EOR Services: Easy Payroll and Employment Management

As a business owner, you know the importance of having the right talent on your team. However, you’ve probably experienced some frustrations trying to hire the best talent from abroad.

Managing multiple currencies, employment laws, and other complexities that come with having a global team can be stressful. Organizing independent contractors and freelancers comes with its own set of challenges. Starting a presence in each country you’d like to hire in is a considerable investment. You'll also need to hire people to help you with administrative tasks.

A good Employer of Record (EOR) service can help you with most of these issues. With a good EOR, you can hire people globally without having a presence in their countries. Plus, you can also outsource payroll, legal compliance, and HR-related services to your EOR.

By having a reliable EOR, you can enjoy having great talent on your team. You won't have to dedicate time and effort to administrative tasks that accompany hiring global workers.

What is an Employer of Record?

An Employer of Record is an organization that legally hires employees in their respective countries. The employee works for your company, and you are in charge of their day-to-day tasks and activities.

An EOR serves as an employer “on paper.” They are responsible for administration and employer responsibilities to your new employee. The Employer of Record typically has entities in the countries they cover. They can hire talent, manage their payroll, and provide statutory benefits.

Since you don’t have to navigate the complexities of starting a presence in a new country, the hiring process is quick regardless of where your new employee comes from. You also don’t have to worry about compliance, payroll in different currencies, or other differences.

What are the services an EOR offers?

If you decide to rely on an EOR service to hire your new employees, you can count on it to manage all there is regarding tax and legal compliance.

Your Employer of Record will prepare and create all the documentation so that the employee is hired legally. It includes drafting contracts that follow local laws and handling employee payroll. The EOR will also handle renewals and terminations for your global employees.

Depending on your provider of choice, you can also count on the EOR to:

1. Process and fund the payroll for your employees,

2. Collect and process timesheets,

3. Withhold and file taxes,

4. Issue form W2 by the due date,

5. Handle worker’s compensation and unemployment,

Your Employer of Record can help you with completing and storing Forms I-9, or their equivalent in the country your employee is working from. They may offer to manage insurance, and help you comply with E-Verify or its equivalent.

Some Employer of Record services will also help you manage the onboarding process for your new employee. They may offer background checks and screenings of new employees. It can also assist you in managing your global employees and provide you with a centralized system for addressing their requests.

You can also rely on your Employer of Record to provide both statutory and additional benefits. The ability to provide these regardless of the country they live in will help you attract and retain top talent in your company.

What are the Benefits of hiring an EOR?

Its assistance in providing you with the means to hire and retain great talent globally is only one of the many benefits of hiring an EOR.

The most important benefit for many businesses is the speed. Establishing a presence in the country you want to hire from is very time-consuming. It can take weeks or months, depending on the country. This may not be ideal for a company looking to hire and onboard talent quickly.

Setting up a presence also requires a significant up-front investment. In some countries, setting up a company can cost as little as $100, in others it can go up to tens of thousands of dollars. You want to ensure legal compliance, so you’ll probably have to invest in legal expertise and HR professionals to manage payroll in the country.

With an EOR, you can hire employees for a flat monthly fee and never have to worry about local laws and regulations. Not having to worry about compliance may be the biggest benefit of them all.

You are outsourcing all the legal and administrative tasks related to your employee when you hire an EOR. Since the EOR is the legal employer, you are also protected from any liabilities related to your new employees.

It is EOR’s responsibility to maintain compliance with local regulations at all times and adjust to changes in the law. In short, the main benefit of having a reliable EOR partner is that you get to hire great talent globally and enjoy their contribution to your company, without all the daunting responsibilities.

When to hire an EOR?

An EOR might be a good option for your company if you are looking for great talent that you cannot source locally. It can help with outsourcing complex HR tasks, and provide you with the speed you need to enter new markets.

When hiring global talent

Global talent will give you the competitive edge your company needs to thrive.

However, not many employees are willing to relocate for work, especially when remote work is a popular alternative. Only 1.6% of all Americans relocated for work in the first months of 2023. Freelancers and independent contractors also come with their own set of risks. So if you want to hire the best candidate from another country as an employee, going with an EOR is the solution.

When global payroll becomes unmanageable

You can also rely on EOR to outsource global payroll for your new global team. Having an experienced team handling payroll, compliance, and all the relevant tasks will ensure you meet all the legal responsibilities toward your new employees. At the same time, it will free up your time to focus on growing your business and improving your product or service.

When you need to test or enter new markets quickly

Relying on an EOR can also be beneficial when you need to test markets in new countries. Sometimes a full-blown expansion might not make sense financially. However, hiring a small team through an Employer of Record to test whether expanding will be fruitful might be a good course to take.

If the market shows promise, you can rely on an EOR to scale it further or downsize if it doesn’t. Since you don’t have to start a presence or shut it down, with an EOR you can do so quickly. This can be a great benefit if your opportunity is there only for a limited period.

