Over the past few years, remote work has grown significantly in popularity. Employees can take positions in companies that are located even in the most distant places on Earth. Recruiters are no longer searching for potential candidates only in the immediate area, city, or even country, but are also considering people who are physically thousands of miles away. This revolution in employment is also reflected in the way in which hiring is organized. Companies that want to follow the spirit of the times and allow their employees to work fully remotely can meet these expectations through two options. The first is fairly obvious, as it involves registering the new entity in the employee's target country of employment. The second option is to use the Employer of Record service.
The situation is very simple if both the employer and employees are in the same jurisdiction. In this case, the company fulfills all obligations related to both performance management and legal liability. Things get a little more complicated if the employee is located in another country. Registering a separate entity is rarely beneficial to the entrepreneur, which is why most companies choose to take advantage of an EOR service.
What is an Employer of Record?
Employer of Record is an intermediary between an employer and an employee. It is
a local entity dedicated to providing an international employment service through which companies can acquire workers from all over the world. EOR does not assist in the recruitment process - its role begins once a candidate has been selected and the next step is to complete all the paperwork. A company operating within an EOR is officially listed as an employer in a given jurisdiction, but the employee performs duties for its client entity. Significantly, in the vast majority of cases there is no practice of "co-employment", i.e. simultaneous employment of the same person by two different companies. This means that the employee selected by the client company is listed in all documentation as working solely for the EOR. Despite this fact, the obligations of employment and legal liability are the only things the EOR takes over from the original company.
Hiring people from different countries around the world is challenging. It involves gaining knowledge of local tax and employment laws, as well as any employer obligations that need to be taken care of. EOR is a great solution to leave these issues in the hands of professionals with years of experience. They will ensure that all employment matters are handled completely in accordance with the laws of the jurisdiction in question and relieves the company of unnecessary risk and stress. Using this service also removes the company's obligation to set up another business entity, which saves a lot of time and gives the opportunity to hire and deploy candidates selected during the recruitment process almost immediately. Attracting talented employees from around the world has never been so easy! Find people who will enrich the staff of your company with their competence, knowledge and experience, and EOR will take care of the rest.
What are the responsibilities of the Employer of Record?
The EOR relieves the original company of a number of responsibilities, and these include:
- Onboarding newly hired employees into the workforce,
- Creating and maintaining employment contracts,
- Obtaining employee visas and work permits,
- Processing and funding payroll,
- Collecting and processing timesheets,
- Filing of tax returns,
- Advising on local employment laws and practices,
- Compliance with E-Verify regulations,
- Issuing W-2 forms,
- Completing and maintaining I-9 forms,
- Representing the company as an attorney registered as a legal employer in the region,
- Offering and administering benefits,
- Maintaining certificates of insurance,
- Handling workers' compensation claims,
- Performing background checks and drug testing,
- Closing contracts with employees,
- Handling unemployment.
What is the origin of Employer of Record?
The EOR service was created on the basis of outsourcing which has been used by companies for many centuries. The first entrepreneurs already knew that some tasks related to running a business are often more profitable to be outsourced to a third party than to perform them on their own or employ additional staff for this purpose. For example, nowadays it is common to outsource the cleaning of the office space of
a company's headquarters to another, professional cleaning company. With the passage of time and the development of globalization, outsourcing has become an increasingly common practice. The greatest increase in the tendency to use outsourcing services was observed at the turn of the 20th and 21st century, resulting in dynamic economic development.
The history of the employer role dates back to the mid-19th century, when its emergence is recorded. Prior to this period, workers generally had no one above them to direct their work and to whom they were contractually obligated, as they acted independently. Above all, poor working conditions, which were not regulated in any way, contributed to the emergence of the employer role. Another factor was the occurrence of mass labor movements. In response to these phenomena, it was decided to create a function by which formal matters would be properly controlled. The employer, under the initial arrangements still in place today, has certain responsibilities. These include:
- recruitment of employees,
- negotiating working conditions, both with employees and with trade unions,
- induction of new employees,
- managing the work performed by employees,
- paying employees their due salaries,
- paying employees' taxes and remitting them to the appropriate institutions,
- providing employees with suitable working conditions,
- taking responsibility for any injuries that employees incurred in the course of their work,
- ensuring that employee's employment complies with applicable laws and regulations.
Outsourcing employment services is a relatively new concept that has emerged fairly recently. While it is true that there has been scrutiny of which employer functions can be outsourced to independent entities since the late 1800s, EOR-type services were introduced much later.
Outsourcing of employer role
One of the first companies to offer outsourcing services related to fulfilling part of the employer role was Gabbitas & Thring, registered in the UK in 1873. It was a recruitment agency that dealt with recruiting employees for companies that were its clients. Apart from this, it was also involved in finding teachers for private schools. The main function of the first recruitment companies was to recruit temporary workers, usually for replacements. For this reason, they were often called temporary worker agencies or contract worker agencies. A few decades later, in 1949, a company specializing in payroll outsourcing was also established, operating under the name Automatic Payrolls Inc. The company offered its clients, i.e. other entities, to take over the duties related to paying employees as well as printing payslips and checks on a mass scale. This company is still in business today, rapidly expanding its operations and automating more and more of its services over time. It is listed in the Fortune 500, "Automated Data Processing," among others.
Creation of Employer of Record
The first practices, similar to the providing of EOR services, took place in the U.S. in the 1980s. It was then that a small number of entrepreneurs began to increasingly look for ways to cede their legal duties and responsibilities to third parties. Setting a specific date is not possible because this type of activity was not regulated in any way, so there is not much trace left of them. Slightly earlier, in the 1960s, such a service as labor leasing was commonly presented. It consisted in a kind of "renting" of employees, who legally belonged to one company, to the client business. This service could be temporary or long-term. By using labor leasing, employers were able to avoid the liabilities associated with making pension contributions for employees. It is estimated that this phenomenon was the impetus for the continued move toward EOR.
Over time, the EOR service has evolved significantly, influenced by the growth of global mobility programs. Employee secondments have also changed. Previously, they could last for several years, but now they are quite short and cover far more locations. These changes have increased the demand for alternatives to traditional employment. Employers realized that setting up new entities in more countries around the world was highly unprofitable, so they looked for other ways. For example, hiring immigration lawyers, working with local business partners, or outsourcing payroll continued to be used, but it involved taking on a lot of smaller collaborations. This was not convenient for entrepreneurs who wanted to outsource everything to one company. That's why the EOR service was created, which is now used by businesses all over the world and is incredibly popular.
When using an EOR service, neither party has 100% responsibility for the employees, as it is spread out depending on the functions performed. The Employer of Record, providing the EOR service, is responsible for all formal matters that are related to the employment of the employee, such as payment of employee benefits, compliance with tax and payroll regulations, and carrying out administrative operations. The original employer, thus using the services of an Employer of Record, is responsible for ensuring that workplace conditions and safety are in compliance with applicable standards and manages all types of business operations, managing the employee's work.
What are the types of companies that provide EOR service?
We can distinguish between two types of companies that provide EOR services - these are companies that use a consolidator or aggregator model in their business or companies that decide to use the infrastructure model, i.e. all ownership. How do the different models work? The consolidator model is based on working with smaller intermediary entities that are employed in each country where the company offers EOR services. This means that this type of company becomes an umbrella organization. There is some risk associated with this model, as in many cases the intermediary entities located in each jurisdiction do not have adequate knowledge of international regulations, for example on tax or HR. Undertaking cooperation with an Employer of Record that uses the consolidator model requires thorough familiarization with the competences not only of the company, but also of the intermediate entities. It is also worthwhile to protect yourself in some way against situations when a mistake is made. A much better form of EOR is to use the infrastructure model. This means that the company has a number of its own entities in numerous countries around the world and has its own trained professionals. These types of business entities are much more trustworthy and can be relied upon without worrying that the external partner will not be able to carry out their role. The vast majority of Employers of Record choose to use this particular model.
What does the future of EOR services look like?
All indications are that as the economy continues to grow, the demand for EOR services will continue to increase. This means that they will become more and more advanced. As you can see, local employment and immigration laws are changing in many jurisdictions. This is to prevent problems such as the loss of tax revenue to the country or to prevent fraud by those who are involved in illegal practices.
What are the benefits of using the EOR service?
Dealing with the formalities of running your own business, such as managing payroll, administering benefits or terminating employees, can be very time-consuming. By focusing on tasks that could just as easily be delegated, entrepreneurs miss out on things where their input and presence is especially important and valuable.
Entrepreneurs can fully devote themselves to the mission of the company and its activities, instead of spending their precious time on duties that can be better and faster handled by dedicated experts.
Starting a business in a foreign market traditionally involves setting up an office. This is not a cheap undertaking - while larger companies can afford it in some cases, for medium and small companies it is almost impossible. Costs related to renting, equipping and maintaining an office can be very high, which is not insignificant if
a company is just starting out and is cautious about its finances. Business owners also have to reckon with the cost of employment associated with building a close-knit team of employees from scratch and hiring financial and legal assistants. By using an EOR service, all of these costs will be reduced significantly. It is the Employer of Record that will provide your employees with an office and the necessary equipment. They will also take care of training your staff from the ground up, making sure that each new employee is thoroughly onboarded.
