Employer of Record

12 burning questions about an Employer of Record (EOR) answered

Why not think outside the border?

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August 14, 2024

Date

10 Minutes

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Hiring talent abroad can be an exciting prospect for businesses looking to expand their reach or tap into a global pool of skilled individuals. However, navigating the legalities and complexities of foreign employment can be daunting, leading to misconceptions and fears about using an Employer of Record (EOR).

This article debunks common myths and answers the 12 most burning questions employers have about EORs, empowering you to make informed decisions about expanding your global workforce.

1. How does an EOR work exactly?

In simple terms, the EOR becomes the legal employer of your international staff on paper, handling payroll, taxes, and other HR tasks. You maintain control over the hiring process, work assignments, and performance management, while the EOR ensures everything is compliant with local regulations.

Imagine you want to hire someone in Spain but don’t have a company there.

An Employer of Record (EOR) already has an entity in Spain that allows them to become the official employer of your new Spanish employee on paper. They handle all the paperwork, taxes, and legal matters, while you focus on the work.

You’re the boss, giving tasks and feedback. The EOR is the one dealing with payroll, benefits, and making sure everything is legal. It’s like having a local HR expert without the hassle of setting up a whole company in another country.

2. What are Employer of Record risks?

While EORs can significantly reduce your risk of non-compliance, it’s crucial to choose a reputable and experienced provider. Sharing sensitive employee data with a third party carries inherent risks. Ensure the EOR has robust data protection measures. Also, if the EOR doesn’t stay up-to-date with local labour laws, your company could face penalties. When choosing an EOR, it’s important to conduct thorough research, ask the right questions, and understand their service offerings and limitations.

3. Is an EOR worth the investment?

Absolutely. Navigating foreign labour laws can be complex and costly. An EOR handles it all. By outsourcing the administrative burdens of international employment to an EOR, you can free up valuable time and resources to focus on your core business activities. At this exact moment, you may be losing tons of money because of your current open positions. By choosing an EOR, you can find talent abroad and speed up your hiring process, thus saving time and money. By outsourcing HR and compliance, you also reduce the risk of legal issues.

4. What are the alternatives to using an EOR?

While EORs can be a convenient solution, they might not always be the best fit for every business. You can also consider a Professional Employer Organisation (PEO) where a PEO becomes a co-employer with your company, sharing responsibilities like payroll, benefits, and HR. It’s often a good fit for larger companies with established HR functions.

Another solution here would be setting up your own legal entity abroad, but it’s often time-consuming, expensive, and requires ongoing compliance management. Our solution WorkDirect allows you to employ talent directly under your brand and administer specific employee benefits. It’s ideal in situations where your intention is to test a market or use your brand to attract talent in markets where you do not have a registered office.

However, for companies looking for a hands-off approach to global hiring, an EOR offers complete control over the employee relationship while handling all the complexities of employment. In essence, an EOR provides a more comprehensive solution, especially for businesses new to global hiring.

5. Is it safe to use an EOR?

EORs are definitely safe. They act as your remote employee’s legal employer, assuming responsibility for payroll, taxes, and other HR functions, ensuring compliance and mitigating risk for your business. However, due diligence is required when choosing an EOR provider. Ensure they are well-versed in local labour laws, have measures in place that safeguard your employee data, and check reviews and references.

6. Are there any hidden costs?

Transparency is crucial. While EOR services come with a fee, reputable providers offer clear pricing structures with no hidden costs. However, there still may be potential hidden costs that are not disclosed from the get-go such as setup fees, termination fees, security deposits or additional service fees. To avoid surprises, carefully review the EOR’s contract and fee structure.

7. Isn’t hiring with an EOR more expensive?

Hiring with an EOR can be more expensive upfront compared to traditional hiring methods. This is due to the EOR’s fees for handling payroll, benefits, taxes, and compliance. However, the long-term costs of hiring and managing employees in a foreign country, including legal, tax, and HR overhead, definitely outweighs the EOR fees. It’s essential to conduct a thorough cost-benefit analysis to determine if an EOR is the right fit for your business.

8. Will I lose control over my employees?

Not at all. You retain full control over the hiring process, performance management, and day-to-day work of your international employees. The EOR simply handles the legal and administrative aspects of employment.

While the EOR handles HR, payroll, and compliance, you retain ownership of the employee-employer relationship. You set expectations, provide work assignments, and manage performance.

Think of the EOR as an extension of your HR department, handling the administrative tasks so you can focus on core business operations.

9. How quickly can I start hiring?

The speed of hiring with an EOR can vary depending on several factors such as country-specific regulations and labour laws, roles requiring specific qualifications or security clearances, and the EOR’s own internal processes.

In general, EORs can significantly expedite the hiring process compared to setting up your own legal entity abroad. Their expertise in navigating local regulations allows for a faster onboarding process, getting your new talent working quickly. Most EORs can onboard employees within a few weeks, even days.

10. What happens if I want to terminate an employee?

Terminating an employee through an EOR is typically a straightforward process. The EOR handles the legal and administrative complexities involved in termination, ensuring compliance with local labour laws. EORs follow local legal requirements for termination, ensuring a smooth process for both you and the employee.

11. What are the benefits of using an EOR?

Using an EOR offers numerous benefits, including:

Reduced costs and time: Save on legal fees, administrative burdens, and the time required to set up your own subsidiary.

Compliance expertise: Mitigate the risk of non-compliance with local laws and regulations.

Faster hiring: Get your international talent on board quickly and efficiently.

Scalability: Easily expand your global workforce without the complexities of managing local entities.

Focus on your core business: Free up time and resources to focus on your core business activities.

By understanding the realities and addressing common concerns, you can confidently leverage the expertise of an EOR to unlock the potential of a global workforce and achieve your business goals.

12. How do I choose the right EOR partner?

Look for an EOR with a proven track record, expertise in your target markets, and a transparent pricing structure. Consider factors like industry specialisation, customer support, and the technology platform they use to ensure a seamless experience. Here are some important questions to ask before choosing an EOR partner.

By now, we have helped over 1000 companies hire the best employees from around the world. We can help you onboard talent quickly (in fact, our fastest onboarding was done in 11 minutes), and safely. Our platform is easy-to-use, our pricing is 100% transparent and our in-house experts are always here to guide you along.