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If you are planning on expanding your team globally, hiring through an Employer of Record (EOR) could just be the solution your organization is looking for. However, before you work with an EOR, you should first know the pros and cons of working with an EOR, so you can make the best decision for your hiring needs.

THE PROS

Access to Global Talent Pool

Some EORs have local entities operating in different locations across the world. You can broaden your talent pool by working with these EORs which can help you with talent search and recruitment. They help you find the best talent from different countries so that your talent search is not limited to your current location. In other words, working with the right EOR provides you with a workaround for location-based skill shortage.

Save Time and Operational Costs

Oftentimes, when you scale your operations, you will also need to add support personnel in your team like HR and payroll professionals. Hiring an EOR lets you outsource those tasks including managing foreign entities, payroll, and taxes so you can save time and money.

Global Payroll Compliance

Employment practices including how employees are paid vary from county to country. Managing global payroll is a beast in itself. The learning curve on global payroll processing is steep because companies not only have to deal with volatile currency exchanges and exorbitant overseas bank transfers, but also the struggles of painstakingly managing global payroll manually. EORs usually handle these processes on a per country basis for all their employees so your payroll compliance is assured.

Competitive Benefit Packages to Employees

Aside from taxes and payroll processing, an EOR also keeps track of and manages employees’ social security, pension funds, and health insurance in order to meet the country’s legal requirements. On top of the benefits required by law, an EOR also advises their clients with attractive additional perk packages they can offer to their employees based on their local knowledge.

Expand Your Team Internationally without a Local Entity

When hiring professionals from several countries or locations, setting up a local legal entity is usually required. With an EOR, you can save this step. This is also useful if you are just testing the waters in new markets, as an EOR with legal entities across the world can help you expand your team internationally without going through the tedious task of opening a foreign subsidiary as a legal entity.

Hiring through the Employer of Record (EOR) is a great option, though it is not for everyone. If implemented incorrectly, there could be some potential disadvantages, including:

THE CONS

Having Less Control

If you are the kind of business owner or employer who prefers hands-on management on every aspect of your employee onboarding process, then relying on EOR services for your HR needs may not be suitable for you. This is because EORs take care of all formal employment tasks, so working with an EOR would result in limitations on the client’s authority. For instance, since the EOR is the owner of the employment contract, if any claims or legal actions arise, the employer must rely on the EOR to enforce the claims based on the signed agreement between the employee and the EOR. In short, you have less influence and control over your employees.

Local Time Limit

Another disadvantage would be the potential time limit of employment contracts, as certain countries prohibit staff to be permanently employed via an EOR. For example, in Germany, the limit of EOR arrangements is up to 18 months. In Mexico, there was a law passed in April 2021 that prohibits the outsourcing of workers, thus limiting the use of EORs. So if you are partnering with an EOR, it is advisable to make sure if these limitations and restrictions apply to your country as laws in different countries are ever-evolving.

Changes in Organization Culture

Having someone else recruit employees on your behalf is a relatively new concept many employers are unfamiliar with, thus hiring through an EOR and onboarding a global team may affect the familiar work routine and company culture you were used to. However, these temporary disruptions of the workflow and culture of a company are oftentimes quickly replaced with positive growths–greater achievements with expanded talent pool and better appreciation of diversity in talent. Nonetheless, before partnering with an EOR, it is important to revisit your company goals to see if outsourcing your HR tasks to an EOR is aligned with your mission and vision.

Reduced Relevance of In-House HR

Subscribing to EOR services will definitely take the burden off your organization’s HR department. With an EOR, you can outsource jobs to different parts of the world. However if not handled properly, your organization’s HR department will risk becoming less relevant in the organization’s workflow and changes. So while your team grows internationally, do not forget to also include your in-house HR department in the latest happenings and keep them up-to-date with new skills, knowledge and policies.

The pros and cons of Employer of Record (EOR) can be subjective. What works for some organizations may be counterproductive for others. But there is no denying the fact that remote and global hiring are becoming more common today. With the rise in remote and borderless hiring and work, more services and tools are being developed to assist organizations achieve their remote and global hiring goals–and EOR is one of them.

If you are ready to expand to new markets, Globelise is here to handle everything you need in the employment process, from EOR and recruitment, to payroll and benefits management.

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