Are you planning on expanding your team to a new country where you do not own a legal entity? Are you looking into outsourcing some of your teams, but want to be able to manage those teams closely like how you manage your regular teams? Then, an Employer of Record (EOR) might be the solution you are looking for!
An Employer of Record is not just a staffing agency, it is also an organization that is legally responsible for formal employment tasks including the handling of payroll, employee taxes, benefits, insurance, and various other human resource tasks and activities.
EORs are frequently hired by businesses to reduce the complexities resulting from the variations of human resource operations in different parts of the world. These complexities include managing payroll for overseas personnel working in different countries in a way that is compliant to the corresponding jurisdictions.
What are the services an EOR provides?
These are the most common services EORs provide:
An EOR can search for the best talent from around the world. They can do this because most EORs operate in different countries so they can efficiently and quickly search for talent in countries they operate in. As a result, an EOR’s client can have access to a wider pool of talent internationally. Aside from the initial screening of talent, the EOR can also perform background checks for security purposes.
Once you have selected your candidates, an EOR will handle the onboarding of your new hires. The onboarding process does not only include assisting new employees with the paperwork required to become a legal worker employed by the EOR, but also payroll and benefits administration.
Process Payroll and Taxes
Provide Employee Benefits
Handle Employee Termination
What Are the Benefits of an EOR?
Utilizing an EOR for your staffing needs has a potential list of benefits:
Access to Global Talent Pool
Save Time and Operational Costs
Global Payroll Compliance
Competitive Benefit Packages to Employees
Expand Your Team Internationally without a Local Entity
What are the Various Models of EOR You Need to Consider?
There are three (3) operating models of an EOR:
- Direct Model– Most EORs that operate through a direct model register their own entities and have the essential local experience needed in the countries wherein they are providing services. EORs operating under this model can provide and guide their clients with their own airtight contracts, documents and policies. The global hiring and onboarding process is usually straightforward and quick as direct EORs have their own legal entities and ready resources.
- Indirect Model – Most EORs that operate through an indirect model do not own entities in the countries wherein they are providing services. Instead, they team up with local or third-party partners to provide employment and payroll services. Working with EORs operating under an indirect model is more time-consuming because there is an additional step involved where the EOR will need to communicate with a local partner before they can advise you on the requirements to hire in specific countries.
- Hybrid Model – These EORs act as direct EORs to some employees and indirect EORs to others from countries where they do not own local entities.
These various EOR models have benefits and disadvantages, and depending on your hiring needs, one of these may work better for you, so it is important to consider what your hiring needs are before making your final decision on which type of EOR to work with.
Employer of Record (EOR) vs Professional Employer Organization (PEO)
At first glance, these two terms may seem interchangeable when you are looking for a hiring agency to hire international talent. However, there is one main difference between the two. The difference can be identified by asking who the legal employer of the employee is. In a professional employer organization (PEO), your company or a foreign subsidiary controlled by your holding company is the employer. You outsource the HR and payroll work to a PEO. In this setup, you will need to maintain a legal entity in every jurisdiction where you wish to hire talent from.
This is not the case with an Employee of Record (EOR). An EOR already has legal entities and tax registrations established in different countries so that they can hire talent legally and compliantly without the need for you to set up your own legal entities. In the case of EOR, the EOR is only your employees’ employer on paper. Since EORs are legal employers, they can also provide competitive benefit packages to your employees. The same cannot be applied to PEOs since they are not the legal employers of your employees.
The short answer is yes. There are a few options on how to hire international talent without going through an EOR. The first option is to sponsor an international employee to get a local visa (if applicable). This is necessary if your organization or the position does not support remote work. This can be cumbersome depending on your local laws.
If you are exploring global hiring but you do not want to go through the hassle of relocating your international employees or setting up a foreign entity, EOR might be the best option for you. This is because EORs have local entities in different countries so they can take care of the hiring, onboarding and payroll processing on your behalf.
If your organization does not want to hire an external HR agency, hiring a PEO is also a possible alternative. However, with a PEO, you will have to set up legal entities in countries you want to hire from.
Hiring international employees under Globelise costs USD 299/month per employee. The fee includes drafting a locally compliant employment contract where your employee resides and a fully digital onboarding process. The employee payroll, tax filings, expenses and contributions will be processed by Globelise as well, so you do not have to navigate the complexities of local regulations. Locally competitive benefit packages will also be provided for your global employees. Globelise is also one of the few EORs that also provide recruitment services with an additional fee of 20% of the annual salary of your international employee.
There are several responsibilities of an EOR. An EOR will have a tax registration, which means that they are required to withhold income tax and other payroll contributions. An EOR will also assist you with the preparation of locally compliant employment contracts, so you can bypass complicated local labor laws. Once hired, an EOR will take care of the onboarding and the regular payroll, benefits and other payroll contributions required in the jurisdiction as well as termination and rehiring process of your employees.
The most common reasons for employing an EOR are the following:
- You want to hire an international talent, but you do not have a legal entity in that country.
- You want to outsource some of your teams overseas but want to still be able to manage them closely.
- You want to assess the expansion in a country without opening a new legal entity in that country.
An EOR client can still provide daily supervision for its global hires but there are limitations on what a client can do because they are not the legal employer of their global employees. Depending on the country, there are some actions that only an employer on paper can do. For example, if you want to promote an employee, you might need to take additional steps in coordination with the EOR you hire.
Furthermore, some business activities might also require legal entities in the countries you are doing business in, like manufacturing or selling, depending on the jurisdictions. An EOR as a legal entity would not be able to cover this aspect of your business an EOR only takes care of your staffing needs and formal employment tasks. In other words, an EOR as an entity would usually not engage in activities outside of its nature of business declared with the local authorities.
Yes. EORs are legal solutions to help and guide clients on all global hiring matters, while complying with local laws in different countries.
Globelise provides Employer of Record (EOR) service in more than 141 countries across the globe. Other services that Globelise can do for your business include:
- Global Payroll
- Human ResourceInformation System (HRIS)
Talk to us, and our seasoned experts from more than 141+ countries can provide you with a tailored solution to your international hiring needs.