staffing firms, or FSaaS just to name a few.
Clearly, employment law, compliance, and service key business needs play an unspeakably important role in selecting the employer of record model that makes the most sense, so make no mistake that this vendor selection is a big decision.
At its simplest form, employer of record essentially means who is signing on the dotted line for the employer liabilities associated with a given employee, which vary greatly between country and include but are not limited to:
- Payroll and taxation – employee and employer liabilities
- Reporting and filing requirements for those liabilities
- Visa application and sponsorship responsibilities, if hiring internationally (link to previous post here)
- Health benefits
- Work injury insurance/workers compensation
- HR liabilities
- Termination requirements
- Unemployment liabilities
As I mentioned, there are fundamentally three employer of record options:
- Outsourcing your talent management & HR solution through PEO, ASO, BPO or some level of staffing firm support. Examples include PEOs such as ADP TotalSource, TriNet, Insperity. Staffing firms like Manpower and or BPOs like Conduit Global.
- Considerations include: Who is liable for what if a conflict arises? Who provides day to day direction to the employee? Who is on the hook if employment compliance is compromised?
- Engaging in a contract employment arrangement:
- Contract employee’s essentially remove the employer of record concerns. But, do open a litany of exposures to the organization as far as IP protection.
- Misclassification of a contractor who should truly be considered an employee can carry high compliance risks if that relationship is questioned by regulators.
- Lastly, the traditional method of employing talent directly under the organization.
- Full employment of this nature brings forth administrative burdens, compliance challenges, tons of time and bandwidth, HR considerations, vendor management and ultimately most of the employer liabilities will fall directly onto the organization.
Ultimately, the direction you choose as far as employer of record will depend on key business goals associated with the needs for talent, what you want that day-to-day relationship to look like, and how much liability as an organization you want to absorb. And if you are considering international expansion, the complexities are tenfold.
At Velocity Global our FSaaS model is revolutionizing the way companies do business overseas. We seek to be of constant service to our clients needing support to that end. If you are curious about international employer of record options for your global initiatives, we would love to chat!