What is an Employer of Record?

As businesses continue to expand on a global scale, the demand for comprehensive workforce management solutions has grown. Partnering with an Employer of Record (EOR) is one solution. This article will discuss what an EOR is, the services it offers, the advantages of working with one, and how to choose the best EOR partner for your business.

What does Employer of Record mean?

Employer of Record refers to the entity that functions as the legal employer for a company's employees, handling all administrative and compliance responsibilities. EORs are especially useful for organizations operating in multiple countries or attempting to hire employees in jurisdictions where they do not have a physical presence. EORs facilitate compliance with local labor laws and regulations by acting as the legal employer, allowing businesses to focus on their primary operations.

Discover the pros and cons of hiring employees with an EOR here.

What does an Employer of Record do?

Employer of Record (EOR) plays a crucial role in managing employment-related duties on behalf of an organization. EORs assist organizations in navigating the complexities of international employment and ensuring compliance with local labor laws and regulations by providing a variety of services. Here, we examine in greater detail the primary services provided by an EOR:

Payroll management

One of the primary responsibilities of an EOR is administering the payroll for a company's employees. This requires calculating employee salaries, applying the correct tax rates, and withholding the required taxes and social security contributions in accordance with local regulations. In addition to ensuring that employees are paid promptly and accurately, the EOR submits any required tax returns to the appropriate authorities.

Administration of employee benefits

EORs can administer employee benefits packages in accordance with local regulations. This includes the administration of health insurance, retirement plans, and other benefits, such as vacation and medical leave. EORs can help companies offer competitive benefits to attract and retain top talent by coordinating with local providers and leveraging their knowledge of local markets.

Compliance management

Compliance with local labor laws and regulations is essential for multinational corporations. EORs are responsible for keeping abreast of any modifications to these laws and implementing the necessary modifications to ensure ongoing compliance. This includes managing work permits and visas for foreign workers and adhering to local employment contracts, wage and hour regulations, and health and safety regulations.

Onboarding and offboarding 

Onboarding and offboarding are processes that can be complicated, especially in foreign jurisdictions. EORs facilitate this procedure by managing the required documentation, such as offer letters, employment contracts, and other documents required by local authorities. In addition, they are responsible for offboarding duties such as exit interviews, final payments, and ensuring compliance with any local termination requirements.

HR support

EORs can provide a variety of HR support services to assist businesses in managing their workforces effectively. These services may include employee relations, performance management, training and development programs, and labor dispute assistance. By utilizing their knowledge of local HR best practices and legal requirements, EORs can assist businesses in fostering a compliant and positive work environment for their employees.

Risk management

By assuming the function of the legal employer, EORs are also responsible for managing employment-related risks. This includes addressing any prospective issues, such as employee complaints, workplace safety concerns, and labor disputes. EORs work to mitigate these risks and safeguard the organization against potential legal liabilities and reputational harm.

Advantages of Working with an Employer of Record

Working with an Employer of Record (EOR) provides businesses with numerous benefits for administering their global workforce. EORs enable businesses to focus on their core operations and growth strategies by handling the administrative, legal, and compliance aspects of employment. Below, we examine the principal advantages of collaborating with an EOR:

1. Speed and ease of expansion: EORs enable businesses to establish a presence in new markets rapidly and without the need to form a legal entity.
2. Compliance assurance: EORs reduce the risk of penalties and sanctions by ensuring that businesses comply with local labor laws.
3. Expenses management: By outsourcing administrative duties to an EOR, businesses can reduce expenses and concentrate on activities that generate revenue.
4. Access to local expertise: EORs have comprehensive knowledge of local labor markets and regulations, which can be invaluable to businesses entering new markets.

Do I need an Employer of Record?

An Employer of Record (EOR) can be a valuable partner for companies seeking to manage their personnel, especially when entering new markets or navigating complex labor laws and regulations. Consider the following situations to determine if an EOR is the appropriate solution for your organization:

1. Global expansion: If you wish to expand your operations into a new country without establishing a legal entity, an EOR can assist you in establishing a presence there. By handling the administrative and legal aspects of employment, EORs enable you to concentrate on your primary business and growth strategies while ensuring compliance with local labor laws.
2. Local labor law expertise: If you intend to hire employees in a jurisdiction in which you lack knowledge of the local labor laws and regulations, an EOR can be of great assistance. They have extensive knowledge of the local labor market and regulations, allowing them to guide you through the complexities of international employment and ensure compliance.
3. Outsourcing administrative duties: Managing payroll, benefits, and compliance can be time-consuming and difficult, especially when multiple jurisdictions are involved. If you wish to outsource these administrative responsibilities, an EOR can handle them on your behalf, allowing you to focus on revenue-generating activities and reduce overhead expenses.
4. Flexible workforce options: If your business requires a workforce solution that can adapt to changing requirements and is scalable, an EOR can provide the necessary adaptability. They can help you onboard new employees quickly or adjust your workforce as your business expands or contracts, ensuring that you have the appropriate resources in place at the appropriate moment.
5. Risk management: Employing an EOR can help mitigate employment-related risks associated with conducting business in international markets. EORs safeguard your business from potential legal liabilities and reputational damage by managing compliance, employment contracts, and HR matters.

How to choose an Employer of Record partner

Employer of Record (EOR) partners are crucial for managing your global workforce effectively and assuring compliance with local labor laws and regulations. Consider the following criteria to discover the best EOR partner for your organization:

1. Experience: Look for an EOR with a track record of success in your industry and the countries where you intend to operate.
2. Services: Ensure that the EOR provides a complete suite of services that aligns with your organization's requirements.
3. Reputation: Consider requesting testimonials and case studies from contented customers, as well as references.
4. Pricing: Assess the pricing structure of the EOR to ensure it is transparent, competitive, and within your budget.
5. Support: Seek out an EOR that provides prompt customer service and a dedicated account manager to address your queries and concerns.

Skuad - Your Employer of Record partner for global expansion

Choosing the right EOR partner is fundamental for your global expansion success. While navigating the processes of global payroll management, hiring, onboarding and managing compliance for your distributed team might be challenging, a formidable Employer of Record partner like Skuad can make the process of global expansion easy. 

Skuad enables organizations to hire full-time employees and independent contractors in over 160 countries without setting up subsidiaries or legal entities. With Skuad, you can manage employee payroll, administer comprehensive benefits, and ensure compliance with country-specific employment laws. Book a demo with Skuad to begin your journey to an excellent global expansion.

FAQs

What is the difference between PEO and EOR?

PEO means Professional Employer Organization and EOR means Employer of Record. While an EOR handles all employment-related activities on behalf of the client organization, a PEO enters a co-employment relationship with the client organization and shares the employment responsibilities.

What does EOR mean?

An EOR simply means Employer of Record.

Is Employer of Record (EOR) legal?

Yes, Employer of Record is legal. It is also legal to hire employees and contractors in other countries via an EOR.