Establishing business globally is a powerful opportunity for business owners in many ways. From small to mid-size companies experiencing growth, outsourcing gives access to new markets, global talent and lowers the cost of project development. To ensure a seamless expansion in the foreign land, selecting the right solutions is essential for your success.
In this article, we’ll take a closer look at what the EOR concept means and the benefits of partnering with an employer of record.
What is an Employer of Record?
The Employer of record or EOR is a local corporate entity, which facilitates the international expansion process for the company. It’s a company that takes responsibility for financial and in-country legal procedures, compliance and operates an office abroad. An employer of record firm handles employee benefits, payroll, and tax documentation. Most companies think about the employer of record when they send employees overseas, recruit remote workers, or need a hand with the employment-related tasks for the company’s foreign subsidiary.
When should a company turn to EOR service?
- If you are planning global expansion, but you don’t have enough time to set up a branch office in a foreign country, you should consider calling the EOR company.
- If the company has no human resource group, they can ask the Employer of Record to provide the service to onboard talent at the foreign location.
- If you are new to a foreign market and have no idea about the local labor laws or culture, the EOR will save you from this situation.
- If you are not sure how you can fit your global expansion within your budget, the Employer of Record can be a big help to you.
Responsibilities of Employer of Record:
- Represent a company as a proxy entity registered as a legal employer in the region and managing payroll.
- Ensure compliance with local labor and tax legislation.
- Fill in tax and insurance forms on the employer’s behalf (W-2, I-9, and other documents).
- Arrange visa-related documents and work permits in case the relocation of an international employee is necessary.
- Offer consultant services to the company regarding the best practices of employee onboarding, severance pay, or contract termination in the region.
Benefits of Hiring Employer of Record
The Employer of record tackles all the compliance tasks and administrative employment-based tasks. They have highly experienced yet talented professionals who will assist the client companies regarding local market entry, expense management, risk mitigation, taxation, compliances, and so on. The EOR saves a lot of time for the company allowing it to focus on core business.
They handle services related to payroll processing, tax filing, employee onboarding, timesheet processing, drug screenings, doing background checks, employee terminations, and so on. Since the employer of record is the one featured in the official documentation, drafting agreements, and paying taxes, the organization will be the one to take the fall should something go wrong. Thus, by hiring an employer of record companies you don’t have to worry about accidentally defaulting on any local compliance.
Hiring an employer of record also saves a lot of costs associated with opening an international office. Business owners save on expenses related to establishing a local entity, hiring a human resource department, hiring legal and financial assistants, interviewing, and onboarding local talent.
What are the factors for choosing the employer of record?
Here, we have mentioned a few factors that will help you choose the right employer of record for your global expansion. Let’s start.
- Is the employer of record experience in providing services in a chosen region?
Understanding in-country laws and regulations are an important aspect of hiring an employer of record. Business owners need to make sure the vendor they are selecting should have sound knowledge, understanding, and years of experience in the business region. Moreover, they can facilitate employees’ immigration and visa processes.
- What interests of the company does the EOR contract protect?
The EOR team must protect the commercial interests of your company. Therefore, they should take the confidentiality clauses of the company seriously and have well-defined protocols. The contract should include all procedures that will be used by the company to protect sensitive data and avoid a data breach. It’s preferred not to deal or collaborate with subcontractors.
- Can they clearly understand your requirement?
Every business has different requirements from a foreign market. You should talk to the Employer of record clearly before your global expansion. Check if the contracted company understands the business needs, onboard and manage a team that matches your niche.
- Are they technically strong?
Before signing a contract, business owners should make sure the signing company is using the latest technology and your data is secure with them. Also, the company should have a scalable platform to meet company expansion needs. Prefer vendors who use large-scale tools over those who use SME-oriented software or handle documentation manually. Additionally, make sure the technology used by EOR should be easy to integrate with your in-house software or tools. This way businesses can create the best practices that are easy to follow across their domestic and international branches.
- How do they collaborate with you?
The business owners should also focus on how the Employer of Record collaborates with their clients and stakeholders. There should be a proper communication channel to avoid any hassles. Most EOR companies use online platforms (messengers and task manager tools) and constantly update the client companies about their business operations in the foreign land. In addition, the EOR should provide the parent company with weekly or monthly reports. Some EOR also directly contact the client company managers with the information. So, you should decide which type of service you want from your chosen Employer of record.
- What are the market experience years for the EOR team?
While selecting an EOR team, you should check the overall years of experience of that organization in the market. Choose an EOR with at least ten years of industry experience.
- What do other customers say about your chosen EOR team?
Check the customer reviews before collaborating with an Employer of record. You will get to know about the shortcomings of the EOR this way. The customer reviews can also direct you towards a good reputed EOR solution team.
- Can you discontinue the partnership if you are not satisfied with their EOR service?
You should check the Employer of record contract before signing it. There should be an exit clause in the contract for the client companies if you are not satisfied with the service of the Employer of record for your subsidiary in a foreign country.
- Has the EOR worked in your business industry ever?
It will help you a lot if your chosen Employer of record has experience of working with a similar type of business in your industry. So, search for an industry-specific Employer of record.
It is recommended to check the aforementioned guidelines before signing a contract with an employer of record as it will help you to choose the right partner in a foreign land and assure business success.
