Using a Global Employer of Record - What are the Benefits?

Having the best talent on your team is one of the keys to success in a competitive business environment. Sourcing and hiring global top-tier talent can provide you with the resources your business needs to thrive.

Unfortunately, companies have to jump through hoops to hire globally. The amount of rules you have to follow can discourage even the most determined ones from going after global talent. Setting up a presence in a new country is time-consuming at best, and navigating local labor laws is a known recipe for headaches.

This is where partnering with a good Employer of Record (EOR) can make a world of difference.

What can a global Employer of Record help my company with?

An Employer of Record is invaluable for attracting and hiring top talent globally. It also minimizes the risks of hiring talent from a different country.

Let’s go through all the benefits of having a good Employer of Record on your side.

1. Faster hiring for global talent

In most countries, you must set up a local legal entity to hire talent. It's often the only way to maintain compliance with local employment, tax, and payroll laws. But, setting up shop in a new country can take weeks, even months, and can become very expensive.

The best Employer of Record providers already have an established presence in the countries where you want to hire. It shortens the hiring process to a day or two, saving you valuable time.

2. Commitment-free foreign market testing

Testing the waters in new countries can be daunting and often costly. It requires investing upfront in establishing a presence in a new country — only to find all the work was pointless in some cases.

With the help of an Employer of Record, you can avoid these costly disappointments. You can start small in any or as many countries as you like and test whether the expansion will be profitable by hiring local talent short term.

If it works out and your new market shows opportunity, you can count on your EOR to help you scale further. It can help onboard more people and manage all HR tasks and compliance requirements until you're ready to branch out.

3. Outsourcing the pain of navigating employment and tax laws

Hiring globally is all about maintaining compliance with local employment laws. These differ significantly from country to country, sometimes even on a county or city level.

Staying on top of all the relevant laws in your primary country of operations is difficult enough. Including additional countries into your HR’s workload could quickly become overwhelming or very expensive.

However, if you decide to go with an Employer of Record, you can trust them to manage all aspects of the employment process, often for a flat fee.

Since the Employer of Record is the "legal employer" while the talent works for you, it is responsible for legal compliance.

The EOR will take care of all employee-related obligations, including, but not limited to:

1. drafting contracts that comply with local laws,

2. coordinating renewals and terminations,

3. Handling all employee payroll.

It's also up to EOR to stay on top of changes in regulatory requirements and maintain compliance at all times.

4. Streamlined onboarding and offboarding

Hiring globally can be complicated, especially when it comes to managing the paperwork required for payroll and other HR functions. If your team abroad is small or changes frequently due to the nature of work - you need a streamlined set of processes to stay on top of it.

With the right EOR partner, these processes are their responsibility. The EOR ensures onboarding and offboarding employees is a smooth process..

Your EOR provider will support you with payroll, benefits, and other relevant HR functions. That way, you can focus on what’s important—your business's goals and your new employees' day-to-day tasks.

5. Outsourcing payroll, taxes, and benefits for remote workers

Your company probably has a team managing payroll, taxes, and benefits for your local employees. You are at least familiar with its workload, so you know how time-consuming and complex it is. Adding international laws around payroll, taxes, and benefits to the mix can easily overwhelm you and your HR team.

Outsourcing administrative tasks to a trusted Employer of Record will save you time and effort. It also guarantees that it’s all regulatory compliant at the same time, without having to hire additional experts.

6. Centralized management of international hires

Managing local employees can be challenging, and it becomes even more complex when dealing with different time zones, languages, cultures, and other aspects that arise when hiring globally. Therefore, staying on top of your employees' requests can become a full-time job.

Yet, you want to meet your employees' needs in full. Their work-related expenses need to be covered, and no one should have to give up holidays due to an administrative mishap.

Most Employers of Record solve these problems with a centralized management platform. It allows you to manage your international employees and their requests from one location.

These platforms provide valuable support for approving payroll and expenses. A good platform also simplifies the process of onboarding and approving time-off requests - allowing you to do it all with just a few clicks.

7. Access to local and legal expertise

Partnering with an Employer of Record means having someone on your side who is knowledgeable and experienced in terms of HR, employment, and other legal requirements in the country where you want to hire talent.

Having this type of support will prove priceless when navigating any HR and legal challenges. It can also remove language barriers and cultural differences. A local expert is a great asset when navigating local administration and requirements.

8. Enhancing employee benefits and retention

It’s well-known that providing your employees with benefits can help them feel appreciated and satisfied with their jobs. This, in turn, lowers turnover rates within the organization.

Most countries have statutory benefits that every employer must provide. However, offering only the bare minimum the law requires is far from enough when you’re looking to attract top talent to your company. Employees always consider the benefits of the role when choosing a company, even though it may not always be the deciding factor.

With the right Employer of Record, you can offer your new employees statutory and additional benefits to attract and keep them in your company. Your EOR can help with providing bonuses, commissions, or monthly allowances. It can also set up private health care plans and pension schemes.

9. A cost-saving solution for international hires

When all the benefits are summed up, it comes down to significant savings when hiring an international employee.

It's not cheap to start a presence in another country. You have to hire talent, navigate local laws and regulations, hire experts to help you set up a compliant business, and handle all the logistics. It's often better to start small and evaluate profitability first.

