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Why EOR is your best bet for global hiring

Why EOR is your best bet for global hiring

Palak Jamuar
April 3, 2024

Businesses are constantly seeking new opportunities beyond their borders. However, expanding internationally comes with a slew of challenges, particularly in hiring and managing a workforce across foreign countries. The complexity of legal requirements  and local employment laws, can be a major barrier. 

That's where Employer of Record (EOR) comes into play. This unique solution simplifies the process,  taking on the legalities of international employment, optimizing operations and ensuring compliance. In this  blog, we'll delve into how an EOR can streamline your global expansion, offering a direct path through the bureaucratic maze and enabling your business to tap into international talent effortlessly.

What is an employer of record?

An employer of record (EOR) is a third-party entity that assumes the legal responsibilities associated with  employing staff on behalf of another company. Essentially, they handle all aspects of HR administration, including payroll, taxes, compliance, and benefits, for employees working in foreign countries. Acting as a partner, it allows businesses to expand into new markets more easily, sidestepping the complexities of international employment laws and the need to set up legal entities abroad.

What does an employer of records do?

EOR serves as a bridge between businesses and their employees, overseeing various administrative tasks such as payroll, benefits, and compliance. By outsourcing these responsibilities, companies can fine-tune operations, minimize risks, and ensure legal compliance. Here are some of the functions of the EOR:

  • Payroll processing: Managing employee salaries, deductions, and payments accurately and on time.

  • Tax compliance: Ensuring adherence to local tax laws and regulations, including withholding taxes and filing tax returns.

  • HR administration: Handling all administrative tasks related to employment, such as onboarding, offboarding, and maintaining employee records.

  •  Legal compliance: Ensuring compliance with labor laws, employment regulations, and statutory requirements in different jurisdictions.

  • Benefits administration: Managing employee benefits such as health insurance, retirement plans, and other perks according to local regulations.

  • Risk management: Mitigating legal and financial risks associated with employment, including worker classification issues and employment disputes.

  • Workforce expansion support: Facilitating the expansion of businesses into new markets by handling employment-related matters in foreign countries.

  • Employee relations: Handling employee queries, grievances, and disciplinary actions in compliance with local laws and company policies.

  • Visa and immigration support: Assisting with visa sponsorship applications and ensuring compliance with immigration laws for international employees.

Why should you consider using an EOR?

Navigating legal waters

An EOR is invaluable for its ability to navigate local employment laws. This ensures that your business operations are in full compliance with the legal requirements of each country you operate in, mitigating risks of legal complications. 

Simplifying onboarding

EOR simplifies the onboarding process by providing comprehensive support to new hires, including handling paperwork, coordinating training sessions, and ensuring compliance with local regulations This streamlined approach benefits both employers and employees, making the integration of new hires seamless.

Facilitating global payroll

Using an EOR simplifies payroll operations by handling payments in local currencies, thus mitigating currency fluctuation risks and administrative burdens. It also ensures compliance with local employment laws and regulations. Ideal for global companies, this ensures smooth, timely payroll in each team member's chosen currency, making managing a worldwide team easier.

Administering benefits and compensation

Organizing benefits are essential tasks that an EOR expertly manages, ensuring that every employee receives their rightful earnings and access to a comprehensive  benefits package, tailored to their needs. This not only plays a pivotal role in keeping current employees satisfied and engaged with their work but also serves as a powerful tool in attracting new talent. 

Handling terminations with care

The process of terminating contracts is sensitive. This is to make sure everything is done according to local laws and to keep a good relationship with employees who are leaving. An EOR carefully takes care of this process, making sure that both the employer and the employee have a smooth experience during this change.

Reducing operational costs

Employing an EOR can lead to substantial savings for your business by eliminating  the expenses associated with establishing legal entities in each country, reducing administrative overheads, and optimizing operational efficiency.

What to look for while choosing an EOR?

When deciding on an EOR, it's crucial to prioritize certain factors. Start by assessing the provider's reputation; opt for well-established firms familiar with the necessary regulations. 

Additionally, efficiency is key – aim for a provider known for prompt responses, ideally within three days. Before finalizing any agreements, conduct thorough due diligence. Confirm the company holds a valid business license and can maintain accurate records of your employees. Remember, it's not solely about cost-effectiveness; prioritize finding a provider capable of effectively meeting your business requirements.

What is the difference between EOR and PEO?

What is a PEO?

A PEO or the Professional Employer Organization works with businesses to handle HR tasks through a shared employment model. This means companies can outsource jobs like paying employees, managing benefits, and making sure they follow employment laws, making it easier for them to manage HR tasks while sharing some of the responsibilities and risks related to employment.

The difference between a PEO and an EOR is that a PEO becomes a co-employer with your company, sharing responsibilities for HR management and compliance. They handle tasks like payroll, benefits, and HR administration.

On the other hand, an employer of record acts as an employer for tax and legal purposes but doesn't become a co-employer. They handle employment-related tasks like payroll, compliance, and taxes, but you maintain control over day-to-day management and operations. Essentially, a PEO shares HR responsibilities, while an EOR takes on the legal obligations of employing workers without co-employment.

How is an EOR different from a staffing agency?

An employer of record mainly handles HR and compliance tasks for employees on behalf of a company, focusing on the administrative side of employment. In contrast, a staffing agency is involved in the recruitment process, including sourcing, interviewing candidates, and negotiating offers, primarily focusing on finding the right talent for temporary or permanent positions. Each serves different aspects of employment needs, with EORs managing the employment relationship and staffing agencies facilitating the hiring process.

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