Expanding a global presence is a natural and savvy move for any growing business. Hiring international talent is an excellent approach to tapping into new foreign markets, and a global employer of record (EoR) can help you along that trajectory. This guide explains the role of an employer of record, how to utilize an EoR, and the benefits of partnering with a global EoR to achieve your global expansion goals.
Employer of Record Meaning
An employer of record (EoR) is a third-party organization that becomes the full legal employer of your workforce and assumes all employer-related responsibilities and tasks on behalf of your company. An EoR takes on a company’s human resources responsibilities and onboards, pays, and manages your supported employees while you maintain and control the day-to-day operations.
What Is a Global Employer of Record?
A global employer of record allows companies to legally engage with employees across international borders without having to set up a local entity or risk violating local country or state employment laws. Think of a global EoR as your international HR team who understands the complex labor laws and payroll regulations of the different markets your workforce is located in.
What Does an Employer of Record Do?
Ultimately, an employer of record allows companies to legally and efficiently engage with talent in a new country or state without having to set up a local entity or risk violating local employment laws.
The global EoR carries out the legal and regulatory requirements of immigration, employment, payroll, and benefits for your distributed workforce. While the global EoR is the legal, registered employer for the supported employee, you maintain control over day-to-day management tasks, such as compensation, position duties, projects, and performance management.
Some of the services that a global EoR provides:
- Drafts and maintains locally compliant employment contracts
- Manages all payroll and tax withholdings
- Pays supported employees on time
- Offers comprehensive and statutory benefits
- Ensures compliance with terminations and offboarding
- Provides ongoing support on local labor laws and regulations
Benefits of an Employer of Record
A global EoR partner offers companies many benefits. Because most companies don’t have the resources or extensive knowledge to compliantly hire in international markets, an EoR allows you to hire top talent from anywhere and support them based on their local needs. A global EoR also helps you:
- Onboard talent quickly
- Save costs compared to entity setup
- Retain talent and offer comprehensive benefits packages
- Maintain compliance with employment contracts and evolving labor laws
- Receive ongoing HR support
When to Use an Employer of Record
An employer of record is a valuable partner when it comes to balancing a distributed workforce and navigating global markets. A global EoR allows businesses to:
Explore New Markets
If you want to explore a new market but your business does not have plans to set up an entity, an EoR allows you to compliantly test out a new country without the commitment of entity establishment. Through an EoR, you can hire a team quickly in new global markets, generate new revenue streams, and reach new customers.
Attract and Retain Top Talent
The ability to work from anywhere is a highly desirable benefit in today’s labor market. The competition to attract top talent is as fierce as ever, and more and more companies are turning to remote options for their workforce. Additionally, hiring with no geographic limits opens up the talent pool and allows you to hone in on a workforce with the exact skillsets you’re looking for.
A global EoR helps companies hire from anywhere and attract top talent. Additionally, when employees want or need to be relocated, a global EoR helps you retain your top-tier talent without needing to set up an entity.
Hire Employees During Entity Set Up
While entity establishment allows you to hire local talent and expand into a new international market, it requires an extensive amount of time, money, and expertise in the country’s local laws. An EoR can serve as an intermediary solution, offering hiring support and insight into entity establishment while you finalize the requirements.
Avoid Misclassification of Contractors
An alternative to hiring international employees or establishing an entity in another country is to engage contractors instead. Many companies use contractors as a cheaper option to hire remote, international talent. However, once a company grows large enough, it faces a substantial risk of misclassifying contractors as employees. A global EoR provides an efficient way to hire contractors as employees to avoid compliance risks.
How to Select an Employer of Record Partner
There are several important considerations to make when selecting an EoR partner:
- Transparent pricing. Find an employer of record with clear pricing with no surprise charges or fees that make it easy to stay within your distributed workforce budget.
- Accurate employer burden calculations. Look for a provider that is informed and accurate about employer burden costs. When calculating payroll costs, an employer must also take other social contributions into account, such as health insurance, social security, and paid time off. These employer burdens differ between markets and your EoR partner is responsible for providing you with accurate quotes on those requirements.
- Worldwide coverage in markets you need. Make sure your partner has deep expertise and knowledge of the markets you are engaging talent in. Working with an inexperienced partner costs you unnecessary time and money, and puts you at risk of non-compliance with local labor regulations.
- Responsiveness and support. Choose an attentive partner who can quickly respond to you and your team’s needs. Your EoR partner is there to regularly engage with your existing workforce and new talent on your behalf. Make sure your EoR partner provides an assigned client account manager who quickly answers your team’s questions, onboards new supported employees, and accommodates local time zones and languages.
- Independent third-party validation. Consider a partner that has been identified as an industry leader by relevant and credible third-party sources. Unbiased validation reports from industry analysts are based on in-depth research and customer insights. Reviewing these reports helps you quickly identify verified EoR leaders that offer the best solutions for growing and supporting your global workforce.
Employer of Record vs PEO: What’s the Difference?
The primary difference between an EoR and a professional employer organization (PEO) is that an EoR is the legal employer of a company’s distributed workforce, and a PEO acts as the company’s co-employer.
While an EoR handles all HR tasks, such as onboarding, payroll compliance, payroll, taxes, and benefits, a PEO partners with small and medium-sized businesses to provide HR services.
Employer of Record vs Staffing Agency: What’s the Difference?
A staffing agency is different from an EoR because it recruits candidates to meet temporary workforce needs. A staffing agency or firm recruits workers and matches them to businesses to fill worker absences, skill needs, or special projects.
Hire Talent Anywhere With an Employer of Record
When tapping into new international markets, each expansion comes with its own unique mix of complexities that require an experienced team. As your global Employer of Record partner, Velocity Global ensures the highest level of support for you and your distributed workforce. Our global capabilities in 185+ countries, unrivaled expertise, and dedicated service enable you to quickly and compliantly hire top talent. We offer a full suite of global workforce solutions that handle all risk mitigation, local labor requirements, and compliance while you focus on growing your business.
Reach out to us today.