What is an Employer of Record (EOR)?

What is an Employer of Record (EOR)
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Summary

Expanding a global presence is a natural and wise decision for any expanding organization. Hiring international talent is a wonderful way to break into new overseas markets, and a global employer of record (EOR) can assist you in that endeavor. This guide discusses the purpose of an employer of record, how to use an EOR, and the advantages of collaborating with a global EOR to meet your worldwide expansion objectives.

What is an employer of record?

An Employer of Record (EOR) is a third-party entity that lawfully hires employees on behalf of another company. The EOR is fully responsible for all aspects of employment, such as compliance, payroll, taxes, and benefits. The EOR enables businesses to legally and efficiently engage talent in the global market by assuming all employer-related legal and regulatory responsibilities for immigration, employment, payroll, and benefits for the sponsored employee. The client company maintains managerial control over its workers and task assignments. Most countries have EORs. Employers looking to grow globally may seek third-party support from an EOR specializing in payroll, benefits, human resources, and other areas.

What does an employer of record “EOR” do?

Simply put, using an Employer of Record (EOR) lets companies easily hire talent worldwide without the hassle of setting up a foreign branch or breaking local employment laws. The global EOR handles all the legal stuff—immigration, employment rules, payroll, and benefits—for your remote team. Although the EOR is the official employer on paper, you still control the day-to-day stuff like pay, job duties, projects, and performance. Here are some services a global EOR offers:

  • Creates and manages legal employment contracts that follow local rules
  • Takes care of payroll and tax deductions
  • Ensures employees get paid on time
  • Provides comprehensive benefits
  • Handles terminations and offboarding in compliance with regulations
  • Offers ongoing help with local labor laws and rules

What are the benefits of using an employer of record

Employers of Record (EORs) bring numerous advantages to businesses expanding globally. Here are some of the benefits of using an EOR:

  1. Simplify HR: EORs make HR tasks like payroll, benefits, and compliance more straightforward, freeing up time for business owners to focus on other crucial aspects.
  2. Risk Reduction: By hiring an EOR, business owners pass on legal responsibilities. The EOR manages immigration, employment regulations, payroll, and benefits, lowering the risk of compliance issues.
  3. Time Savings: EORs handle all administrative tasks related to hiring and managing employees, such as onboarding, payroll, and taxes, saving business owners time and effort.
  4. Cost-Effective: Choosing an EOR is a budget-friendly alternative to establishing a legal entity in a foreign country. It removes the need for expensive legal and accounting services, allowing businesses to cut costs.
  5. Global Talent Access: EORs enable businesses to engage talent globally, breaking down entry barriers and expanding the talent pool efficiently.
  6. Talent Retention: EORs offer comprehensive benefits, making it easier for businesses to retain top talent.
  7. Compliance Assurance: EORs are experts in local labor laws and regulations, ensuring businesses remain compliant with all legal requirements.

When to use an employer of record ?

An Employer of Record (EOR) is a helpful ally for managing a dispersed workforce and navigating global markets. A global EOR empowers businesses to:

Explore New Markets:

If your business aims for global expansion but doesn’t plan to establish an entity, an EOR allows you to test new markets compliantly.

Quickly hire teams in new global markets, create new revenue streams, and reach a broader customer base without committing to entity establishment.

Attract and Retain Top Talent:

The flexibility of working from anywhere is a coveted benefit in today’s labor market.

Remote options are increasingly popular, enabling you to attract the best talent globally and focus on specific skill sets.

A global EOR supports hiring from anywhere and helps retain top-tier talent, even when relocation is needed.

Hire During Entity Set-Up:

While establishing an entity facilitates hiring local talent in a new international market, it demands considerable time, money, and knowledge of local laws.

An EOR serves as an intermediary solution, offering hiring support and insights into entity establishment while you finalize requirements.

Avoid Contractor Misclassification:

Engaging contractors is a common, cost-effective method for hiring remote, international talent.

As companies grow, there’s a risk of misclassifying contractors as employees. A global EOR efficiently allows you to hire contractors as employees, mitigating compliance risks.

What’s an example of an EOR?

Here are some specific examples of how an EOR can help:

  • An American company wants to hire a developer in India. The EOR handles hiring, payroll, and compliance, which allows the company to focus on product development.
  • A French company wants to open an office in the UK. The EOR handles all administrative tasks, which allows the company to focus on recruiting and training its employees.

Is an EOR the same as a PEO ?

Both an Employer of Record (EOR) and a Professional Employer Organization (PEO) offer services to help businesses manage and care for their distributed workforce. The fundamental distinction between the two is that an EOR forms a legal employer-employee connection with the personnel they engage on behalf of the client firm, whereas a PEO operates under a co-employment agreement with the client company. Because an EOR serves as the legal employer, businesses can hire people in many countries without the need to establish a local corporation. In contrast, a PEO establishes a relationship between the client company, the employee, and the PEO, requiring the client firm to have a local legal entity in the chosen country or region for hiring reasons.

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How to select an employer of record ?

When choosing an Employer of Record (EOR) partner, consider these key factors:

Transparent Pricing:

Opt for an EOR with clear pricing, avoiding surprise charges to stay within your distributed workforce budget.

Accurate Employer Burden Calculations:

  • Choose a provider knowledgeable about employer burden costs, including health insurance, social security, and paid time off.
  • Ensure they provide accurate quotes tailored to different markets.

Worldwide Coverage:

  • Confirm your partner understands the markets where you’re hiring talent.
  • Working with an experienced partner saves time and money and minimizes the risk of non-compliance with local labor regulations.

Responsiveness and Support:

  • Select a responsive partner with an assigned client account manager.
  • The manager should quickly address your team’s questions, onboard new employees, and accommodate local time zones and languages.

Independent Third-Party Validation:

  • Consider partners recognized by credible third-party sources.
  • Unbiased reports from industry analysts based on research and customer insights help identify top EOR leaders offering the best solutions for your global workforce’s growth and support.

Hire talent anywhere with an employer of record

When venturing into new international markets, every expansion introduces its own unique set of challenges that demand a seasoned team. As your global employer of record (EOR) partner, Pentabell ensures the highest level of support for you and your distributed workforce. Our global capabilities spanning +20 countries, unparalleled expertise, and dedicated service empower you to swiftly and compliantly recruit top talent.

We provide a comprehensive suite of global workforce solutions that address risk mitigation, local labor requirements, and compliance, allowing you to concentrate on expanding your business.

Ready to assemble your dream team? Pentabell is prepared to assist. Contact us today.

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