Global Employer of Record Explained- The Perfect Solution for Employers

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There are many challenges companies face when it comes to managing their human resources. In the case of a global organization, each of these issues is magnified because of the logistics and time zone differences that must be considered.

Global employer of record solves one of the main challenges companies face when managing their human resources. According to reports, the International Employer of Record market had a worth of USD 1890.29 million in 2022 and is projected to grow at a CAGR of 12.07% during the forecast period, potentially reaching USD 3745.43 million by 2028.

When you use an international employer of record, you can refrain from worrying about foreign exchange rates, currency fluctuations, and tax laws in different countries. Your payroll provider will handle everything right from money management, legal compliance regulations, and payment processing.

What Is a Global Employer of Record?

Global employer of record (EOR) is a business model in which an international company transfers its employees to the country with the lowest labor cost. Companies with multiple offices in different countries, such as Amazon and FedEx, could use a global EOR.

In this model, one country is the employer of record for all employees, regardless of where they work. The essential advantage is that it allows companies to hire people without paying national insurance or payroll taxes. This can save companies large sums of money on each employee they employ. 

When a global company assigns a worker to perform services in another jurisdiction, the foreign entity pays the employer to assume all employment obligations. This relationship can be established through an agent/principal agreement or the hiring of contractors.

The relationship between the foreign entity and its global EOR is typically governed by a master service agreement that outlines the global EOR’s obligation to the foreign entity. Global EORs may also handle benefits administration, such as health insurance, workers’ compensation, or retirement plans.

Why Use a Global Employer of Record?

An employer of record (EOR) is a third party that acts as the employer for all purposes under local law. For example, if you have employees in multiple countries, an EOR can help ensure they are appropriately taxed and covered by employment laws in each country. 

Leading companies such as Adecco and Randstad are among the major players in the global employer of record market. These top two players hold approximately 10% of the global market share. North America is identified as the primary market, accounting for around 43% of the global market.

There are many reasons to use a global employer of record. Some of the most common factors include the following: 

1.  Improved Accounting Efficiency

You can streamline your accounting processes by centralizing payroll and tax tasks, making managing your finances and making better business decisions easier. With an international employer of record, you’ll have one central database for all your employees’ information — including pay rates and taxes withheld — so you can easily access it when necessary. 

Eventually, it will make it easier for you to comply with tax regulations in every country where your employees are based and ensure that no one faces payment woes during each pay cycle.

You can use a global EOR to simplify your accounting processes by eliminating duplicate timekeeping systems, costly reconciliations, and automating tax payments. The system also gives you more reliable data for your financial statements. 

2.  Enhanced transparency

A global employer of record helps you keep more accurate records, which can help improve transparency in the workplace. A global EOR also gives you greater visibility into how much each employee earns, which helps ensure that all workers are paid fairly for their contributions regardless of location or job title.

Using a single provider for payroll and benefits can make it easier for employees to understand their paychecks and benefits packages, which increases employee satisfaction and loyalty. Additionally, having one contact for questions about paychecks and benefits reduces confusion for employees who may not know how their compensation works in the countries where they work or live.

3.  Reduced Compliance Costs

A global employer of record can help reduce compliance costs by making it easier for you to comply with international regulations and laws. A global EOR reduces overall costs by eliminating the need to set up and manage payroll processes in each country where you have employees.

With a single source of truth for payroll data, you can use automation tools to reduce manual processes and ensure that employee data is always up-to-date. Using a multi-currency solution, you can also reduce currency risk by converting paychecks into local currencies at the point of payment. So there are no surprises when employees receive their checks!

How Does an International Employer of Record Work?

A company has multiple offices in different countries, but instead of having separate HR departments in each office, it uses the same HR department for all employees worldwide. The employees are then assigned to individual locations based on where they’re needed most at any given time. 

For example, if Amazon needs more warehouse workers in Europe than in Asia, it will send them there; if it needs more developers in China than in Europe, it will send them there instead.

Global employer of record is a new data model that establishes a unified view of employees across systems, locations, and countries. The global employer of record unites HR data from multiple sources into one system. It eliminates the need for various systems and siloed data sets to manage employee data.

The international employer of record improves onboarding and offboarding processes for multinational companies by automating many functions of payroll, benefits, taxes, and employee records. It also helps them retain employees by integrating with their talent management software. 

A global employer of record can be implemented in a few different ways:

  • As a cloud-based solution hosted in the cloud or on-premises
  • As an on-premises solution hosted at the company’s premises
  • As an outsourced service through a third-party provider

Advantages of Using a Global Employer of Record

The advantage of using a GEO is that it can be easier for employers to manage multiple locations, especially if they have offices in different countries. It’s also great for companies that want to grow internationally without spending time dealing with individual governments’ tax regulations.

The main advantage of a GEO is that it allows companies to maintain one global payroll system that can be used by all employees worldwide. This means that all payroll data is stored in one place, and payroll processing is easier since there is no need to have different systems for different countries.

Benefits of an international employer of record include:

  • Simplified compliance with local laws
  • Reduced administrative burden on the employer
  • Lower risk of non-compliance with local laws
  • Single source of truth for payroll, benefits, and payroll taxes

The most significant advantage is that employers no longer have to worry about setting up different payroll accounts in each country where they have employees. This saves time and money. It also makes it easier for employers to manage their payroll.

Another advantage is that it makes it easier for workers to manage their finances, as they don’t need to pay multiple bills from different countries every month. They only need to deal with one bill at one location throughout the year, which can be much less stressful than having multiple bills from different locations worldwide.

Hire Talent Any Time, Anywhere, with the help of a Global Employer of Record!

The global employer of record concept is powerful, capable of shifting the paradigm of how business is conducted and placing customer experience front and centre.

By partnering with a Global EOR, companies can streamline their global expansion process, reduce costs, and ensure compliance with local employment laws. As the global marketplace continues to evolve, the demand for flexible and agile employment solutions like Global EOR is expected to grow, making it an attractive option for businesses of all sizes and industries.

What does it mean for the future of global business?

Certainly a greater cooperation between small and large firms. The ability to access resources from across the globe with a typical structure and goal of saving costs will help create a unique advantage in international sourcing, and this could be just the beginning of many more businesses employing this strategy.

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