What is an Employer of Record? HR’s Guide

Their core focus is to eliminate the hassle that comes with international hiring by covering the whole value chain like payroll, benefits, compliance, as well as global tax management in more than 60 countries. An EOR works as a legal employer whereas a staffing agency operates differently, acting as a recruitment partner offering workers on a temporary basis. EORs manage all legal employment issues while staffing agencies handle most of the recruitment. Depending on local laws, registering a business in a foreign country can take considerable time and may require the expertise of financial, legal and HR advisors. Partnering with an EOR that is already registered in the destination country allows businesses to potentially enter new markets faster and with less overhead costs than if they attempted to register on their own. Ensure the EOR has a solid understanding of local labor laws, tax regulations, and compliance requirements in the countries where you’re hiring.

The Benefits of Using an EOR

A professional employer organisation, or PEO, is another category of third-party employee management service. An Employer of Record can be an effective solution to work through compliance obstacles, mitigate the risks of employment in complex jurisdictions, and expand operations efficiently. The platform allows clients, employees, and recruiting partners to handle their aspects of communication for the work assignment. The software also provides insights and analytics on the employees on assignment, costs, and more.

An EOR helps you avoid this legal minefield because they’re automatically compliant in every market where they have coverage. Under ordinary circumstances, if you scale a business into a new country, you’d have to consult with legal counsel in every new country where you established a presence. In the early stages of expansion, these advantages make contractors an attractive option,  especially for startups or teams testing product-market fit. A good global EOR will be aware of these variations and will be able to help you navigate them without needing to become a regional expert yourself.

What is the difference between an employer and an Employer of Record?

The complexity of regional compliance spans multiple state jurisdictions, each with distinct shop and establishment acts and professional tax regulations. It is becoming increasingly difficult for foreign entities to obtain work permits and visas, particularly for certain types of business activity. Using an EOR reduces the risk of noncompliance, because the EOR understands local immigration policies and can hire staff through their own structure. The extent of their knowledge of the country you are looking to expand into is critical when selecting an Employer of Record provider. Furthermore, considering the duration of the provider’s presence in said country is a good indicator of how well suited they are to your needs. Before going ahead with an Employer of Record service, it’s essential that you thoroughly understand the services that are being provided.

Ultimately, an employer of record allows companies to legally and efficiently engage and hire talent within the global marketplace without having to set up a foreign entity or risk violating local employment laws. An Employer of Record effectively hires workers in another country on your behalf. For example, if your company is based in the United States and you want to hire someone in Germany, you can use an EOR to ensure the onboarding process is smooth and, more importantly, legal. Similarly, if you are looking to expand your business operations into Australia, an employer of record Australia can manage all local employment responsibilities. Businesses that need help managing people will sometimes outsource HR to a professional employer organization (PEO). Like an EOR, a PEO can help with payroll and tax processing, benefits administration, hiring and onboarding, regulatory compliance, HR, risk management and more.

• Engaging contractors is a common, cost-effective method for hiring remote, international talent.
• The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
• The software also provides insights and analytics on the employees on assignment, costs, and more.
• An EOR can provide this while also making it easy for an employee to see all their current benefits with a few clicks, from their health insurance plan to their worker’s comp benefits.
• An EOR partner offers many of the documentation and resources that an HR department needs, starting with core services like payroll, taxes, and benefits.
• Setting up a local presence through an EOR simplifies compliance with local employment laws and operations.

What Is a PEO? A Guide to Its Benefits, Risks, and Alternatives

• An EOR partner ensures supported employees in the Netherlands receive their mandated 8% holiday allowance while complying with all other market-specific payroll regulations, like providing a work-from-home allowance.
• It lets you hire international employees without establishing a local business, and takes care of essentials like payroll and compliance so you don’t have to.
• While excited about the potential for growth, the company was concerned about the complexities of hiring in unfamiliar territories, including cultural differences and regulatory hurdles.
• Before working with any Employer of Record that charges a percentage rather than a flat fee, tread cautiously.
• Some EORs rely on infrastructure from local third parties to deliver their services and support.
• 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 provider navigates these intricate frameworks and complies with all aspects of Australian employment law, such as long service leave and superannuation requirements. An EOR partner addresses these complexities on a business’ behalf while complying with Germany’s strict employment protection, including detailed employment contract requirements and termination procedures. Through an EOR, companies can ensure compliance with the U.K.’s stringent IR35 contractor regulations and adapt to post-Brexit employment standards that continue to reshape the business landscape. London’s position as a global financial hub, combined with thriving tech clusters in cities like Manchester and Edinburgh, creates exceptional opportunities across multiple sectors. British employment law presents unique challenges, from complex TUPE regulations to specific requirements around pension auto-enrollment and statutory leave. EORs also mitigate permanent establishment risk by ensuring most activities managed through them do not trigger tax obligations except in specific situations like direct sales within the host country.

Example 2: A Healthcare Provider Hiring Temporary Staff

By carefully considering these factors, you can select an What Is An Employer Of Record EOR that not only meets your immediate needs but also supports your long-term growth and compliance strategies. Whether you need an Employer of Record, HR software or a bit of both depends on your specific business needs. For a second straight day, SpaceX scrubbed the 10th test launch of its Super Heavy-Starship rocket, this time due to weather conditions.

But before they do so, organizations need to know what to expect from an EOR and how to choose the right EOR partner for their business. Independent contractors are self-employed individuals who provide services to clients without becoming employees. They typically maintain control over how, when, and where they perform their work, use their own equipment, and may serve multiple clients simultaneously. A staffing agency is different from an EOR because it recruits candidates to meet temporary workforce needs.

When your local talent pool can’t deliver the skills you need, an EOR gives you the flexibility to look overseas to hire the right person. Let’s dive into the advantages of working with a global EOR service and discuss how to select the best option for your needs today. While engaging an Employer of Record (EOR) presents numerous advantages, it is essential to acknowledge the challenges and considerations that may arise. Being aware of these potential hurdles can help you navigate the EOR relationship more effectively and maximize the benefits while minimizing risks.

Easily hire, pay and manage global employees without setting up your own local entities. Pricing for EOR depends on a few different factors, including the number of workers involved, where they are located, and the services being used. EOR services pricing is based on a fee structure, which could include setup fees and costs for particular services or requirements specific to certain countries. It is best to consult with the company you are considering to better understand their pricing structure and get a quote for your organization’s specific EOR needs. As organizations increasingly rely on contingent workers to maintain business operations and stay flexible, they face challenges related to employee misclassification and co-employment risk. If mishandled, this can be detrimental, as it could result in serious financial consequences, including hefty fines and legal liabilities.

They charge transparent service fees rather than markups on salaries and focus on compliance rather than recruitment. The terms Employer of Record (EOR) and Global Employer of Record (GEO) are often used interchangeably in the industry, but there can be subtle distinctions in how service providers position these offerings. Understanding these nuances helps clarify what you’re getting from different providers. I’ve helped hundreds of companies find the right EOR provider for their global hiring needs – quickly and without the stress. When tapping into Singapore’s talent pool, global companies can partner with a global EOR to expertly manage detailed foreign worker quota systems and qualify salary thresholds by the Fair Consideration Framework.