Growing organizations seek international expansion to increase revenue, diversify their customer base, and access talent. Today, many understand that global recruitment is an opportunity to gain a new diverse pool of talent. However, they must comply with the different labor laws where they wish to operate and hire employees.
To overcome the challenges of global recruitment, companies can seek assistance from a third-party entity, such as an employer of record (EOR). This entity can help them recruit and engage a vast pool of talent from diverse cultural and ethnic backgrounds. While also freeing up their valuable resources and prevent compliance issues.
This comprehensive guide delves deep into answering the question: What is an Employer of Record (EOR)? How can you use an EOR, and what are the key benefits of an employer of record to achieve your expansion goals?
An EOR is a third-party legal entity that recruits employees on behalf of other companies to offload their employment liabilities. This service helps companies enter new markets with easy access to the global talent pool. It acts as a global HR team that provides recruitment services such as salaries, onboarding, payroll processing, and tax registration in accordance with local labor laws and compliance.
It performs vital business functions for client companies, including legal responsibilities and HR tasks, and helps you focus on other productive tasks.
The EOR service provider handles all legal responsibilities, including compliance, contracts, benefits, and leave policies.
HR tasks include:
The EOR also helps you focus on productive tasks by handling back-end tasks. This way, you can retain control over the regular functions and make informed decisions for the business and your team.
By offloading the employment responsibilities to an EOR, you can concentrate on the key activities of your business operations and growth without any hassle.
An EOR performs several tasks on behalf of the client companies, including:
The EOR onboards all new hires and facilitates smooth exits for the departing ones. It keeps employee records updated, such as job history, personal information, and performance assessment, for future reference.
The employer of record calculates bonuses, salaries, and commissions. The vendor oversees tax filing, withholding, and reporting to ensure that local laws are followed. They also take care of reimbursements, payroll deductions, and bonuses to meet the local labor laws.
The employer of record service ensures that the local labor laws and other regulations are followed. For example, labor laws can change rapidly from country to country. An experienced EOR will stay up to date with the latest regulatory changes to keep a company compliant.
An EOR ensures multiple benefits for businesses seeking expansion in global markets. The list of advantages of using employer of record service includes:
An EOR helps companies access top-tier global talent pools. They support companies to hire and improve their retention rates to maintain a competitive and skilled workforce.
The EOR enables you to enter new markets swiftly without navigating the complexities. Put simply, the benefits of an employer of record service are innumerable, with the most prominent one being hassle-free global expansion.
The EOR service provides an employee-friendly work culture with competitive benefits, prompt and accessible HR support, on-time payroll, and other perks. This enhances employee satisfaction and elevates it to support the employees.
The EOR benefits the company as it ensures that the regulations are thoroughly maintained by the employees and the company. EOR helps with law-compliant solutions across different jurisdictions.
One of the most prominent benefits of an employer of record is that it prevents your financial drain from setting up another subsidiary in any foreign market. This makes it a cost-effective option to work with a global and diverse team. The employer of record also ensures lower overhead expenses.
Businesses can harness the capabilities of top-tier global talent without the hassle of navigating international labor laws and processes that vary from one jurisdiction to another. This seamless hiring is one of the crucial benefits of an employer of record service.
An EOR mitigates the risk of compliance issues, legal disputes, and tax liabilities.
An EOR follows the steps below to ensure that companies receive benefits without any legal or administrative complications. Let's dive deeper to learn more:
The process starts with a call between the company and the EOR service provider. The client outlines the specific needs, business goals, and other parameters of the company and discusses crucial details.
After the discovery call, both parties sign legal documents to agree upon each other's conditions, duties, and expectations. These legal bonds include compliance assurance and service agreements.
Once the contractual agreements are completed, the EOR provider initiates the onboarding process by setting up payroll accounts and ensuring compliance with local and federal laws.
In the next step, the Employer of Record provides comprehensive support to the client and its employees, including compliance management, issue resolution, payroll processing, and HR administration.
Once the agreement is over, the EOR service provider can easily manage employees' offboarding and handle final pay and benefits with a streamlined compliance and termination process.
The employer of record services encounters numerous challenges to ensure compliance with local labor laws and employment practices. Some of them include:
An EOR operates in diverse legal environments, such as compliance requirements, taxation laws, and labor laws. Keeping these in sync with the organizational goal is challenging yet crucial to achieving business goals.
The EOR service providers identify the workforce and adhere to standard employment laws. Failing to do so may result in fines, lawsuits, and huge penalties.
Remaining compliant with the local labor laws across multiple jurisdictions requires a meticulous record-keeping process.
Managing good relations with employees requires cultural sensitivity, an unbiased approach, and conflict-resolution skills. The employee must handle such challenges while fostering positive relations to minimize operational disruptions.
Securing technical systems is vital to safeguarding sensitive employee data. EOR vendors need to keep their software updated to ensure data security.
The selection of an EOR partner is a crucial process. Take the following points into consideration before making a choice:
Transparent pricing is essential. Partner with an employer of record with a transparent pricing structure with no hidden charges to avoid future conflicts and ensure seamless collaboration.
The EOR should have deep knowledge and expertise of the markets in which you are engaging talent. Work with experienced EOR service providers who have ample experience serving global companies for seamless recruitment and onboarding processes.
Choose a partner who is prompt and responsive to your team’s needs. Make sure that the firm must onboard new employees, accommodate local time zones and languages, and respond to the team’s queries.
Consider selecting a party that is renowned and credible in the market. Review the reports from industry experts to identify the EOR leaders who provide the best solutions promptly.
The main difference between an EOR and a staffing agency lies in their key roles and functions and the nature of the job they perform. It includes:
International expansion and recruitment come with a unique mix of opportunities and challenges that require an experienced team to manage them.
As your global EOR service partner, Global Expansion can extend unwavering support to you and your workforce. We have a full suite of workforce solutions to handle local labor needs and compliance while you grow your business.
Going global doesn’t have to be complicated. Contact Global Expansion for an unmatched EOR service.