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Employer of Record: Definition, What You Need to Know, and Benefits

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Businesses have a clear sense of why they plan for a global expansion. They aim to build their brand, reach new customers, diversify markets, and increase their sales. However, many companies hope to avoid the complexities of actually doing it, including finding and hiring overseas staff. In such a case, an Employer of Record (EOR) service can take those difficulties away.

What is an Employer of Record?

An Employer of Record is a third-party organization that can help your business hire employees in a global market without taking on the legal and financial risks of establishing an entity abroad. When partnering with an EOR, they manage the administrative and legal responsibilities of your employees. Their services also include handling employee taxes, benefits, insurance, and other related undertakings.

Who can use an EOR?

An EOR enables businesses to explore new markets while assisting them with their expansion strategies. It is ideal for companies trying to establish their presence in a foreign country for the first time but have reservations, especially regarding the complex employment policies or processes that need to be followed to setup an entity. EOR’s take away the hassle of learning the local hiring procedures and setting up legal entities. Thus, the company can focus on the day-to-day work of the newly hired employees.

What does an EOR do?

An EOR will handle the full spectrum of legal and operational tasks when hiring employees abroad, which include:

  • Running employee background checks
  • Managing employment contracts and ensuring they are compliant with local regulations
  • Employee onboarding and offboarding
  • Processing and funding payroll
  • Filing taxes
  • Arranging visas, sponsorships, and work permits for employees
  • Administering benefits and worker’s compensation
  • Acting as the representative between employees and government authorities

Why use an EOR?

An EOR makes global expansion hassle-free. Creating a local legal entity to hire employees can be expensive and laborious. When working with an EOR, it will help speed up the process, cost less, and you can focus on creating potential business opportunities. An EOR also ensures that all regulations and requirements of hiring an employee adhere to local policies. Therefore, it will lessen the chance of encountering problems later on.

Benefits of an EOR

There are many benefits to partnering with an EOR. When expanding to a new location, EORs help you save time, money, avoid complex processes, and guarantee that your business will remain compliant when onboarding new employees.

Avoid the trouble of local incorporations

Usually, you would need to establish a local entity before hiring employees, which can be costly and time-consuming. When you hire an employee through an EOR, you are sure they are ready to work. The EOR will take care of the onboarding, payroll, employment, and immigration requirements.

Ensure local compliance

Employment laws or labor laws for the country that you are recruiting in can be one of your main worries. EORs will take care of this to make sure that you are compliant with local laws. They will manage requirements like employee benefits, worker’s compensation, and insurance. As such, you only need to think about whether or not an employee is fit for your company.

Save time on payroll

Part of an EOR’s job is to handle payroll end-to-end. An EOR will ensure that the salary payment follows local guidelines, is delivered on time to employees, and accurate. They will also manage taxes and any statutory deductions based on the country.

Limitations of EOR

While working with an EOR is convenient for your business, there are some limitations to using an EOR, such as:

  • EORs are better suited for small to medium sized companies.
  • EORs only handle the legal and administrative requirements of your employees. You still have to manage the day-to-day work and other aspects of their jobs.
  • Dissolution of your HR team. Human resource team members for learning and development need to ensure they communicate with the EOR to ensure they remain compliant.

How to find a good EOR service

Working with the right EOR is a key factor to achieving success. Therefore, it is necessary to ask the right questions when looking for an EOR.

  • How long has the company been around?

A well-established EOR has proven systems ready and extensive partner networks available. It will make the entire operation run efficiently and effectively.

  • How global is their coverage? Do they operate in your target country?

Getting the services of an experienced EOR with operations in different global markets is advantageous. It is also positive if the EOR has a physical operation in your target country.

  • Do they have experience with a business in the same industry? Having a vast understanding of how your industry works means that they can offer you a unique and effective solution for your needs.
  • Who will you coordinate with? Sometimes you will be assigned a single point of contact or be relegated to an online platform. Having someone to manage your account will be more effective in terms of communication and in pushing the hiring process forward.
  • Are they internationally compliant? The primary reason to work with an EOR is to avoid the risks of violating procedures. An EOR should have a thorough understanding of local policies and regulations.

EOR vs. PEO: What are the differences?

While they may offer similar services, there are some distinct differences between a EOR and PEO. Some of the most notable differences include:

  • A PEO generally offers a more comprehensive range of HR services than an EOR.
  • A PEO can be an EOR, however an EOR is not necessarily a PEO.
  • While an EOR generally focuses on the legal responsibility of hiring staff, a PEO can offer additional services, such as recruitment, compliance and payrolling.

How INS Global can assist your business

As a leading global PEO, INS Global is able to provide Employer of Record services to your company. Our experts will introduce you to our full range of services that can be tailored to the needs of your business. Our extensive experience allows us to deliver top quality service to our clients in a fast, efficient manner. Get in touch with us today and our consultants will walk you through our comprehensive range of services which includes recruitment, payroll and tax administration, invoicing and many more.

 

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