EOR Alternatives

Of course, relying on an EOR might not be the right option for every company. Not all companies will benefit from this permanent employment type, meaning they might be better off with freelancers or independent contractors. Outsourcing work to an agency, or forming a partnership with another company is sometimes a better option.

Why would I hire an EOR instead of individual independent contractors?

Hiring an independent contractor has its pros and cons. They do have specific expertise your company may benefit from. In the short term, they are often a cheaper alternative to relying on an EOR to hire someone permanently.

However, independent contractors and employees are not the same. Independent contractors set their own hours and daily tasks. Plus, they dictate how the work is being done. You also can’t expect them to take on extra work outside of their contract, or to have the same sense of loyalty to your company as employees would have.

The most important aspect of hiring independent contractors to consider is the misclassification of employees. Each country has its set of rules on what it means to classify someone as an independent contractor.

You can come to a mutual agreement with your independent contractor on when they would be performing the job and how. However, it’s important to ensure your company is compliant with the relevant regulations. You want to avoid penalties for worker misclassification.

Should I hire an EOR or a PEO?

For some companies, partnering with a PEO instead of an EOR might be a better option. If you need to outsource HR tasks to another company, you should consider going with a Professional Employer Organisation.

While both EOR and PEO provide a similar set of HR services, there are two significant differences. To partner with a PEO, you need to establish a presence in the PEO’s country of operations. Once you do, you can partner with a PEO to outsource HR tasks for your team in that country.

A PEO will ensure that your local team is compliant and that the payroll runs smoothly. It’s usually a better option for companies that have larger teams in a specific country. An EOR may be cost-efficient for up to ten people in a country. For teams larger than that, establishing a presence and hiring a PEO might be more cost-efficient.

It’s important to note that PEO doesn’t take on full responsibility for compliance as an EOR does. Since you are partnering with a PEO, you share accountability if something goes wrong.

EOR vs Staffing Agency

An Employer of Record is often confused with a Staffing Agency. Since both options deal with employees, it is an understandable mistake. Especially since some EORs offer finding the right people as a service.

The main difference lies in which part of the hiring process one may be more beneficial than the other.

A Staffing Agency is the perfect solution when looking for employees, locally or globally. The staffing agency can handle all the aspects of sourcing the right talent. This includes crafting the right job offer, finding and vetting the candidates' resumes, interviewing with the candidates, and negotiating salaries and benefits.

These agencies typically charge a fee for every placement. Once the right candidate accepts the position, their engagement with your company ends. Some of them may provide add-on services, including onboarding, or training.

Once the employee has accepted a position, you can count on an EOR to legally hire them in the country they live in.

An EOR will draft the contracts so that they are legally binding and compliant with local laws. They will handle payroll and benefits for the new employee.

How to vet EOR service providers?

When hiring through an EOR for the first time, it’s tricky to estimate whether they will be the right fit for your company. It’s hard to evaluate someone’s expertise when you don’t know what to expect.

The first step to finding the right EOR provider is to take stock of your company’s current status as well as short- and long-term goals. You want to consider what aspects of your business an EOR can help with and your priorities.

For example, outsourcing payroll to another provider might be the most important aspect for you. Or, you quickly need a global support team to support the launch of your new product or service in different countries, time zones, and languages. Of course, you should also consider your budget.

Answering these questions will help you set parameters against which to vet the providers. You should also ensure the provider is reputable, as you will have to provide them with access to sensitive data to handle the payroll.

So, here’s a quick guide on how to vet an EOR service provider against the parameters above:

Check which countries are covered

One of the biggest benefits of going with an EOR is the opportunity to hire talent from other countries much faster than you would if you decided to start a presence in the country.

A good EOR service should have a presence in the country you are looking to hire from. Because of this, the hiring process is much faster. Your EOR should have a diverse set of countries offered, as you don’t want to have to pick a different EOR per country.

While comparing the countries offered with your needs, make sure to keep your long-term business goals in mind as well. Also, when interviewing EORs, ask whether they plan to include additional countries to the ones they already cover in the future.

Look at the services offered

Not all EORs offer the same set of services. If you are a small business, you might need to outsource more than just payroll and could use help with onboarding. Larger companies might want to hire larger teams in multiple countries at the same time. They need an EOR that has the infrastructure to support this.

You need to know in detail what the EOR service can help you with, and compare it with your needs. With the right EOR service, you can enjoy the ease of mind for much more than just compliance with local laws. Some may offer platforms for managing your employees. Others may offer help with acquiring visas and relocating your new employees.

Most EORs offer a demo or a run-through of their services. When vetting EORs, take advantage of these demos so that you can get familiar with what features and services a particular EOR provides. Compare EOR features, and vet them against your company’s needs to find the right fit.