Compliance with local law
Every jurisdiction has its own law. Sometimes it doesn't differ too much from the country you are in, however, in most cases there may be times when certain regulations may not be entirely clear and understandable to you. When starting a business in another country and hiring employees from different parts of the world, it is important to remember that all payroll, employment, and work permit requirements vary from location to location. Failure to comply with local law can result in very severe consequences, such as fines or even imprisonment, for example.
No registration necessary
In the past, the registration of a separate legal form in the country in which a company wanted to expand its business was something obvious and inseparable from the expansion into new markets. Even now, companies that decide to operate independently often decide to open, for example, a foreign subsidiary. This is associated with additional costs and often takes a very long time. If you are not in a hurry and have a lot of funds at your disposal, you can consider this type of action, but in the vast majority of cases it is completely unprofitable. Instead of focusing on its actual activity, the company has to deal with formal matters for many months, sometimes even years, losing potential clients, money and time. Employer of Record relieves the employer from the need to register a separate entity in the new jurisdiction, because the employer has a company that can formally employ the client's employees. This allows the business to get on with its target activities almost immediately without setting up another company.
No barriers to entry
Expanding your business abroad has great potential to grow your company and bring you multiplied profits. It often provides a number of advantages, such as access to a wider pool of attractive job candidates or the opportunity to hire equally good staff, but at a much lower salary cost. However, in order to do so, it is first necessary to obtain all permits in the given country, thanks to which opening a new branch of the company or creating a completely separate entity will be possible. In many jurisdictions registering a legal form is challenging, especially if you are used to the fairly simple requirements for entrepreneurs that apply in European countries. If you are planning to expand to certain countries in South America or some places in Asia, just waiting for approval to start doing business can take a very long time. In many cases, the embassy can take up to several months. This is a waste of time for the entrepreneur, but also an additional stress - it may happen that our application for permission to operate will be rejected. Such a long wait puts the company in a kind of limbo, because on the one hand the company would like to invest in the foreign market, but it is not able to do so until it receives the appropriate permits. In this situation, the EOR, whose business entities have previously obtained all necessary approvals, can give assistance.
Each country has its own immigration rules and related laws, which are constantly undergoing more and more changes and amendments. The issuance of all types of work permits and visas is also under increasing and more detailed scrutiny. Doing business in another jurisdiction involves staying abreast of changing regulations, and it is very easy to make a mistake. This is the biggest challenge faced by employers with numerous employees from different countries around the world. Even the smallest lapse in immigration compliance can affect the future of not only the company, but also its employees. The stakes are too high to risk. For this reason, many businesses choose to use EOR, ensuring both themselves and their staff are completely safe.
Maintaining a payroll
A vast number of jurisdictions around the world have certain regulations regarding the running of payroll. In order to operate in full compliance with the law, it is necessary for the company employing the expatriate workers to adapt to the standards set in place. It may seem like an easy solution to this problem to simply transfer payroll from your home country to the country where the employees are located, however, this type of practice is very often prohibited. In some cases it is permissible to do so for one-off assignments, but for long-term assignments, it is not allowed. The main obstacle is the need to pay deductions from the salary received such as health insurance, taxes and pensions. With an EOR you can always be sure that your employees are getting paid in the right amount and that all contributions to benefits to which they are entitled are being conscientiously paid.
Contributions to benefits
Once we talk about benefits, the ways in which their rate is calculated vary in each country. The law relating to health insurance and pension contributions is often very complicated, which makes it even more likely that mistakes will be made. All the regulations related to them are constantly changing, you need to keep up to date with them and when dealing with companies in numerous countries around the world this can be particularly difficult and time consuming. EOR service has the significant advantage that such matters are handled by educated specialists who are familiar with all the novelties and know how to practically apply them. They are not afraid of even the most complicated tax issues, such as how to treat options granted to foreign employees. Besides, in case of any shortcomings, all responsibility is borne by the Employer of Record and not by the company whose employees are hired. Therefore, the company is under double protection.
Competitive benefits packages
Individual companies have varying access to benefits packages. Typically, only large, well-established companies that have been in business for many years have access to the most favorable packages. It is much more difficult for small or start-up companies to get an attractive benefits package. Thanks to the EOR service, the chance for a highly cost-effective benefits package is significantly increased, regardless of the number of employees or the number of countries in which the business is conducted. As is well known, the problem with access to pension plans was one of the main reasons for the decision to launch the new Employer of Record service. Enabling access to attractive benefit packages is therefore one of its primary tasks.
When working with people from different parts of the world, many companies are afraid to hire them officially as their employees. The reason for this is insufficient knowledge of the regulations regarding the registration of employees in a given country. For this reason, some employers decide to offer cooperation under different conditions, for example, that the person who was potentially to be our employee will theoretically act as an independent contractor. This solution is much riskier than it may seem. Tax authorities in many countries are particularly sensitive to any attempts to circumvent the regulations and evade the obligation to payroll contributions. This type of activity can be considered fraudulent if it turns out that the true nature should be employment by contract rather than as an independent contractor. Detection of this type of misconduct can result in fines for the business and, in cases that violate the law, can even result in imprisonment. It also involves increased scrutiny by government authorities in the future to detect whether the company continues to practice circumvention. Employees from all over the world can be hired using the EOR. Local regulatory affairs specialists will make sure that everything is done properly.
Every entrepreneur running his own business is aware of how tedious it is to prepare various types of reports. It is one of the duties that you cannot escape from in any way and from time to time it needs to be done again. The truth is, however, that it consumes a lot of time that could be spent in much better ways, for example, on planning further development of the company. By using the EOR service, you do not have to face the monotonous process of generating reports once again, the Employer of Record will take care of it for you. All necessary documents will be prepared on your behalf, according to the latest data. You do not have to worry about compliance and correctness, but you can always review the reports and suggest your comments.
Access to talented employees from around the world
As we expand our operations in numerous countries, we can find candidates with extraordinary talent and all the necessary qualifications that we would not have access to if it were not for EOR. You can recruit employees who will bring a breath of fresh air to your existing team, presenting new ideas and bringing existing visions from a completely different perspective.
Using the Employer of Record service, this ceases to be an obstacle. Any company, regardless of the size of its budget and the seniority of its presence in the market, has the opportunity to recruit the best candidates from the most distant countries.
Security of employee data
Since the Employer of Record is formally the employer of employees who practically work for the client company, the EOR practices employee data processing.
The main tasks of an EOR service company include encrypting and backing up data, secure network communications and also ensuring compliance with the General Data Protection Regulation (GDPR). It is also very common for us to see the practice of proactive security protocols, which are used to detect any interruptions and vulnerabilities, as well as regular training of employees on data privacy and security.
The future of the labor market
There have been significant changes recently in terms of what the labor market looks like and what are the expectations of employees. While previously it was standard for an employee to do their work at the company's headquarters or premises, now flexible work options are leading the way. Through the impact that the pandemic has had on the way people around the world function, employees have come to appreciate the ability to do their work remotely, from anywhere. It is estimated that as many as 73% would now like to work this way permanently, no longer having to return to their desks. After interviewing ten company leaders, as many as nine of them boldly stated that they definitely plan to base their future strategy on a hybrid or fully remote working model. All indications are that remote employee work will become something more and more common, so it will be a wise decision to follow the changes that are taking place in the market. The EOR service definitely facilitates the entire process of hiring remote workers, saving time, reducing costs and saving stress. It is on this model of work that the whole essence of Employer of Record is based, so a company providing this type of service knows exactly how to manage an employee working on the other side of the world.
Flexibility in operation
The EOR service is not limited to one specific type of operation. It is used by companies that see it as both a short-term and long-term solution. Thanks to the flexibility it provides, making any changes to the company's operations and hiring of employees is extremely easy.
You don't have to decide right now whether you are tying your entire business future to EOR. You can always try it out for a few months and then possibly extend the period of cooperation or dissolve it.
With the Employer of Record being the formal employer of the employees who actually work for the client, the Employer of Record assumes much of the responsibility. The Employer of Record officially hires employees by signing employment contracts with them, draws up and manages work lists and handles its employee benefits. In the event of any discrepancies, it is the Employer of Record that will bear any consequences, not the client company using its services. If, for example, there is a situation where there is a dispute over family leave policies, external authorities decide to conduct a tax audit or employees are misclassified, the EOR is solely responsible. The company whose employees are hired is completely safe and need not fear any risks. Fortunately, this type of situation is extremely rare, as most EOR providers are specialists with many years of experience, who are well aware of the current regulations and make every effort to act in compliance with them.
A work environment to meet expectations
Using the EOR service not only offers numerous benefits to the employer, but also to the employees. If an employee is from a different country than the company's, they are likely to come from a different culture and speak a different language.
Companies that independently manage their employees from different countries of the world often apply the same mechanisms to them, which rarely works. Even if they are aware that the requirements in each labor market differ, they often lack the time to familiarize themselves with these differences. To the rescue comes the EOR, which is well versed in the particular environment.
What are the disadvantages in using an Employer of Record?
