Why choosing an Employer of Record may be the best choice for your business
Shortage of workers makes it difficult for businesses in several countries to find suitable talent vital to their growth. This is the reason why an increasing number of employers are ramping up their efforts to hire offshore workers.
But to escape the overwhelming costs and responsibilities that overseas employment entails, companies opt for outsourcing services like Employer of Record (EOR) for seamless and cost-efficient HR management.
What is an EOR?
Employer of Record (EOR) is a third-party company that carries out basic personnel functions on behalf of another business.
It enables client companies to form distributed teams without having to set up a local entity, thereby mitigating employment-related legal risks, penalties, and liabilities.
How does it work?
The EOR serves as a middleman in the relationship between the employer and employee. It allows companies to legally work with foreign workers.
While the EOR is the official employer on paper, it usually does not have the authority to make decisions related to employees’ daily work activities, compensation, and dismissal. This arrangement gives the client full control over staff supervision.
From recruitment to retainment and termination, EOR service is an end-to-end solution to human resource management. It covers a wide range of services that can be tailored to meet the client’s specific needs. The services include but are not limited to payroll processing, work permit and visa arrangements, onboarding, timekeeping, and tax compliance.
Some benefits that EOR can provide your business are as follows:
- Easier global expansion
By partnering with an EOR, businesses can simplify their employment process and avoid dealing with the complexities of foreign tax and labor laws on their own. HR tasks like filing of taxes, payroll administration, and employee record management are easily accomplished.
With EOR, hiring managers can also tap into a wider talent pool where they can find professionals that match their needs and standards. This makes international expansion achievable for companies across all industries.
- Time and cost savings
Opting to administer offshore employment independently can result in increased expenses, responsibilities, and longer processing times. Outsourcing HR functions through an EOR is one solution for businesses to reduce and control their operation costs.
This removes the need to hire and train in-house HR and administrative staff, which could otherwise raise the company’s expenses.
- Guaranteed HR Compliance
Having an EOR onboard ensures that the clients adhere to relevant tax and labor laws when hiring from a foreign country.
It is the EOR’s responsibility to stay up to date with local labor laws for compliance monitoring. This gives companies peace of mind, knowing that their employment-related obligations are taken care of by the employer of record.
- Decreased employee accountability
Employers don’t have to worry about the welfare of their remote employees since it is the EOR who takes care of all duties mandated by the government, such as payroll processing and providing insurance coverage.
Why hire an Employer of Record?
Starting global operations from scratch is no easy task. It’s a demanding process that requires businesses to be knowledgeable about foreign laws, global market trends, payroll procedures, and management of foreign workers.
To give you a much bigger picture, here are some reasons why an EOR can be the best choice for your business:
- To explore new markets without building an entity
EORs can be the safest and straightforward solution for companies who want to grow their reach. With the EOR’s help, the company can easily start expanding globally through its offshore hires. Doing so won’t require them to spend a large amount of time and money on establishing a separate local entity.
An EOR also provides assistance to companies in assessing their readiness to enter the global scene.
- To have safe and smooth global hiring
Avoiding non-compliance penalties is a top priority for businesses to protect their reputation and financial well-being. So, partnering with a good EOR is crucial defense against the potential risks associated with hiring independent contractors, such as tax and employment violations.
Besides compliance, EOR can also expedite global employment, allowing clients to hire professionals in a matter of days or weeks.
Things to consider when selecting an EOR
When selecting an EOR, it’s important to ensure that they are the right fit for your business. Here are some key considerations:
- Price transparency
Like in any other business transactions, transparency is essential to the success of your partnership with an EOR. The EOR should provide clear pricing and disclose all fees associated with their services. This will prevent you from paying any unexpected costs.
- Knowledge and expertise
The EOR should have a solid understanding of the country where you are planning to expand.
Strong familiarity with local labor laws and regulations is a must to ensure that your business is compliant with local legislation.
- Data protection
The EOR should have robust security measures in place to protect your company’s confidential data.
- Employment contract There should also be clear and thorough employment contracts that cover the terms and conditions of employment. This ensures that both the company and employees understand their respective rights and duties.
Expanding your workforce globally doesn’t have to take so much resources. So, if you’re considering growing your business outside your home country, it’s worth exploring what an Employer of Record can offer.