Look at the pricing

Pricing is also something you should consider in-depth, so try to familiarize yourself with the EOR’s pricing and fees. Some providers are not truly transparent with their pricing, and you may end up with a hefty bill. Ask about any hidden fees, and make sure to read the fine print to find out if there are any.

Also, you want to shop around and compare prices. You want to get as many features as possible for an affordable price. Knowing what your priorities are in terms of features will help you find the best provider for your money.

Check for reviews online

In terms of quality, it can be tricky to estimate a particular EOR upfront. You want to hire an experienced team, knowledgeable about local laws and regulations. Their team should also have all the necessary expertise to provide a secure and compliant payroll.

All these may be difficult to estimate upfront. It’s important to know how your cooperation with them would work, and whether you can rely on the provider in times of need.

To get a sense of whether a provider is right for your current situation, you can check for reviews of previous users online. You can also ask your business network for recommendations or to share experience with a particular service.

If you don’t get any useful answers, you may also post a question on forums, such as Quora or Reddit. There, you’ll get actual customer reviews which may provide insight into what you can expect from a particular EOR service.

Responsiveness and support

When you start hiring globally, you’ll experience a lot of unknowns. You want to ensure your employees’ needs are met and they have all the benefits. Your EOR should provide support and guidance on any concerns you might have about the processes behind filling that remote position, meaning that your EOR should be responsive and provide support when needed.

This will be straightforward to estimate even before you start working with an EOR. Pay attention to the communication style and openness as you interview providers.

Also, make a note of how quick they are to reply to your questions during the interview process. The quality of client support an EOR offers will prove to be much more important than features in the long run.

Are there any risks to hiring through an EOR?

If you’ve vetted your Employer of Record carefully, it’s unlikely that you will experience any significant risks when hiring using their service. However, it’s important to be mindful of the following and discuss them upfront with your EOR.

Employee’s obligations

In a traditional employer-employee relationship, you provide the work, salary, and benefits. The employee performs their job. They typically sign contracts that include provisions that protect you as an employer. These could include non-competes or confidentiality clauses.

Considering that an EOR is a technical employer, it is important to communicate with the EOR and find a solution that benefits you as well. In some countries, non-competes and confidentiality clauses through an EOR cannot be enforceable by local laws.

Depending on the type of work your company does, this may be a dealbreaker, so it’s important to consult with your EOR and see how this can be remedied.

IP rights

As an employer, the IP rights typically belong to you. With an EOR, this is not the case by default. It should be discussed upfront, just like when you would hire an independent contractor.

Your Employer of Record should provide you with a separate contract or another solution to ensure you own the IP rights.

The type of work the employee provides

In some countries, the relationship in which one party employs a person, and then lends them to another employer who dictates the work, is heavily regulated. Some countries put restrictions on this under the supply and use of temporary workers regulations. It may restrict what type of work the employee can perform for you.

If you have an experienced EOR this shouldn’t be a problem, but it’s important to be informed whether the country you want to hire in has restrictions on it.

Hiring global talent through an EOR provider

Hiring global talent using an Employer of Record services may be just what your company needs to grow and thrive. Having the best talent on your team is a game-changer. Plus, the opportunity to outsource administrative tasks and payroll will free up your time to focus on core business activities.

Going with a reliable Employer of Record can also help ease the complexities of navigating local laws and regulations. They will ensure your employees are paid on time and that they are entitled to all the benefits your regular employees have. This will help build excellent teams and attract top talent.

However, it’s important to vet your provider carefully. They should have good coverage and knowledge of local laws and regulations. However, you should also feel confident that they will provide support and assistance throughout the cooperation.

FAQ:

Should I use an employer of record?

Whether an Employer of Record is a good choice for your business depends on what your business plans are. If you want to hire talent globally, without establishing a presence in the country or asking the talent to relocate, an EOR is a great option. It is also a great solution for outsourcing global payroll.

With an EOR, you can have talented employees on your team regardless of where they live. You also won’t have to rely on freelancers or independent contractors and worry whether they will accept a full-time position with a local employer instead of working for you.

What does employer of record mean?

An Employer of Record is an organization that acts as a legal employer of talent in countries where your company doesn’t have a presence. Talented employees work for your company. The EOR takes on all legal and regulatory responsibilities related to their employment.

What are the risks of EOR?

There aren’t many risks in going with a reputable Employer of Record, as they typically take on the risks of ensuring legal and tax compliance. However, the key here is “reputable”, so make sure to vet your new EOR service thoroughly before signing up with them.

If you have a reputable service provider on your side, the only risk you can experience is the occasional miscommunication between you, an EOR, and the employee.

However, keep in mind that when hiring through an EOR you’re not the legal employer. You may not be eligible for certain benefits. This includes the IP rights or non-compete clauses that typically come with traditional hiring. Make sure to communicate these requirements with your EOR upfront.