Hiring local talent without establishing a presence can significantly reduce your costs. An Employer of Record can also handle legal and administrative tasks, saving you money that would otherwise be spent navigating local laws and regulations.

What are some of the risks the Employer of Record services can mitigate?

Having a team with extensive knowledge of local laws and regulations on your side when hiring from a foreign country is a blessing. It can save you from many potentially expensive mistakes lurking for companies trying to navigate international employment.

Minimize compliance risks

Even accidental breaches of employment regulations can result in costly fines. An Employer of Record with experience navigating local laws and compliance already knows the rules by heart. They are also familiar with potential pitfalls and know how to avoid them.

When hiring globally, the importance of being familiar with local laws and regulations is even greater. For example, illegally hiring an employee in the US can cost companies a lot in fines per employee. It may also involve criminal charges raised against the employer.

In the UK, if a company is found guilty of hiring someone they knew had no right to work in the country, it could face a significant fine. The person responsible may face up to five years of prison time. Someone going to prison certainly won't help the company's reputation, either.

The cost of hiring an experienced EOR well-versed in local laws and regulations to keep everything operating by the book pales in comparison. You can't put a price tag on having peace of mind.

Avoid the costly repercussions of falling out of the loop

Laws and regulations are constantly changing. When hiring in other countries, you need someone who can set everything up properly and stay up-to-date on any changes, too.

You want to ensure compliance at all times. With a reliable Employer of Record, you don't have to concern yourself about it at all. The EOR takes on responsibility for the contracts and ensures these are updated and following any changes in the country's regulations.

What are some alternatives to an Employer of Record?

Unfortunately, for many companies, the most common alternative is giving up on the idea of hiring someone from abroad. When presented with all the complexities of hiring globally, most find hiring someone locally to be a better idea.

Other companies opt to hire talent as independent contractors. While this is a good alternative, independent contractors are not employees. They do perform almost the same tasks as employees, but they don’t necessarily have the same loyalty to the company or share your company’s goals. Also, in some countries, you may face misclassification risks when working with contractors.

Another alternative would be establishing a presence in the country where you’re looking to hire. As we’ve covered, it is often too time-consuming, costly, and complex for many businesses looking to hire employees abroad.

How do I choose an Employer of Record?

With many EOR providers to choose from, choosing the right Employer of Record may be tricky. Here are some suggestions on what to look for to find the right one for you:

1. Coverage

Your EOR should have a legal presence in the countries in which you are looking to employ talent. Make sure to take note of which countries a particular Employer of Record covers to avoid any surprises.

It's also crucial that they have experience with local laws and regulations in that particular country, and in other countries that you may consider expanding to in the future. It can be a bit more difficult to assess this upfront, so shop around. Interviewing several EORs will help estimate the knowledge of a particular EOR better.

2. Range of services offered

Do your research and inform yourself about all the services a particular EOR offers. It should, by default, include HR services, payroll administration, tax compliance, and risk mitigation.

It will also be worth your time to learn whether the company can handle benefits for your new hires. Ask if it has a centralized employee management platform, or if it offers other perks.

Different EOR services offer different features, so this is one of the most important elements to look for and evaluate when deciding which service to trust with your global employees.

3. Scalability

Your business may need to hire in another country quickly to exploit a short-term opportunity. Or, you may want to briefly test the waters without committing. Either way, it’s important that your chosen EOR can keep up with your scalability needs. You need the Employer of Record to have the capacity to accommodate your growth or even help you to downsize quickly.

4. Client support

Navigating a hiring process internationally is an overwhelming experience with a lot of unknowns. The right Employer of Record should be able to handle all the complexities and answer any questions and concerns you have.

Pay close attention to the client support quality when choosing your EOR provider, and don't compromise on speed.

5. Pricing

The price tag attached to all these services should play an important role in choosing your Employer of Record. Many providers aren't transparent enough about their pricing, and you may end up facing hidden fees when the invoice arrives.

Make sure to inform yourself of the pricing and fees you can expect. Opt for EORs with flat fees whenever possible to avoid any surprises.

Is hiring an Employer of Record a good option for your company?

To dip your toe in a global talent pool, hiring an Employer of Record is the best option for your company. The major EOR service benefit is that it enables you to enjoy the perks of having top talent working on your team without worrying about international laws, taxes, and regulations.

With an EOR, you can have the cake and eat it, too. You can have employees from all over the world, while you focus on your company's day-to-day tasks and activities. The EOR will handle the necessary administrative tasks to onboard the talent, freeing you up to focus on how they can help grow your business.

FAQs

What is an Employer of Record?

An Employer of Record is an organization that takes on all the administrative and legal responsibilities of hiring people internationally, while the talent does the work for the employer. A good EOR can also handle payroll, taxes, and benefits and minimize compliance risks.

What is the difference between EOR and PEO?

Both organizations offer a similar set of HR services, but they focus on different aspects. In short, an Employer of Record (EOR) hires people globally to work for other companies. A Professional Employer Organization (PEO) handles HR responsibilities in partnership with local companies. The main difference lies in that an EOR doesn’t require you to have a presence in a country where you want to hire, while a PEO does.

What is the difference between payroll and an Employer of Record?

Payroll companies often provide only financial services to their clients. An Employer of Record, on the other hand, takes care of all administrative and legal tasks around hiring international talent for your company.