Unclear employer status
In each country, regulations regarding who is considered an official employer vary widely. Just because an entity will be considered an employee's employer under one jurisdiction's regulations does not mean that it will also have that status in another. In such cases, even the contract that will be concluded between the EOR and the company using the services cannot rectify the issue. It is necessary to act in accordance with the applicable law, as this is the only way to deal with this issue legally. For example, if we decide to hire employees in the United States using the EOR, there may be a situation in which both our company and the Employer of Record are recognized as the official employer. We are then dealing with so-called co-employment, and this complicates a lot of paperwork. To avoid this type of situation, the key is to work with a responsible and trustworthy company. A professional Employer of Record will make every effort to ensure that such an eventuality never occurs.
Not suitable for large companies
If a company plans to hire more than 10 employees in a single country, the cost-effectiveness of using the EOR service may drop somewhat. The same is true if the company plans a large expansion in a particular country rather than just hiring individual employees who come from there. If a company binds its future to a particular market, intends to do business there comparable in scale to that of its home country, it is more likely to be profitable to set up a new business entity. This allows the company to afford much more freedom of action, has the entire payroll management process under control, and allows it to hire specialists in a particular area. Admittedly, an EOR can only be used at the very beginning to test the waters a bit, do some research on a particular market and hire the first employees quickly. However, this does not mean that EOR will always be inappropriate for large companies. This service is very often used by SMEs and global corporations, however, for setting up medium-sized offices in a given country rather than doing extensive business.
Complications with time limits
While the vast majority of countries allow the possibility of hiring employees through EOR-type techniques, in some parts of the world this kind of practice is restricted or banned altogether. When deciding to expand your business in a particular jurisdiction, it is necessary to find out in advance whether this type of solution is even possible. For example, if we want to hire employees in Germany, we can use the EOR's equivalent of Arbeitnehmerüberlassung, or AÜG for short. It operates on identical principles to the EOR outlined earlier. There are, however, certain guidelines according to which an AÜG cannot employ employees of another company for more than 18 months. This means that we can use this service on a short-term basis, however, if we wish to employ German workers after 18 months, it is necessary to establish a new business entity in Germany.
There is no denying that the EOR, along with taking on some of the company's responsibilities, also takes away some control. Despite the fact that the company's employees are only registered as working for Employer of Record and their duties relate to actual work, any kind of formal disciplinary proceedings are the responsibility of the EOR.
Of course, according to the contract drawn up between the EOR and the client's company, the EOR is absolutely obliged to undertake work that fully complies with the client's expectations, however, in practice, there may be a misunderstanding, for example, resulting in potential errors that are not intentional. In some jurisdictions, it is possible to use EOR services through a contract between three parties - the EOR service provider, the client company and the employee. The contract includes detailed duties and rights of each party, making it much simpler to follow pre-determined, clear rules.
The need for local inclusion
With some types of business, EOR may unfortunately prove insufficient. If you care about hiring employees from another country who will do their work remotely and only send the results back, this is the solution for you. Unfortunately, if the company cares about expanding significantly globally, it may be necessary to establish a separate business entity instead of hiring employees through another company. For example, if a company is interested in applying for government grants available in a particular country or would like to enter into supply contracts with local carriers, registering the company in a new jurisdiction is unfortunately inevitable. Settling locally will be a necessity, which of course will involve more paperwork, costs and will be quite time-consuming, but this is what will allow the company to fully develop and take advantage of the potential it has. EOR services can be used in the initial stages of market entry to familiarize the company with the local work culture and competition, however, this is a temporary solution in this case.
Redress of rights
As you know, when using an EOR service, it enters into a contract with the company, but also enters into a separate one with the employee who will be hired under the service. The EOR client company does not formally employ the employee, so in the event of any shortcomings, the company is somewhat doomed to trust the EOR to take care of handling any kind of claim. The client company itself has no independent standing in the country where the EOR employs its employees, so it cannot take any decisive action. In the contract between the EOR and the company using its services, it must be clear that the company allows the EOR to take action in the company's interest and agrees to ensure compliance when hiring employees. The company is not in a position to assert its rights against the employee, this is one of the responsibilities that the EOR takes over. This is why it is so important to opt for a trustworthy service provider.
When do you need to use the EOR service?
Remote work is an increasingly popular form around the world. This gives employers access to countless talented candidates who are located in distant countries. Nowadays, however, physical location doesn't matter at all, as it's easy to arrange for an employee to perform their duties while residing in a different time zone, at any time and place that suits them. International job recruitment is a great opportunity for companies to bring diversity to their workforce in terms of gender, nationality, ethnicity and more. According to a study conducted by the Boston Consulting Group, companies marked by a strong diversity strategy can boast revenues as much as 19% higher than other businesses.
Setting up a new entity in another jurisdiction very often involves going through
a complicated registration process. The subsequent operation of the business is not necessarily any simpler. These types of activities almost always require specialized knowledge, not only of business, but also of law.
An alternative solution may be to use payroll services or HR consulting companies, however in the vast majority of cases this is not the best solution. Handing over responsibility for the company to independent, international contractors runs the risk that they will only erroneously follow local guidelines, instead of resolving things from an international angle. This, in turn, runs the risk of legal violations and inconsistencies in hiring employees. Employer of Record becomes the formal employer of your employees, and will therefore make every effort to ensure that all legal issues are carried out with the utmost accuracy for legal compliance.
There may be a situation where your company records an increase in demand for the services or products you offer in a particular region of the world. Obviously, the priority will be to enter a new growth market in order to take advantage of this opportunity. For this purpose, one of the ideas that may come first to mind is to establish a new business entity. In many cases, however, this is not the best solution, mainly because the process of registering a new company is very often time-consuming. It requires facing a lot of bureaucracy, which is also sometimes convoluted and requires additional steps. Another issue is the search for trustworthy cooperation partners in a given location, which can also be a challenge. If time is of particular importance to you and you can't afford even a moment's delay, it's better to consider using an EOR service.
More freedom for employees
Once one has succeeded in recruiting talented employees with the right skills, the company should be particularly keen to continue working with them for as long as possible. In order to keep the most productive and needed people on its staff at all times for as long as possible, it also needs to adapt to their demands and needs, which increasingly include freedom at work. After the pandemic-related transitions, more and more employees desire to remain mobile despite work. This includes the possibility of sudden departure or complete relocation. The company should be prepared for such an eventuality and offer a form of work that does not limit the employee's freedom in any way and his change of location does not mean immediate termination. Keeping the most talented employees with you is, first of all, a huge benefit for the company. It allows a significant reduction in turnover, but also contributes significantly to the final strengthening of the brand. Having a stable company is welcomed by job-seeking candidates, so this way we can attract even more desirable employees. By working with Employer of Record, you don't have to worry about wage differentials, labor laws and other issues related to the movement of your employee. The service provider ensures complete compliance so that your company can enjoy a satisfied employee and the employee the freedom they crave.
Exploring new markets
Not every company wants to immediately jump in at the deep end and register a new business entity elsewhere if they are not sure at the outset that it will be profitable.
Of course, it may also turn out that the company grows in the new jurisdiction at an unexpected pace. Then there is nothing to prevent you from carrying out your earlier plan to register your business, if this option is the most advantageous. However, before making such serious decisions, it would be a better idea to discern cautiously rather than sacrifice your resources, which you may no longer recover in case of failure.
Changing the mode of work
Through the events that have taken place over the past two years, plenty of companies have realized that it is possible to function hybridly or completely remotely for some employee positions. It is true that for a while now the trend of remote work has been developing more and more each year, but the pandemic has undoubtedly accelerated all this. Hybrid and remote working is not only a convenience for employees, who do not have to commute to the office and can work from the comfort of their home, but also a huge saving for companies. This benefits both parties, which is why so many industries are slowly moving toward remote work. According to a McKinsey survey, which interviewed a number of executives from smaller and larger organizations, a significant number of interviewees favored having their employees work from home at least two days a week. It is worth remembering, however, that the process of changing from stationary work to hybrid or remote work is not as easy as it seems. First of all, it requires significant changes in the organization of the company's operations, primarily in the field of HR. Everything must be properly prepared in terms of labor law, data protection, social security and tax law. This requires specialized knowledge and experience. Specialists working for companies offering an EOR service can make this transition much easier by comprehensively dealing with each employee individually. To see how this will work, you can try this solution with individual employees at first. If you come to the conclusion that cooperation with Employer of Record is something for you, there is nothing to prevent the rest of your staff from also working this way.
Change of status from freelancer to employee
A common practice used by many companies around the world is to work with freelancers. This is an alternative to hiring employees under contract. However, this solution is not always satisfactory for the company, as it has its downsides. One of the disadvantages of working with a freelancer is that there is little or no control over their working hours. It is true that they are obliged to perform the order they have committed to deliver to the company, however, the principal does not know exactly when and how long they are specifically doing the work. Another issue in favor of hiring a freelancer as a full-time employee is the company's desire to reduce its turnover rate. However, the biggest problem that businesses face when working with independent contractors is misclassification, which consequently exposes the company to financial penalties related to improper payment of taxes and benefits. For this reason, one may consider the idea of hiring a person who has previously worked for the company as an independent contractor. In order to avoid legal problems and be able to hire a freelancer as your employee, it is advisable to seek help from the Employer of Record. The EOR service provider will support you in concluding a long-term cooperation on terms that will satisfy both parties. The freelancer will continue to retain some of their independence but, on your part, all formal issues will be completed and will comply with legal regulations.
