What is an Employer Of Record7 min read
When a company hires an employee, it takes on all the duties, expenses, and liabilities related to having that person on staff. But not every company wants to take on that duty. Using an employer of record is an alternative.
Recruiting people from abroad is a great way to enter new global markets, and a global employer of record (EoR) can assist you in that endeavor. This manual describes the function of an employer of record (EoR), how to use an EoR, and the advantages of working with a global EoR to meet your international expansion objectives. This article will provide this important information.
What is an employer of record?
Simply explained, an Employer of Record is a third-party organization that handles a sizable portion of the labor associated with employing foreign workers. However, an EOR does not conduct recruitment but rather participates in the process once the organization has chosen a candidate.
An EOR ensures that the customer performs compliantly throughout and operates within the safety of the specified framework by supplying all relevant information. This framework addresses issues like minimum wages, collective bargaining agreements, taxes, social contributions, and other costs associated with the local workforce of the nation where the talent is situated.
An EOR is also the worker's registered employer even though it does not have management responsibilities for them. The original employer is responsible for making decisions on salaries, job responsibilities, projects, and terminations.
5 Use Cases for an Employer of Record
For your firm, an EOR offers a number of significant advantages. An EOR can focus on certain areas and assist you in carrying out those activities based on your own objectives and challenges. A business will benefit most from an EOR when facing the complexity and regulatory risk of a new international market.
Here are 5 scenarios where having an Employer of Record will benefit your business:
Expanding without a legal entity
When growing, creating a local organization through incorporation and registration may be quite time-consuming and expensive. In order to remain compliant, you also require an understanding of the legal nuances of the new country. In this situation, a global EOR might be a preferable option, helping the business by managing payroll in addition to the labor and immigration laws of the host nation. Through its network and experience, the EOR would act as a go-between between the client-company and the assignee, assisting in ensuring compliance.
International hiring is simple and legal.
Geographical restrictions have been removed by the rising popularity of remote work, making it easier to access talent from around the world. Since people won't have to move in order to work for your company, this is a fantastic chance for businesses to advance their diversity initiatives in terms of gender, disability, and many other categories, as well as in terms of race and origin.
Making the switch to remote-first
The pandemic hastened the trend toward remote work, with businesses preparing to switch to more adaptable workspaces. Furthermore, from before to after the pandemic, the percentage of executives surveyed who said that “at least one-tenth of their workers could work remotely two or more days a week” nearly increased from 8% to 15%. However, this is a complicated process that calls for several adjustments within your organization, particularly in HR-related areas.
Complying with regulations will also get more difficult as you have to take into account the legal systems of the nations where your employees are based, including social security, data protection, and compliance with tax and labor laws. Your business will be able to test this strategy out with fewer workers thanks to an EOR. This would lead to a seamless transition as well as significant time and money savings.
Making independent contractors into employees
An alternative workforce, like contractors and freelancers, benefits many businesses. However, you might think about turning freelancers into employees to lower turnover, get greater control. over working hours, and prevent compliance problems like misclassification, which puts businesses at risk of owing back taxes and benefits and can result in harsh penalties.
Your long-term workforce planning, including the transition time and HR procedures to maintain compliance, can be supported by an EOR, which can also assist you in keeping this talent.
Greater degree of flexibility for your staff.
Give your staff as much mobility, independence, and flexibility as you can after the pandemic. Don't use an employee's potential relocation to another nation as justification for firing them. Maintaining your talent even if they want to relocate abroad for an extended period of time will not only lower your turnover rate but will also improve your employer brand, which will help you recruit more talent. An EOR will be in charge of the labor laws, payroll discrepancies, and other factors that must be taken into consideration while trying to remain compliant. An EOR will be able to support you throughout the process.
Benefits of an EOR
A global EoR partner has many advantages for businesses. An EoR enables you to hire top talent from anywhere and support them according to their local needs because the majority of businesses lack the resources or in-depth knowledge necessary to hire legally in foreign marketplaces. As a result of a worldwide EoR, you can:
Your ongoing attention is required for all HR-related tasks, including payroll processing and hiring new staff. You must pay close attention to detail when doing time-consuming operations, including processing individual payments, taxes, commissions, reimbursements, and other employee benefits, in order to avoid facing severe fines. EOR gives you access to reliable services that can do these tasks on your behalf. By doing this, you can free up time for tasks on which you can concentrate to expand your firm.
You gain the advantage of using the services of a highly skilled firm when you entrust EORs with significant responsibilities like employee administration, payroll processing, and other HR-based activities. EORs have the necessary expertise and understanding in this area. They are more than capable of providing accurate calculations for payroll and compliance thanks to their tried-and-true techniques.
All of your confidential information for each of your employees is kept up to date by the Employer of Record. The majority of the time, they have a dependable and effective system with specialized staff for data administration, making it simple to update your records.
Reduced Risks Of International Regulatory
Maintaining legal compliance in each of the operating countries is a requirement of international employment and payroll administration. Maintaining current knowledge of the numerous tax tables and labor regulations that their legal entities are subject to is one of EOR's key services. EORs greatly lower the compliance risks for their clients by handling these tasks with professionals like attorneys and accountants.
How to Choose a Record Employer Partner?
When choosing an EoR partner, keep the following factors in mind:
- Pricing that is open. Find an employer of record with transparent pricing, no additional fees or surprises, and easy budgeting for remote workforces.
- Accurate estimations of the employer burden. Choose a provider who is knowledgeable and accurate about employer burden charges. An employer must factor in other social contributions such as health insurance, social security, and paid time off when determining payroll expenditures. Your EoR partner must give you precise prices on these criteria because these employer constraints vary by market.
- Global reach in the markets you require. Make sure your partner has extensive knowledge and experience in the markets where you are hiring people. You waste time and money working with a partner who lacks competence, and you run the danger of not adhering to local labor laws.
- Response and assistance. Pick a responsive partner who can react to your needs and the needs of your team quickly. On your behalf, your EOR partner will regularly communicate with both your current employees and new hires. Ensure that your EoR partner assigns a client account manager that responds to inquiries from your team promptly, onboards new supported personnel, and takes into account regional time zones and languages.
Hire Talent Anywhere With an Employer of Record
Each expansion into a new overseas market brings its own set of complications that call for an expert staff. As your global Employer of Record partner, Groove Technology guarantees the highest level of support for you and your distributed workforce. With the help of our multi-national reach, unmatched knowledge, and committed service, you can employ top personnel legally and swiftly.
We provide a full range of global workforce solutions that take care of risk management, local labor laws, and compliance while you concentrate on expanding your company.
Contact us right away!