Many organizations employ an employer of record (EOR) to hire a few employees in another country. An EOR firm manages employee benefits and hires employees, while the organization manages day-to-day responsibilities.
A EOR can be a great bridge solution for companies who want to test markets or start limited operations prior to establishing legal entities in the target country.
However, the solution is not intended to be permanent. Although the rules vary from country to country, most companies will have to establish a legal entity sooner or later.
To fulfill its employment obligations, the EOR partners up with its client. An agreement is reached and a contract is signed. Although the EOR assumes the role as employer, the company retains control over day-to-day business operations.
The company still assigns employee roles and duties. The company remains responsible for paying employees their salaries. The EOR is not responsible for any safety or health guidelines, despite the recent pandemic.
This is the responsibility of the company. Small and medium-sized businesses looking to expand into international markets often turn to EOR solutions. EOR can be used to help companies enter the international market by either hiring workers or independent contractors depending on their requirements.
Third-party employers are preferred by companies and organizations due to the many benefits that can be derived from their services, as well as the variety of roles EOR can play in an organization. This section will explain the responsibilities and perks that an employer of record has and how they are distributed.
One of the major benefits of Employer of Record services is that your company doesn’t have to go through all of the tedious steps of setting up and registering a subsidiary.
EORs are legal entities that have been established in countries where they can perform employer duties for you. Employer of record companies have already gone through all the licensing and registration processes that you will need. Hence,
EOR has an established system in the new area, so you can hire talent and get started with your business within days. This is a significant advantage over setting up a local entity, which may take longer.
Managing company operations in foreign countries can be challenging. It is important to understand the rules and how they are enforced.
EOR (SA) company employers have the necessary knowledge about the regulations and rules as well as the regulatory agencies.
Employing an EOR can help ensure compliance and reduce the risk of your company violating regulations. Employer of record can help you keep up-to-date with all legal requirements. Lower cost
Because an employer of record is more cost-effective, it’s easier to get into the new market and run your business.
EORs are cost-effective and allow companies to save time and other resources (human, financial, and human) when expanding their business or establishing local subsidiaries.
They also help in onboarding new employees and properly managing and administering their payroll.
The EOR acts as the legal employer and there are fewer risk factors. The misclassification and misclassification of workers are one of the biggest risks. Understanding how the foreign market operates is key to operating in that market.
Understanding how independent contractors and employees are classified is crucial. This will allow you to sort their payroll accordingly. You can avoid this risk by using an EOR. Their services are customized to your requirements. Non-compliance is another risk.
While it may be challenging to navigate a new market, it is possible to not adhere to the many laws. This could lead to fines or litigations. Employer of record solutions reduces the chances that you make these errors.
The EOR manages employee matters. This includes hiring and onboarding new employees. To speed up the onboarding process, the EOR can also handle work permits and visas for employees.
Their roles include managing employment contracts and preparing employee timesheets. EORs conduct background checks on all new employees. All of these checks are performed on behalf of the employer.
Employers of record companies prepare payroll in compliance with local laws and regulations. EORs also take care of tax deductions and pay the appropriate authorities. EORs are equipped with the right knowledge and technology to manage the country’s payroll system.
For employees working in foreign countries. The benefits and compensations that they receive must be consistent with the labor laws.
The benefits include :
These benefits will be managed by the employer of record, as required by the regulations of the government.
There are many employers that offer record solutions that can be very beneficial to your company. We will discuss some of these perks in this section. These include growth and expansion. If you are looking to grow your business globally, the EOR solution is your best option.
This will allow you to grow your business without having to go through the lengthy process of setting up a legal entity in order to hire international employees. This simplified process will make it easy to get your employees settled and hired quickly.
Employer of record allows your business to move around. You can have it in different places, whether they are states or countries. This will help you grow your business.
Innovation and diversity are key to business growth. The world is changing rapidly and innovation is key. The diversity of talent in your workforce will lead to innovation that will help you grow your business.
An EOR solution will help you save a lot of time, effort, and money that could have been spent on researching, finding talent, or setting up a subsidiary.
You will have ample space to divert your resources to other ventures, such as the daily running of your business or other responsibilities.
An EOR is the best and most cost-effective way to make your first international hires.
EORs can be your partner in protecting your business during the hiring process and the life of your employment agreements.
For any hiring manager or HR professional considering international employment, understanding local labor laws can be daunting.
Some companies hire their workers as independent contractors rather than employees. This can prove costly.
Imagine benefits-eligible employees being misclassified to independent contractors. It could cost the company thousands in back taxes and social security payments, as well as the amount that was already paid to workers.
Depending on the particular situation, the country of residence, and the type of worker misclassified, there may be interest or fines.
An EOR allows businesses to easily and economically switch workers from misclassified to legal employees. This avoids penalties.
When evaluating employers of record, it is important to know whether they have legal entities in the countries they operate in or rely on third-party partners.
Imagine that you have a request to your employer of record. An EOR partner-dependent will need to contact a number of vendors in order to obtain the correct information and then execute it.
It could take several days and there may be miscommunications among the parties. EOR services are also more costly because there are many intermediaries. Everyone wants a piece of the profits.
An owned-entity EOR can also be established in the countries you are interested in hiring. They can manage and control your global workforce and make it easier for you to hire.
This will result in less friction, lower costs, and a better experience for your employees.