Yes, in the vast majority of countries Employer of Record services are perfectly legal. There are a few exceptions where this type of practice is not allowed or is partially restricted. An example of this is the previously mentioned Germany, where an employee can only be employed through Employer of Record for up to 18 months.
Using the EOR service, it is the entity providing the service that is to take care of tax issues, distribution of the employee's wages or social security contributions, while the provider of funds is still your company. It is constantly your company entity that pays the due salaries, however, in this case it also has a number of financial and legal specialists at its disposal, so managing payroll in other countries is made much easier.
How much does an EOR cost?
The cost of an EOR service depends on the company you choose to work with. Each has its own individual price list. As a rule, companies offering EOR service use one of two pricing models - a flat fee structure or percentage pricing. These are comparatively popular. The big advantage of flat fees is that they are clearly defined and in the vast majority of cases are much lower than interest rates. Before deciding to sign a contract with a service provider operating on the basis of charging a percentage instead of a flat fee, it is important to keep in mind how things work in practice. Since the service provider will charge a certain percentage, this often results in the client company keeping employee salaries as low as possible so that the Employer of Record fee is not high either. Of course, this reflects negatively on the company, as it leads to employee dissatisfaction, layoffs and increased turnover. To avoid this risk, it is worth opting for an Employer of Record applying a fixed rate. Admittedly, the cost of employment in different countries around the world can change and is very difficult to predict, but a professional company providing EOR services can determine in advance the specific amount that will be due for their services. The average cost of EOR using a flat fee structure pricing model is about $200-300 per month, although this price can vary due to location.
What industries benefit from the EOR?
The EOR service is not closed to any industry. It is used by companies engaged in the most diverse activities. There are also no restrictions on the size of the client company. If a specific position can be covered by a person from another country and the duties related to it can be performed remotely, there is nothing to prevent the use of the EOR service. However, there is no denying that a very large proportion of clients who have chosen to work with Employer of Record are small and medium-sized companies. There's a reason for this - an experienced Employer of Record assists the client company with its experience and legal, HR and financial expertise. It also has on its staff numerous specialists who are ready to provide assistance in any situation. This makes it much easier for small and medium-sized companies with limited finances and knowledge to expand into new markets. By working with Employer of Record, there is no need to worry about compliance issues - entrepreneurs can fully focus on developing the company and pursuing its strategy. It also prevents the company's internal resources from being spread too thin. This does not mean, however, that larger business units are not taking advantage of the EOR service. Even Fortune 500 companies often take advantage of the opportunity EOR provides, increasing global mobility and testing new foreign markets with a staff of experts on hand.
Is it possible to hire international workers without using the EOR?
Hiring international workers without the assistance of the Employer of Record is entirely possible. This can be done in two ways - registering a new business entity in the jurisdiction of your choice, or taking on people you have selected as independent contractors. However, both of these solutions have their strengths and weaknesses, which should be realized before making a final decision. The most obvious answer to the problem of hiring an employee from another country is to set up a new company in that country. Not only is this very time-consuming as well as costly, but most importantly it involves a great deal of responsibility. When registering a new legal form in a country, we automatically have to fulfill certain obligations, such as paying taxes and acting in accordance with local regulations. It also often involves additional hiring of more people, for example, payroll specialists, lawyers, benefits administrators and many others. Of course, starting a new company in a market where we plan to expand widely makes perfect sense. If we intend to employ hundreds of people and tie our long-range plans to a particular country, this is the solution that can bring the most benefits. If, on the other hand, we are in a situation where we want to hire up to a few dozen employees, it will definitely be a more cost-effective option to use EOR services. The second alternative considered by employers is to work with independent contractors instead of hiring full-time contract workers. This option only seems easier and less costly on the surface, as government authorities in countries around the world are becoming increasingly strict about misclassifying international contractors. If an independent contractor is found to be performing duties that are no different from salaried work, the company can face very heavy fines. Using Employer of Record services relieves you of this risk. It is the EOR service provider who is the formal employer of our employee located in another country, so in the event of any inaccuracies, they bear all responsibility.
What are the myths about EOR?
EOR service is no different from outsourcing
Treating Employer of Record as synonymous with outsourcing is by far the most commonly reproduced myth. However, this is not true. When we use the EOR service, it becomes the formal employer of our employees. We are the ones who continue to decide on the scope of work and responsibilities of the positions in question, manage all decisions regarding employment and also dismissal. Although the Employer of Record is listed in the documents as the official employer, the real control over the employees is ours, and it is for our company that they do the work. Outsourcing is about something completely different, as it is a third party's management of employees and their duties. It doesn't have a very good reputation, as employees often don't have a clear understanding of exactly who their employer really is. Tasks and directives delegated in this way are also often miscommunicated, especially if the employer giving the instruction speaks a different language than the employee or person passing on the instruction. Outsourcing, however, forcibly reduces any control, not only over the employee but also over the quality of the work performed by the employee and the analysis of potential risks. There can also be a danger that independent contractors or freelancers will not be able to provide adequate protection for consumer data and proper safeguards for valuable intellectual property. All these arguments, unfortunately, testify to the disadvantage of outsourcing. Many specialists are aware of them, which is why this method of hiring is not as widely used as it once was. Very few companies opt for this solution, because for many it is too risky and based on unclear conditions.
Unlike outsourcing, EOR has numerous advantages that distinguish it from the aforementioned practice.
- A very important issue, which looks extremely different with EOR than with outsourcing, is transparency.
- An experienced and reputable Employer of Record always provides its clients with clear and unambiguous terms of cooperation that leave no doubt about the employment relationship, duties performed and other issues.
- All formal matters are included in the contract, both those pertaining to the relationship between the client company and EOR, as well as EOR and the employee.
- Another huge advantage of the EOR service is that virtually all control is maintained.
- It is the client company that searches for candidates, decides which ones will be hired, and only then does the Employer of Record deal with the issue of formally hiring them and adding them to the payroll.
The client company decides entirely on the employee's responsibilities and any issues related to the position. EOR also stands out for its care in protecting clients' intellectual property, which unfortunately cannot be said of most outsourcing agencies. Employer of Record uses every means possible to ensure that sensitive data is always stored and transmitted as securely as possible to prevent it from falling into the wrong hands. Although the EOR service may initially be associated with outsourcing, after a detailed comparison of the two concepts and a review of the characteristics of the two separate services, it can be seen that this is only an apparent similarity that is not reflected in reality.
Employer of Record operates like a temporary employment agency
There is a fundamental difference between EOR services and those offered by temporary employment agencies. The main task of a recruitment agency is to attract suitable candidates for companies that are only looking for people to fill positions for
a short, specified period of time. The number of industries in which employment agencies operate is significantly limited, as they focus largely on recruiting seasonal workers.
Through EOR, employees can be hired for both short and long periods. Nothing prevents the Employer of Record from hiring on our behalf for full-time permanent positions.
EOR service is not suitable for hiring managers
Employer of Record is distinguished by its great flexibility and diversity. Through this service you can hire individual employees as well as dozens, regardless of industry. Nothing stands in the way of hiring in this manner, both short-term employees and those who take up management positions on a permanent basis. It is up to the contract to determine on what terms the employee will be hired, and its terms are set in detail and can be adjusted according to your expectations and needs. If the duties performed by a person in your company in a managerial position can be performed remotely, it is worth considering using the EOR service. It has been repeatedly confirmed that remote work works in the vast majority of cases, and employees who work from the comfort of their home are much more productive than those who have to commute to the office every day. With the EOR service, it is also much easier to hire someone who is of a different origin or located in another country for a management position. This means that we don't have to limit ourselves in our search for the most suitable candidate only to our immediate surroundings, but the recruitment that is carried out can cover many countries around the world.
What to look for when choosing an Employer of Record?
Owner of the entity
A matter of priority when undertaking cooperation with Employer of Record is to check whether the service provider we are interested in has its own company in the country from which we plan to hire employees. This is an inescapable condition, because if we ourselves do not plan to register our own entity in the near future then we depend on finding an organization that has such an entity. Establishing cooperation with an Employer of Record that does not have its own company in the country of our choice may result in the hiring of our employees by a third party unknown to us. This is a very risky situation, putting both our company and employees in danger. Let's not forget that if we are not based in a given jurisdiction, our ability to supervise the operation of such employment and the quality of services provided is quite limited. By having its own company, Employer of Record can handle even the most complex HR services. A permanent entity operating legally in the country is, as it were, proof that the service provider is committed to its activities in the territory.
One of the main reasons why the popularity of the EOR service continues to grow and more and more companies are choosing to use them, is the knowledge of all the laws, regulations and rules by which the local labor market operates. This type of specialized expertise takes a lot of time to assimilate, however, experience in navigating the business environment in a particular country is also required. When choosing an Employer of Record, another factor we must take into account is precisely their experience in providing this type of service. The best choice will be a service provider who has been engaged in such activities for many years and is well acquainted with the region of interest. The industry in which we operate is also not without significance. While the EOR service, as a rule, is tailored to the needs of any niche, even the most demanding, specific Employers of Records often specialize in managing a team from particular industries. As a result, we can be sure that when providing services to our company, the Employer of Record will not be surprised by anything and will find a solution for every situation.
