Key Points About Employer of Record Risks for Employees

Key Points About Employer of Record Risks for Employees

Key Points About Employer of Record Risks for Employees

March 20, 2023


INS Global



INS Global



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Key Takeaways

  1. An EOR handles administrative and legal responsibilities on behalf of a company for their employees
  2. An employee under an EOR agreement receives timely payroll and employment benefits in countries or situations where this may be difficult otherwise
  3. An EOR contract is made between three parties, service provider, company, and employee


Using an Employer of Record (EOR) to recruit and manage employees is an effective and secure solution for companies of any size. An EOR allows you to expand to new markets without needing a separate legal entity. This helps you provide benefits and timely payroll for your entire staff team easier and faster. However, your employees must understand what goes into an EOR relationship, and any potential Employer of Record risks so that they are reassured.

This article addresses common concerns an employee may have about being in an EOR arrangement. It also explains how the process works, including how employees provided for in this way receive their payroll and benefits.


EORs for Employees: What are International Employer of Record Services?


An Employer of Record (EOR) is a third-party organization that manages the administrative, legal, and HR needs of the employees of other companies.

Here, the employee agrees to a direct legal employment agreement with the EOR provider.

A company may enter into an EOR arrangement for many different reasons. For example, the company may want to branch out into a new market without the complications of traditional methods. At the same time, they may want to add new staff quickly and compliantly.

An international EOR also handles associated unfamiliar administrative tasks such as contract management, HR services, and payroll in multiple countries. In this way, the company can take care of all its global employees in the best way possible for everyone involved.


How Does an Employer of Record Agreement Benefit Me the Employee?


An EOR agreement can benefit employee satisfaction in a variety of ways. For instance, the company will be able to provide employees with all the same benefits and protections that they would receive in their home country.

This means that employees will be able to enjoy the same legal rights and privileges regardless of their location. Additionally, employees may find that the EOR arrangement offers flexibility and convenience when it comes to managing finances and taxes.

This can include providing greater fringe benefit packages (for things like life insurance) as an EOR may have access to larger group benefit deals.

Furthermore, employees may find that the EOR agreement simplifies the process of relocating to a new country. This is because the EOR company will be taking care of all associated administrative tasks.


Contract Management and International Payroll Outsourcing with an EOR


In an Employer of Record contract creation process, there are three parties:


  • the EOR
  • the company that has partnered with them
  • the employee


Depending on the country of the company, local laws may require that the contract is signed by all three parties. Other places ask for parallel contracts, one between the employee and the Employer of Record, and another between the EOR and the company.

These may appear like complex contracts, but with the right support from the EOR provider the process is quick and simplified.

Officially, the EOR becomes the employer. However, from the perspective of the employee, you do not perform work for the EOR.


How is an EOR Contract Different to a Professional Employer Organization (PEO) Contract in Terms of Liability?


One of the biggest differences between an Employer of Record contract and a PEO contract is the level of liability. With an Employer of Record contract, the third-party company is legally liable for all aspects of the employee’s actions. In contrast, with a PEO contract, the liability is shared between the “co-employers”.

This means that under a PEO agreement, if the employee does something wrong their company will be held equally responsible for their actions, As a result, some companies prefer to use an Employer of Record contract, as it gives them more control over the employee’s actions. However, this liability concern is a reason why EOR services are often more expensive.


How Does an EOR Arrangement Affect Me as an Employee?


This arrangement is meant to ensure that the administrative tasks associated with expansion are handled smoothly. This may include taxes, payroll, and compliance with local employment and labor laws. The company still maintains full direction over your work and how you perform your job.

Every month you can continue your work tasks as usual. The EOR will take care of necessary functions like income tax, social security contributions, and any other required benefits. You will receive your salary on time and in the right amount. At the end of the year, the EOR will also provide a tax document for you as necessary.


How About My Benefits and Time Off with an EOR?


An EOR has in-depth knowledge of all local laws around employment benefits, so you can be sure that you are receiving the correct amount of paid time off, sick leave, maternity leave, etc. An EOR is also able to provide more benefits that the company may not have been able to afford otherwise.

When you want to take any kind of leave, you communicate directly with the company you are working for. Only your company has the authority to approve or disapprove your request. The EOR simply files the information as requested and advises the company on the best local practices for employee benefits and paid leave.

Similarly, when getting reimbursed for expenses, your company informs the EOR payroll team which adds it to your salary for the next month. This can include expenses such as travel due to work or other types of compensation outside of your salary.


How Can I Be Sure That My Payroll Service Requirements and Insurance Benefits are Accurately Managed by an EOR?


The best way to make sure that your payroll service requirements and insurance benefits are accurately managed by an EOR is to check in on a regular basis. You should always review your pay stubs to ensure that your deductions and benefits are correctly applied. By staying informed, you can rest assured that your EOR is accurately managing your payroll and insurance benefits.

The EOR should provide you with a detailed agreement outlining the services they provide and the insurance benefits they will manage. They should also provide you with a list of verified and trusted insurance providers they work with and explain how they will handle any discrepancies that may arise.

Additionally, the EOR should provide you with regular updates on the status of your payroll and insurance benefits. This way, you can be sure that your payroll and insurance benefits are being accurately managed.


Other Common Questions Regarding EOR Processes


Q: Is my data secure with an EOR arrangement?


Yes. An Employer of Record utilizes secure networks that are in line with all local requirements for protecting employee data. Furthermore, the type of data that you provide to an EOR is the same as you would provide to your company. This includes the usual details like name, birth date, tax details, marital status, etc.


Q: What if local labor laws change or new bills are passed?


Laws surrounding employment are always changing, and legally compliant providers must stay on top of every change. An EOR’s legal team is experts at international and local labor laws. They stay up to date with every development in labor and employment laws.

When a new bill is passed or changes are made in legal regulations, they will make sure to implement it correctly. This way, you don’t have to worry about compliance errors or legal risks that come with in-house compliance assurance.


Q: What happens if my employment contract is terminated?


If you come to the end of your time with the company you perform work for, you will receive a notice period and severance pay following all local labor laws. If your contract has specified other details for contract termination, your contract will follow the process as agreed upon there. An EOR will ensure that you receive your last paycheck and process your final tax payments as an employee of your company.


Q: Can I Use an EOR to Work From Home While Working Abroad?


Yes, while EORs will offer a physical office to workers employed in this manner, it isn’t a necessary part of the deal. You can still enjoy your global employment experience the way that you and your company want to.


EOR risks for employees


Why INS Global is the Best Choice for Employers and Employees


With an EOR you have access to local assistance and advice at all times as both employer or employee. An EOR operates across country borders so they will always have staff who can navigate the local language and are familiar with local business practices. This way, you can get practical and accurate information whenever you need it.

In a global Employer of Record arrangement, the company can outsource their services and streamline recruitment and HR. At the same time, the employee receives timely and secure payroll and better benefits than if the company provided them on their own.

INS Global is a leading provider of EOR for companies of all sizes and across different industries for nearly 20 years. We are uniquely ready to offer global experience and expertise no matter where in the world you are. Our PEO and EOR services are available in more than 100 countries. More than that, our teams can provide personalized guidance for any situation you find yourself in.

Contact us today to learn more.


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