What is an Employer of Record (EOR) service? A beginners guide…

Employer of Record

Whether you’re opening new offices abroad, or looking to hire remote workers in a different country, you will need to abide by the relevant employment regulations. 

The complexity usually goes beyond the expertise of a regular HR department to handle. That’s why many companies end up outsourcing those tasks to an Employer of Record (EOR) service. In essence, they do the work on your behalf.

Read on to learn about:

  • The logistical challenge of recruiting abroad
  • How an Employer of Record (EOR) service helps 
  • Potential pitfalls to look out for before investing
  • Where to find free expert advice on EORs

Need free impartial advice about EORs or how to deliver employing employee benefits abroad? Get FREE one-to-one advice from our expert international brokers on 01273 974419 or email [email protected]

The challenge of recruiting abroad

Whether your businesses is breaking into new markets or struggling to find the right skilled people closer to home, there can be huge benefits to expanding your talent search around the world. But this opportunity also comes with logistical challenges.

Performing HR duties for a UK workforce can be difficult enough, but people management becomes a whole lot more complicated when it expands into different jurisdictions. 

You might know how to abide by employment tax laws in the UK, but how about in the US, Nigeria or wherever else you might be looking to find staff?

The complexity of employing abroad requires country-specific expertise.

A few of the challenges businesses face when going international, include: 

  • Abiding by different employment laws and regulations
  • Setting up legally compliant payroll systems 
  • Onboarding new employees
  • Managing cultural differences 
  • Providing state-required employee benefits
  • Providing necessary insurance policies, including health insurance
  • Overcoming communication barriers 
  • Overcoming time zone barriers 

How an Employer of Record (EOR) service can help 

An EOR is a third-party organisation that takes care of HR duties on behalf of your company in a foreign location. In essence, the EOR becomes your company’s full legal employer in that country – taking care of all employment laws and regulation.

There are a few variations in how they work: 

  • Global vs one-country: some EORs can handle multi-country requirements, while others may specialise in one country only
  • Scope of responsibilities: some EORs may only cover payroll and tax compliance, while others can carry out a full range of HR duties, including employee onboarding, risk management and employee benefits.
  • Legal structure: an EOR can be a fully independent legal entity or a subsidiary of the client company.

EORs allow you to hire international employees without the lengthy and expensive process of setting up local entities in different countries. It also minimises the risk (or outsources the risk altogether) of falling foul of local labour laws.

A quick overview of what an EOR does: 

  • Helps you hire international staff without risk of misclassification and non-compliance
  • Helps you pay employees across multiple countries
  • Helps you to administer benefits per local labour laws
  • Helps you to manage employees located around the world
  • Provides advice on employee stock options, local entities, and labour laws

What services does an EOR offer? 

EOR’s specialise in HR and payroll, services, including: 

  • Legal compliance 
  • Risk assessments/mitigation 
  • Employment contracts 
  • Verification/security checks
  • Staff attendance 
  • Payroll 
  • Benefits and compensation 
  • Taxation 
  • Stock options 
  • Termination and rehire procedures

How do you know if you need to use an EOR? 

Employer of Records are usually required when a company is looking to expand its talent search globally. Whether you’re employing global workers remotely or opening new offices around the world, an EOR service can simplify the process.  

What impacts the pricing of an EOR?

There are a range of factors impacting the cost of an EOR, such as: 

  • The number of workers under the EOR
  • The range of services you require 
  • The specific pricing structure of the EOR e.g., some might have a fixed monthly fee per employee while others might take out a percentage from payroll
  • Other administrative fees, setup fees, onboarding charges, tax and termination fees

What are the benefits to using an EOR? 

Often when it comes to hiring globally, using an EOR is a necessity. They are essential in helping a company navigate the international markets and ensuring businesses are protecting themselves and their staff correctly. 

Key benefits include: 

  • Time and money saving
  • Faster recruitment processes, while avoiding the lengthy legal work of setting up an international subsidiary
  • Compliance with payroll, local taxation, and social contributions that naturally vary country-to-country 
  • Easy delivery of employee benefits – both those legally required and those offered as a goodwill gesture
  • Easier expansion into new markets

What are the downsides?

Hiring globally and partnering up with an EOR is a big step to take and it doesn’t mean all EORs will be the best fit for your business. To help, we’ve gone over some of the risks and things to look out for when exploring the possibility of EORs. 

1. Possible limitations on your business authority 

As an EOR becomes the acting full legal employer, it may limit your ability to manage staff directly. For example, before any disciplinary action can be taken, it must be run past the EOR first. To avoid this, specify in your contract that the EOR must comply with company directives. 

2. Possible risk of co-employment for your staff 

This can become quite confusing for your staff where the lines become blurred as to who their employer is. Your business and the EOR are both treated as your staff’s legal employer. Understanding contract terms is crucial here.

FREE impartial advice on EORs and employee benefits

Expanding your business into new global markets can be a daunting process, but finding the right EOR service can certainly help. However, the best first step is to speak to an employee benefits broker with international expertise.

Engage Health Group has worked with a wide range of EOR and has expertise covering 61 countries. We can advise on what type of EOR will be best for your business and the market’s you’re looking to expand into, and answer any number of questions about how they operate.

As an impartial broker, we will only give advice in your best interest – not those of a preferred partner.

Contact us at [email protected] or call 01273 974419 for FREE no-obligation advice and support.

Picture of Eleanor Chilvers

Eleanor Chilvers

Eleanor started at Engage in 2021, and is now a Digital Content Writer after studying BA English Literature at University of Sussex for the last 3 years.

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