In addition to hiring employees for your company and handling all formal matters, let's not forget that the Employer of Record also has a representative function.
A reputable Employer of Record makes it a priority to maintain document compliance and meticulous tax record keeping. It is also important how long a given service provider has been operating in a particular market. Usually, companies that have many years of experience are more reputable. We should also look at what companies the Employer of Record we are interested in works with. If we can find large, respected businesses on their client list, we can be almost certain that they have a very good reputation.
Scope of solutions
Companies choosing to work with an Employer of Record always take this step for some specific, defined reason. Usually it is the need for some specific feature that such a provider has in its offer.
Preparing this type of plan in advance is not only beneficial for you and your company, but also for the potential service provider because they will have a clear outline of what you specifically expect from them.
Employer of Record formally hires employees from various companies, so in order to do so, it must have relevant data regarding them. The case is similar when it comes to working with a company - in order to use the EOR service, it is necessary to give plenty of sensitive information to the service provider. Holding this type of data entails great responsibility, so we should be particularly concerned that the Employer of Record we choose is as reliable as possible. In every industry you can find scammers whose sole purpose is to obtain as much information as possible about individuals and business entities and then use it. EOR services are unfortunately no exception to this. Before deciding to trust a chosen service provider, it is generally recommended to check how many similar companies the Employer of Record has managed to work with. If little or nothing is known about the service provider, a red warning light should go on for us. Admittedly, this does not always mean that the company is a scam, but we should be extra cautious. It is best to work with such entities that are well known in the market. The transfer of sensitive data is not an issue to be trifled with, which is why the credibility of the Employer of Record is so crucial.
Tools and technology used
An issue that is often forgotten when searching for a suitable, trustworthy Employer of Record is the type of technology it uses. When deciding to work with another company, it is only logical that we want it to use modern solutions and keep up with the changes that are constantly being introduced. The kind of tools that are used by the service provider when managing the payroll of our employees and also storing all the documentation that pertains to them is extremely important. From the experience of many companies using the EOR service, it is clear that the best cooperation occurs with such providers who use large-scale oriented technologies in their operations. This demonstrates their professionalism and experience. Rather, it is not advisable to opt for an Employer of Record that uses SME-oriented software - or worse, handles all documentation manually. This practice does not ensure sufficient compliance and can expose mistakes to be made, which is not so common when using automated systems. A great advantage is the ability to integrate the tools used by Employer of Record with those used by the client company. This allows for greater control and the creation of consistent practices.
Communication and cooperation
Cooperation with any service provider will not be fruitful if there is no two-way, clear communication. The way of interacting with clients is one of those factors that distinguish a good Employer of Record from the rest. Admittedly, not every service provider will be suitable for every company, however, a professional Employer of Record will make every effort to ensure that the communication between him and the client is as tailored as possible and proceeds without any complaints. Many ways of interaction can be distinguished, but the most common are keeping in touch via instant messaging, setting the terms of cooperation through a designated consultant or using selected task management tools. None of these ways is better or worse, as it depends on the specific company which one works best. The priority is to find an Employer of Record that meets our needs at the level of communication. A concrete, clear way of cooperation is the key to success.
A very large proportion of companies choose to use the services of an EOR because of insufficient expertise in the market in which they wish to hire employees. Employer of Record is supposed to be the solution to this problem - having numerous legal, tax and financial specialists on its staff, it is expected to provide the highest level of compliance and, should any problems arise, know how to solve them. A professional Employer of Record employs local staff, so they have the ability to personally interact with the client company's employees and the management of HR and payroll services is made easier and more efficient. The most reliable testament to the Employer of Record and its staff's expertise is whether it has already worked with other companies hiring its employees in a particular country. When deciding to use the services of an EOR, we should want our cases to be managed by an entity that simply knows its stuff. If the service provider does not have experts in specific fields and does not have experience in providing this type of service, there may be a risk that it will not be able to handle hiring our employees in the chosen country.
Security of intellectual property
When we work with an Employer of Record, we allow them to have access to our company's intellectual property, and protecting it is an incredibly important issue. If we choose a service provider poorly, we can expose ourselves to very unpleasant consequences and put our company at great risk. Before we sign a contract with an Employer of Record, we should find out whether it has defined protocols for the protection of intellectual property. This is not a matter in which we should make concessions, as the security of our company's data is at stake. The contract we enter into should include information on the specific procedures that will be used by the company to ensure that sensitive information about our company is as secure as possible.
In this way, the Employer of Record risks breaching the confidentiality of our company, exposing it to greater danger. A practice that should absolutely be followed by the service provider we want to work with is to make backups of the data they store. This is a great way to protect yourself in case they are lost for some reason. Failure to adequately safeguard a company's sensitive data is incredibly dangerous, and if you don't take the proper precautions, it can effectively prevent you from even continuing to do business. In the most positive scenario, if the data ends up in unwanted hands, we face a series of court battles and the possession of our company's IP in many countries. To avoid this type of situation, make sure your prospective Employer of Record takes proper care of the security of your intellectual property.
Employee benefits package
Last, but not least, is the employee benefits package offered by Employer of Record. The EOR service provider, in addition to formally employing our employees and paying their salaries, is also required to manage their employee benefits. Each Employer of Record has an individual benefits package on offer, so it is important that at the stage of selecting the most suitable one for our company we pay special attention to those providers who can offer the most.
Questions to ask when interviewing our potential Employer of Record:
- Does the Employer of Record have a registered entity in the country of interest, or does it outsource employment to a third party?
- Does the Employer of Record have experience working with similar companies to yours?
- Is the EOR service a core business or just an additional service?
- What is the minimum contract length for your company and the notice period?
- Is the employment contract offered by the Employer of Record in line with your company's interests?
- Does the Employer of Record have legal, tax and business experts?
- How are Employer of Record's rates and fees determined?
- What is the Employer of Record's invoicing and payment time cycle?
- How are Employer of Record's intellectual property and invention rights protected?
- How does the Employer of Record store employee records?
- Will sensitive data about your company's employees be shared with any third parties by the Employer of Record?
- Does the Employer of Record have regional account managers?
- How will communications with the Employer of Record be handled?
- What technologies are used by the Employer of Record?
- Is it possible to integrate the tools used by Employer of Record with those used by your company?
- What does the performance and service history of Employer of Record look like?
The most trustworthy EOR service providers
Airswift has extensive experience in providing EOR-type services, as it has been in the market for more than 40 years. It is one of the leaders in providing suitable solutions for companies in a variety of industries, however, it is particularly specialized in infrastructure, energy and processing sectors. Airswift boasts having its own business entities in 60 countries. Hiring employees as an Employer of Record is the company's core business, however it also offers much more. A very big asset of Airswift is its great flexibility, which allows it to adapt to the individual needs of each client it works with. The company can take over such responsibilities as managing your employees' benefits, paying their salaries and even assisting with relocation. Specialists working on behalf of Airswift also serve to help in handling work permits for employees and sponsoring visas, and will make sure that all processes take place in accordance with applicable laws. If you wish to dismiss an employee of your choice, Airswift will handle the termination issues. The company does not have uniform rates; they are set on an individual basis.
Remote was established in 2019 and was founded by Job van de Voort and Marcelo Lebre. The main purpose of the company's operation is to make it easier for businesses to access talented candidates who are sometimes located in other countries. For this reason, Remote is a great option for companies that have numerous employees in very distant geographic locations. Some of Remote's best-known clients include HelloFresh, Paystack, DoorDash and GitLab, among others. With Remote, the client company can focus all of its attention on growing its business globally, while Remote takes over some of the responsibilities of running payroll, hiring contractors and employees. Remote owns numerous legal entities in key locations around the world, such as the United States, the United Kingdom, Canada, the Philippines and India. Customers have a number of specialists at their disposal regarding the most important fields and can also work with Remote's local partners. We can count on integration with BambooHR and also Greenhouse. There is also continuous work on integration with Bob and Lever. A very big advantage of Remote is that it can be used at no charge if we only wish to manage contractors. We can also try the management of the first employee for free, however, with a larger number it will be necessary to purchase a paid plan. The rate starts at $299 per month per employee.
Papaya Global specializes in global workforce management. Its operations use a fully automated, state-of-the-art Saas platform, through which recruiters can freely recruit candidates from even the remotest corners of the world. The platform consists of several hundred functions and uses the latest technology, so that countless operations can be performed through it, from onboarding to making cross-border payments. The platform can be accessed by the Employer of Record, as well as the cooperating company, hired employees and contractors, so it is available to everyone to some extent. This makes it possible to carry out seamless collaboration and integrate any management tools used. Thanks to the use of smart technology, using Papaya Global's services we can rest assured that we are ensuring the highest level of compliance with local regulations. We don't have to worry about making any mistakes or shortcomings, which characterizes human work. We can keep an eye on the flow of our finances with a clear payroll expense tracking and business intelligence (BI) system. Papaya Global provides its services in as many as 160 countries The cost of Papaya Global's services starts at $650 per employee per month. We can also take advantage of a free trial period to familiarize ourselves with how the service provider operates.
Companies that wish to enter foreign markets but at the same time avoid the need to register a local business entity may be interested in Shield GEO's offerings. This service provider has units in as many as 50 countries and provides its assistance in all possible matters of employee hiring, payroll management and benefits administration. Some of the basic tasks performed by Shield GEO on a day-to-day basis include managing employees, hiring both employees and independent contractors and other wide-ranging business operations. Should the need arise, Shield GEO experts will be happy to assist the client company and its employees by also providing HR, legal and immigration services, such as streamlining the process of applying for a work permit in a particular country or obtaining a visa. Among the many advantages of working with Shield GEO are fixed and predictable costs for conducting international expansion, access to specialists with expertise and years of experience, improved retention and the assurance that everything is done in the strictest compliance with the law. Shield GEO assigns each of its clients their individual account manager, making contact with a company representative lightning fast.
Omnipresent is a service provider that boasts one of the most extensive networks of entities worldwide, as its operations span as many as 160 countries. The company specializes in facilitating the hiring and management of remote teams. Clients can count on onboarding employees, processing their payroll and managing employee benefits at the highest global level. Every employee hired by Omnipresent is provided with an extensive employee benefits package, regardless of their current location. Omnipresent is renowned for its professional approach to cross-border payments and complex local taxes. The company also applies convenient solutions in its operations that greatly facilitate the cooperation undertaken - for example, the company's clients receive only one invoice per month, regardless of the amount of services provided. Omnipresent further ensures security for all employee documents, such as contracts, pay stubs and expense forms, by storing them on its own platform with heavily restricted access. The platform itself allows the client company to integrate with its tools, as it can be linked to 24 of the most popular HR systems, such as Workday, Hibob and BambooHR.
Multiplier makes hiring an international employee a breeze. The very process of inducting a new employee takes just a few minutes, and all the tedious responsibilities of managing a team are taken over by the company. For now, Multiplier provides its services in 150 countries around the world, however, it plans to expand further and establish more businesses in as many places as possible. All of these efforts are aimed at enabling customers to enter new markets more quickly than through other companies that have EOR service on offer. At this point, Multiplier boasts that it is faster than 90% of its competitors in its efficiency. The service provider is focused on hiring talent from every region of the globe. The entire hiring process, of course, is carried out in accordance with local regulations. Multiplier provides access to its advanced, state-of-the-art, platform, from which we can do almost everything related to employee management - it has such functions as hiring employees, onboarding, payroll management, managing tax issues, controlling employee expenses, managing employee benefits and also freely selecting the most appropriate insurance plans for each employee. In case of any doubts, Multiplier leaves more than 100 legal specialists at our disposal, who will do their best to ensure that the operations carried out by our company are characterized by complete compliance with the tax and labor laws in force in the country. The cost of undertaking cooperation with Multiplier starts at $300 per month per employee. It is also possible to use a free demo version before deciding on a paid version.
Another noteworthy EOR service provider is Foxhire. This company can provide its potential clients with a very extensive range of services, covering virtually all matters related to the employment of international workers - covering anything including administrative, legal, financial and insurance issues. Although formally Foxhire will be the employer of our employees, our company will still have full control over the employee's duties. Foxhire relieves us of the burden of keeping an eye on things like HR functions, benefits administration, payroll and timekeeping, which are among the biggest time eaters in almost every existing company. In addition to the standard services performed by the Employer of Record, Foxhire can also handle less obvious matters such as employee background checks, checking for drug possession and presence in the employee's system and can even take fingerprints if necessary. They can also take on less pleasant duties that nevertheless need to be performed from time to time, such as firing employees, applying for workers' compensation or dealing with unemployment claims. In addition, Foxhire can be counted on to assist with immigration issues, drafting and concluding an employment contract, ensuring tax compliance and administering health benefits.
Oyster is an international company, performing the function of Employer of Record at the highest possible level. It acts as a guardian of international employees, ensuring their employment, payment of due remuneration and at the same time providing the highest possible job satisfaction and comfortable working conditions. When working with Oyster, we get access to an intuitive dashboard, through which we can manage matters related to our employees, such as displaying compliance status, checking the work performed by employees and verifying payroll. Admittedly, checking activity by compliance is just a formality in this case, as Oyster is known in the market for its professionalism and accuracy in this regard. An additional service that is not offered as standard by other EOR companies is the cooperating company's workers' compensation insurance in the jurisdictions where the employees are hired. Oyster provides the highest protection for intellectual property as well, they use non-disclosure agreements and IP. New, small companies that are just developing their business and do not yet have much expertise can take advantage of the unique opportunity of the Oyster Academy. The academy organizes numerous trainings and courses on preparing for remote work and managing a remote team, as well as creating a company culture under such conditions. This is a great source of information gleaned from the company's many years of experience, which makes it possible to expand into foreign markets even faster. In addition to the theoretical knowledge, Oyster provides a number of financial tools it uses, which are designed, among other things, to determine the profitability of hiring an employee compared to working with an international contractor, or to calculate the full cost of hiring an employee in a particular country. At the very beginning of our cooperation with Oyster, we can try out their free plan, which allows us to hire and bill up to two contractors. This way we can familiarize ourselves with how their platform works and see if this is something that suits us. If we decide to continue our adventure with Oyster, we can purchase a paid plan, the cost of which starts at $400 per month per worker, not including the flat fee, the amount of which depends on the country in which the worker is employed.
Any case that seems incredibly complicated and too complex to handle, it is worth handing over to experts - such as Velocity Global, for example. This service provider is a specialist in difficult cases related to remote team management. Velocity Global helps at every stage of employing international workers, from hiring them to implementing and paying their salaries to ensuring compliance with local laws. Velocity Global is one of the leaders in EOR services in the United States, operating and owning businesses in all of its states, but you can also enter 185 other jurisdictions through them. Working with Velocity Global means the certainty of conducting business operations in compliance with regulations, maintaining control over employees despite the distance, and significantly reducing risk in the event of any setbacks. The EOR service provider is available to the customer 24/7 because it is well aware that urgent situations can happen at any hour. Each company working with Velocity Global also has its own service manager, able to provide its assistance to the company whenever it needs it most. Ensuring compliance is the company's top priority, so every effort is made to ensure that no shortcomings occur.
When growing your business in many countries around the world, it's a smart idea to make good use of the moment and do it as efficiently as possible. New Horizons is an EOR service provider that delivers express hiring. In as little as 48 hours you can hire dozens of employees in more than 150 countries. The capabilities of this company are immense and it can satisfy even the most demanding clients. New Horizons specializes primarily in hiring, compliance and payroll issues. When you work with New Horizons, you will have a group of legal experts by your side, who will accompany you during every key moment - in hiring new employees, renewing employment contracts and terminating them. Other New Horizons competencies also include compliance management, numerous tax law services and employee benefit distribution. Employees can be supervised through a cloud-based web portal that New Horizons has at its disposal. It provides the highest level of protection for any sensitive data and is perfect for managing up to several hundred employees spread across the farthest corners of the world.
TriNet's business is mainly focused on providing comprehensive services to small and medium-sized companies. TriNet's main goal is to enable the client company to focus as much as possible on growing its business by relieving it of duties that can be delegated, especially those in the field of human resources management. TriNet is able to adapt to the needs of any company, as it has a variety of packages covering different HR services. The packages are very professionally structured, so that any company is sure to be able to choose one that best meets its needs.
International Staffing Consultants
International Staffing Consultants is more than just another company with an EOR service. This is a business that has the necessary expertise, many years of experience and also a very wide range of services, so they can rise to the occasion by serving start-ups as well as huge corporations. In addition to the standard range of duties carried out by the Employer of Record, International Staffing Consultants can also take on issues related to finding the most talented candidates for particular positions. Wanting to provide services of the highest possible quality, ISC cares about the client company's comfort at every step, offering its assistance in every possible matter. ISC has all the necessary qualifications to hire employees and provide them with working conditions in accordance with international standards. ISC's network covers numerous countries around the world and is constantly expanding to include new businesses.
If you want to use Employer of Record's services only temporarily, or you want to try it out first for a limited period of time and then possibly decide to go for a longer partnership, ZeroChaos is a good choice. It is a service provider that specializes in temporary employee management, operating in many locations and countries. It has all the necessary services on offer to ensure that controlling employees is not as time-consuming, costly and resource-intensive as it would be if you were to manage your staff yourself. ZeroChaos makes every effort to keep up with the changes constantly being made in the numerous foreign markets to make hiring international employees as easy as possible.
Innovative Employee Solutions
Innovative Employee Solutions is a company that has years of experience in providing EOR service. The business has an excellent reputation and is widely sought after in the North American market, where it works with thousands of established companies and their employees. IES has on its staff some of the most recognized legal, tax and business experts, who unanimously work together with one goal - to minimize the time and resources used in hiring personnel, while maximizing revenue and efficiency. IES realizes that a good employee with the necessary skills is very valuable, which is why it focuses on finding and hiring talented candidates around the world, not just in the immediate area. IES is one of the few EOR providers with experience in working with companies in diverse industries. This is a good solution no matter what your company's business is.
NPI is an Employer of Record that focuses mainly on providing services to businesses in the entertainment industry. It offers all basic services such as payroll, pension reporting and tax payment. NPI is well aware of the realities of operating in the entertainment industry and makes it possible for the client company to focus as much as possible on the creative process instead of rigid formalities and paperwork. It handles the entire payroll process comprehensively, while ensuring compliance with regulations.
If you want to work with an Employer of Record that excels in innovative solutions and takes an individual approach to each client's needs, consider iWorkGlobal. The service provider keeps abreast of all new developments, both technological and legal, making hiring international employees as efficient as possible and in compliance with local regulations. iWorkGlobal also assists in creating a plan to expand the client's business into more foreign markets, lending its experience and expertise.
Every company wants to act in the fastest possible way, incur the least costs and avoid stressful situations. Nexus CW staff understands this very well, which is why they have a package of staffing services to help bring these expectations closer to reality. Your company's affairs will be in the best possible hands, as all duties related to recruiting employees, paying salaries and managing employee benefits will be handled by
a team of experts. Nexus CW has business entities in numerous countries around the world.
As we expand our business into more jurisdictions, we need to keep in mind that each jurisdiction has different regulations for hiring employees and paying taxes. Most companies don't have enough time to familiarize themselves with the details, so it's worth trusting Globalization Partners in this regard. They will make sure that your employees are hired and work in full compliance with local laws. Globalization Partners is not only an Employer of Record service, but also a very reliable and trustworthy source of knowledge - they organize numerous webinars and create articles and videos, thanks to which companies cooperating with them can learn about the latest changes and gain knowledge about business expansion in specific markets.
EOR contract employment
If we choose to work with an EOR service provider that offers contract employment, the Employer of Record legally becomes the legislated employer of our contract employees. Looking at it all from the formal side, the Employer of Record instead becomes the back office for our contract staff. This means that the performance of back-office duties can be performed by both recruiters and delegated to be filled by the back-office of contract personnel, such as the Employer of Record. Using the EOR service, we can also begin to work together with contractors. In this case, it will be necessary to decide who will act as their employer - our company or the Employer of Record. Of course, we can take care of all the tasks related to the activities of our company, however, for this we need such resources as time, expertise and much more. Any actions we take may also have legal consequences, so acting alone we are fully liable. Working with Employer of Record, we don't have to worry about these matters, as it relieves us of most of the duties and responsibilities, takes care of employee management and payroll and, when necessary, can also perform other additional services, such as recruiting potential job candidates.
Termination of EOR contract
Cooperation with the Employer of Record may not always look like we would expect. There may also be a situation where we desire to use another provider. Some companies grow so much with the EOR service that after some time they are ready to set up their own business entities in selected countries. All the situations mentioned lead to one conclusion - the contract concluded with the Employer of Record should be terminated. However, this must be done correctly. There is no one-size-fits-all on how to terminate an Employer of Record contract, as each contract has its own terms and conditions. However, there are certain guidelines to follow, regardless of the arrangements that are on this binding document. The most important point in terminating a contract with an Employer of Record is to communicate very clearly about your desire to end the cooperation. In this case, the company should not neglect its obligations to the EOR service provider counting on the fact that it will break the cooperation itself, or worse, guess that we are no longer interested in working together. It is important to approach this issue seriously and tell the EOR provider directly about our intentions. It is also a good idea to make additional preparations before having this type of conversation. It would be wise to consult local experts on the topic. Dissolution is also governed by the laws of a particular country, so make sure that everything is done with the utmost compliance. The support of professionals will be invaluable here. In addition, sometimes complications can arise due to cultural differences. If our EOR provider comes from a country very far from our place of origin, chances are quite high that they will consider certain things from a different perspective and understand them differently. This should be kept in mind, as it can make the conversation much more difficult. This type of conversation also cannot be conducted by every employee. It would be best if the representative of our company is a person who has the right soft skills and knows how to handle such sensitive situations. This way, the risk of saying something inappropriate is greatly reduced.
EOR vs PEO
A PEO, or Professional Employment Organization, is a third-party service that is often mistakenly confused with an EOR. There are some similarities between the two, however, there are also many significant differences. Comparing the two types of services, we will see that a PEO is far less comprehensive than an EOR, which can respond to the needs of almost any company. The very concept of PEO is formally defined only in the United States, where this practice is most popular. This is due to the fact that each state has its own separate requirements for hiring employees. This is very cumbersome for entrepreneurs, especially those who cannot afford to hire numerous experts in each state. PEO comes to the rescue, easing most of the troublesome issues. While a PEO does not handle the hiring of employees, it does, however, perform some of the duties similar to those performed by an EOR, such as compliance checks and payroll management. This is the fundamental, most important difference that exists between a PEO and an EOR - while the primary activity of the Employer of Record is to hire the client company's employees and become their legal employer, a PEO does not deal with this at all. It is possible to come across cases in which PEO service companies use the term "international PEO," but even in such situations their offer is aimed only at clients who already have business units in their chosen countries and only need assistance in performing certain duties. This is the main factor in determining when PEO and EOR services are needed. If a company wants to take care of some of the payroll and benefits administration, deal with HR in the broadest sense but at the same time has its own business entity, it is worth opting for a PEO. The EOR service, on the other hand, is broader and, in addition to the functions performed by the EOR, can also offer the hiring of selected candidates, so potential clients will not own business entities in many countries around the world.
The experience of numerous companies indicates that EOR service providers are more committed to updating their knowledge in all areas. As a result, clients using their services can rest assured that all business operations are carried out in accordance with the latest developments. Another issue to look into is insurance policies. When working with a PEO, it is necessary to pay not only the policy of the company you own, but also the PEO's policy. This is completely different for an EOR, since it is the EOR that provides itself and the client's employees it has formally hired with its own policies. The last issue is the required number of employees. In the case of PEO services, it is quite common for a service provider not to work with a client unless the client is willing to put at least 5 employees under its care. For the EOR, in the vast majority of cases, it does not matter at all how many employees the client company decides to hire through the EOR. It can be any number, from one to several hundred.
EOR vs GEO
GEO, or Global Employment Organization, is nothing more than a large-scale application of GEO. It is simply an international structure that has a large number of business entities in many countries around the world and provides EOR services through them. In short, multiple EORs deployed in numerous locations make up a single GEO. A client establishing a relationship is in contact with the GEO, which, after successfully establishing terms and conditions, passes all responsibilities and guidelines on to the EOR in the country in question. The GEO can be called a kind of intermediary between the client company, the client's employees and the EOR. It also performs an oversight function by controlling the activities carried out by the EOR, both from a business and legal perspective.
EOR vs recruitment agency
The main role of a recruitment agency is to find the most suitable employee for the position a company is currently looking for. For this reason, it is very common to hear such a term about them as "headhunters," for example. So, in summary, the priority task of a recruitment agency is to act, so to speak, as an intermediary between the employing company and potential candidates. Comparing an EOR service to a recruitment agency involves an incomplete understanding of the essence of Employer of Record. The EOR service provider deals with the management of employees, however, it does not itself offer to organize recruitment on behalf of the company. It takes care of registration and all personnel-related duties, only that it is already done after the most suitable candidate has been selected. On the other hand, there are also some issues that link EOR with a recruitment agency. Many of them offer services that are very similar, such as filing documents on an employee or checking their work history. It is also increasingly common to come across recruitment agencies that focus only on selected industries, such as healthcare or IT. The Achilles' heel of recruitment agencies, on the other hand, is their incomparably lower expertise compared to EORs, who very often have access to top experts in numerous fields.
EOR vs independent contractors
Companies operating internationally sometimes wonder whether hiring independent contractors might be a better option. Usually this type of dilemma arises if one is concerned about carrying out sales activities or only wants to carry out a fairly short project, not necessarily hire someone for a longer period of time. Looking at all this superficially, it may seem that indeed working with independent contractors has more advantages than disadvantages and that it is more cost-effective and more convenient, but these are all misleading assumptions. When undertaking joint operations with foreign contractors, an inescapable condition is excellent knowledge of the regulations in force in the country where the contractor operates. If we do not have this type of specialized knowledge we expose ourselves to enormous risks, the consequences of which can be lamentable for our company, in extreme cases even making it impossible to continue doing business. Acquiring this type of knowledge, on the other hand, is associated with the need to devote huge amounts of time and also money. Another issue, which is already independent of the company, is the commitment and skills of the independent contractor. From the experience of many companies, it is a real feat to find a professional who exhibits the skills we want and at the same time performs his work on time, without any time slips. Depending on the country in which we may hire an independent contractor, this type of cooperation may be viewed differently by government authorities. In some jurisdictions, if a contractor continually performs duties for our company but is nevertheless not employed as an employee of our company, this may be considered an attempt by the company to evade paying due taxes, which may consequently be considered a misdemeanor or even a crime. In order to avoid all these problems and the nerves that come with them, many companies ultimately opt for the EOR service.
EOR vs FsaaS
Another service whose implemented functions are sometimes confused with those performed by EOR is FSaaS, or File System as a Service. Companies offering this type of service take the worry out of risk and compliance management for their customers, allowing them to devote much more time to developing their business. This is a particularly attractive option for new businesses that are not yet established in the market and are trying to make a name for themselves. FSaaS allows you to operate according to your chosen strategy, without worrying about compliance with current regulations, which is controlled by experts. As you can see, FSaaS service is much more truncated than EOR. While EOR service providers have included practically everything that FSaaS can provide, it doesn't work the other way around.
EOR vs ASO
ASO stands for Administrative Services Organization. It is a form of outsourcing that involves providing services related to cranking out HR responsibilities and administrative matters for companies. Service providers engaged in ASO activities can usually ensure on their part the management of employee benefits or the processing of international payroll. As you can see, ASO performs some of the tasks that can also be carried out by EOR, but there are also very significant differences.
EOR vs BPO
Another service that may resemble EOR to some extent is Business Process Outsourcing, or BPO. A BPO service provider has certain control over all business operations that take place in the client company. It takes over the client's accounting, payroll and HR responsibilities, however, most often it does not handle them personally, but outsources their oversight to third-party providers. This means that
a third party becomes involved, over which, unfortunately, the client company has no control. One can only count on the BPO to fulfill its role and actually do its best to ensure that the contractor carries out the outsourced duties with the utmost compliance. In addition to this, the BPO also offers the tools necessary for hiring potential job candidates and numerous other services related to human capital management. This is a service that business owners looking for resource and money management experts in particular should pay attention to. When expanding our business in foreign markets, we have to deal with complicated accounting regulations, so it's a good idea to outsource some of the duties to professionals. Again, the main difference with EOR is that the client company's employees cannot be hired and no responsibility is taken for any mistakes.
The process of undertaking cooperation
Each EOR service provider operates under slightly different rules, so in each case the process of entering into cooperation may differ in certain elements. However, we can distinguish 3 basic steps that we can expect almost always when we decide to work together with an EOR service provider.
The first step is preliminary discussions and an assessment of what specific needs the client company has. This allows the EOR service provider to figure out what functions will be required to perform in terms of cooperation. It is also the moment when the client company can figure out whether the Employer of Record is able to meet its expectations, or whether a better decision would be to look around for some other. It's not worth skimping on this stage, having in-depth conversations is very important and too often companies take it lightly. Spend a little more time to get to know in depth the entity with which you will be working and who will be responsible for your employees. Furthermore, it is necessary to communicate what specific goals we care about, how many employees we plan to hire through Employer of Record and in which countries. Doing so will also enable the service provider to prepare adequately, so that they will be able to start providing services from the first days of cooperation. The second step of undertaking cooperation with the Employer of Record is the so-called introduction, i.e. the parties establish the most convenient terms and conditions of cooperation. This will ensure that the contract concluded later will be the most beneficial for both the client company and the service provider. The Employer of Record also has a chance at this stage to become more familiar with the client company's policies and the way it conducts its business, which will enable an even more individual approach in terms of the services provided. Chances are that there will be a need to pay a service deposit at this stage, however these are usually small amounts. The third phase is the start of the actual cooperation, which means that the Employer of Record begins to fulfill some of the responsibilities of the client company. Of course, the first thing is to hire the client company's employees and ensure all the paperwork related to their legal employment in the country. After that, the remaining functions are carried out, which, depending on previous arrangements, may include payroll management, tax payment, benefits management or compliance.
EOR services in the various countries
EOR in the USA
The EOR service has its roots right here in the United States, where it was established in the 1960s. The reason why it first began to be offered specifically there is quite obvious - the country is made up of numerous, smaller states that have differing regulatory laws. An employer, wishing to hire employees from places other than the state in which it has its headquarters, would have to familiarize itself with the regulations of every location in which it would employ at least one employee. Doing so would be extremely time-consuming. It is much more cost-effective to outsource the formal hiring to another business entity, which takes responsibility for ensuring all compliance, while our company still maintains full control over the employee and the duties they perform. By using the EOR service, clients' business doesn't have to bother with filing annual tax returns in the numerous states where its employees have tax residency, it's simply taken care of and handled. Employer of Record is a solution that is extremely popular in the United States, and without it, most companies would have enormous problems overseeing compliance and managing all the formalities. EOR service is highly developed in the US, and many companies offer state-of-the-art technology that makes managing employees remotely a breeze. Many offer their customers proprietary software designed to maintain the necessary compliance with all state and federal regulations applicable in the United States. Their dashboards typically provide the ability to control account statements, payroll transactions, employee claims and benefits administration. Receiving and sending messages about operations occurring in connection with the fulfillment of HR and payroll duties is also a frequently used feature.
To resign from a job, any reason can be given, but in the vast majority of cases the practice is to leave without explaining your decision. The concept of "employment at will" often causes a problem for foreign investors, who consequently have doubts about their obligations to employees and what the correct terms of employment, termination clauses or contract terms are. For this reason, the EOR service is widely used in the United States not only by American companies, but also by companies based in other countries. This is one of the many cases where Employer of Record services are extremely useful.
EOR in Singapore
More and more companies are looking towards Singapore with curiosity and considering hiring local, talented job candidates or expanding into the Singapore market. There is a good reason for such a trend, as this small Asian country annually ranks among the top countries, outstanding in terms of trade, finance and business. Such strengths as its pro-business environment, stable political climate and strategic location are not insignificant. Although Singapore has many great advantages, doing business there is not entirely without its challenges. Entrepreneurs attempting to enter the Singaporean market often collide with reality when they realize that the local law differs significantly on some issues from the one they know from their backyard. The simplest solution to the problem of compliance in the operation of a company is to use the EOR service, so that professionals take control of legal matters. This is how foreign entrepreneurs significantly reduce the risk of errors and misunderstanding of regulations, and can focus on further developing their business. Singapore is therefore one of the countries where EOR services are very popular.
In the vast majority of cases, companies lack at least one of these factors. That's when it makes sense to opt for an EOR service. When we work with an EOR service provider in Singapore, it will take over our responsibilities related to HR in the broadest sense, such as employee benefits administration, payroll management, overseeing employee pass requests or HR consulting. It will also ensure the highest possible compliance with Singaporean regulations during the hiring process, from determining the details of the employment contract to managing the employee during their employment period and upon discharge.
EOR in Indonesia
Another country where companies are increasingly choosing to hire foreign workers is Indonesia. This is another jurisdiction where EOR services are in great demand. Quite a small number of entrepreneurs choose to set up a separate legal entity in Indonesia, and they are increasingly turning to the great solution of EOR. As a result, the company's employees are hired by the Employer of Record, but it is the client company that still manages the duties that are performed by the employee. Consequently, this allows the company to avoid numerous complications. Registering a company in Indonesia is not the easiest thing to do, it requires a lot of paperwork and is quite time-consuming.
The EOR service provider hires workers on behalf of the company and transfers all legal responsibility to itself. Thereby, this means that even if some compliance error is made, the client company is not at risk in any way. You can fully focus on growing your business and expanding further without worrying about formal issues. If you plan to hire employees in Indonesia for a short period of time, it will make the most sense to use an EOR service. In addition, if your company does not specialize in Indonesian law, rather than exposing yourself to the danger and risk of going against regulations, relying on the knowledge and experience of experts is advisable. EOR services are also attractive to those companies looking to reduce their business costs. It has been estimated that using Employer of Record is 60% cheaper than registering and operating a company in Indonesia, plus we are not burdened with as much responsibility.
EOR in Poland
Poland is a country that leads the way in various types of outsourcing, thanks to the relatively low cost of obtaining talented employees. Polish job candidates are characterized not only by their versatility, knowledge and experience, but are also known for their diligence, loyalty and ambition. For this reason, many foreign companies are eager to recruit for positions in this country, especially when the workplace allows remote work.
When hiring an employee with Polish residency, we must keep in mind a number of important documents, such as the Polish Constitution (especially regarding social rights and the principles of labor freedom), the Polish Labor Code, international agreements addressing the issue of labor law, as well as legal acts and laws on the rights and obligations of both employers and employees. This is an enormous amount of information, and it should be borne in mind that the matter becomes even more complicated if the job applicant we select comes from another EU country or from a country in the European Economic Area (EEA). In such a case, in addition to complying with all the above-mentioned regulations, it is also necessary to obtain an entry visa and a work permit in order to legally employ such an employee. The EOR significantly assists at every stage of employment management, handling employment contracts, tax payment, counseling, compliance monitoring and many other activities.
Whether you, as a business owner, decide to use the EOR service or rather try your hand at establishing a separate business entity in a new country is not the easiest choice. When considering the most favorable option, keep in mind first and foremost the responsibilities and liabilities that will fall on your shoulders in each case. Also consider how many countries you plan to expand into, how complex your payment schedules will be, how many insurance policies you will need to manage, and how many employees you plan to hire. Only after looking at all these issues will you be able to come to the right conclusions. In addition to factors related to your business, it is also worth doing a comparison of what the estimated costs of setting up and maintaining a separate business entity in another country will be, versus using an EOR service. Also, don't underestimate such things as time consumption or the amount of stress and responsibility. Finally, give some thought to whether you have adequate knowledge of the jurisdiction in which you want to hire employees. The truth is that in the vast majority of cases, companies perform better in many fields by working with an Employer of Record. This has numerous benefits, the most important of which are ensuring compliance, lower costs, giving up some responsibility and access to expertise. This solution is often a gateway for a company to international expansion in numerous foreign markets. It allows for a much faster and more efficient operation, and business owners can focus primarily on growing their companies.