Employer of Record (EOR)
The new era of work is that of a remote, digital, and interconnected global workforce. Companies and businesses work with remote workers across many geographies in the world.
When it comes to hiring remote workers from other parts of the world, businesses need to have strict regulations.
Employer of Record (EOR) is one model that enables organizations to scale while working with a remote and globally-located team. Here is a deep dive into understanding what EOR is, how it works, and the benefits of EOR for your business.
What is an Employer of Record?
An Employer of Record (EOR) refers to a third-party organization that acts as the employer for a worker when another company employs the worker. The EOR is responsible for payroll, taxes, and other employment-related matters for the worker.
This arrangement benefits companies that want to hire workers on a temporary or contract basis but want to avoid dealing with administrative tasks. The EOR takes on these responsibilities, allowing the other company to focus on its core business.
Employer of Record- Value Proposition
The value proposition of an Employer of Record (EOR) is that it allows companies to hire workers on a temporary or contract basis without having to deal with the administrative tasks associated with being an employer.
Given below are some benefits of using an EOR.
1. Cost savings
Outsourcing employment-related tasks to an EOR can save a company time and money, as it eliminates the need for the company to hire and manage its own HR staff.
2. Compliance
An EOR can help a company comply with local employment laws and regulations, as they know the laws in the countries where they operate.
3. Flexibility
An EOR can offer flexibility to companies that need to scale their workforce up or down as needed without the hassle of hiring and laying off employees.
4. Expertise
An EOR can provide access to HR professionals with expertise in payroll, taxes, and other employment-related matters, which may not be available to the company internally.
Overall, an EOR can provide companies with a convenient and cost-effective way to hire workers on a temporary or contract basis while allowing them to focus on their core business.
Employer of Record and Performance Management
An Employer of Record (EOR) can play a role in performance management by providing support and resources to the company to help it effectively manage the performance of its employees.
Some specific ways an EOR may support performance management include:
1. Providing tools and resources:
An EOR may offer performance management software or other tools and resources to help the company set performance expectations, provide feedback, and evaluate employee performance.
2. Offering training:
An EOR may train and support the company’s HR staff or managers in effectively managing employee performance.
3. Assisting with performance evaluations:
An EOR may help the company develop performance evaluation forms and processes or provide guidance on conducting performance evaluations.
Overall, an EOR can help a company effectively manage the performance of its employees by providing tools, resources, and support to help it set and measure performance expectations and provide ongoing feedback and coaching.
Employer of Record vs. Staffing Agencies
The main difference between an EOR and a staffing agency is the level of responsibility the two types of companies have for the workers they place. An EOR acts as the employer for the worker and is responsible for payroll, taxes, and other employment-related matters. A staffing agency simply matches workers with job opportunities and is not responsible for these tasks.
Some of the notable differences between EOR and Staffing agencies include the following:
1. Compliance:
An EOR can help a company stay compliant with local employment laws and regulations, as they are knowledgeable about the laws in the countries where they operate. It can be especially beneficial for companies new to a particular market and unfamiliar with the local laws.
2. Simplicity:
Working with an EOR can be simpler for a company, as it provides a single point of contact for all employment-related matters. It can be more efficient than working with a staffing agency and managing employment-related tasks separately.
3. Expertise:
An EOR can provide access to HR professionals with expertise in payroll, taxes, and other employment-related matters, which may not be available to the company internally. It can be beneficial for small and medium-sized businesses that need their own HR.
Differences between an EOR and a PEO
Although many people tend to use the phrases EOR and PEO interchangeably, there are several differences between the two.
The main difference between an EOR and a PEO is their scope of services. EORs are focused on payroll and employment-related matters, while PEOs offer a broader range of HR services. Additionally, an EOR is typically used for temporary or contract workers, while a PEO can be used for all types of employees, including full-time and part-time workers.
| Responsibility | PEO | EOR |
| Payroll & Taxes | Yes | Yes |
| Employee Benefits (Pension, Insurance) | Sometimes | Yes |
| Local Employee Contracts & Compliances | No | Yes |
| Employee Timesheets / Holidays | Sometimes | Yes |
| Company Expenses & Reimbursements | Sometimes | Yes |
| Severance / Terminations | Sometimes | Yes |
| Employee Legal Responsibility | No | Yes |
| Collective Agreement Responsibility | No | Yes |
Why Should You Work with an EOR?
Employment Regulations
Working with international talent comes with legal compliance risks since companies have to deal with international and local regulations. Each country has its own legal framework, which needs special management expertise. EORs can help companies comply with these laws and stay up-to-date with labor laws, taxes, and other legal requirements within the country, with legal and financial experts handling these activities.
Saves time and effort
By entrusting EORs with tasks such as employee management, payroll processing, training, and other administrative and HR activities, companies can save the time and effort required for these activities while scaling operations quickly.
Expands talent pool to include global talent
Working with EORs allows the company to hire and work with a large global talent pool. It enables them to get the best hands onboard with the expertise and experience for the role.
Maintains records of personnel effectively
EOR takes care of maintaining employee records, timesheets, and other administrative tasks, creating an efficient and reliable system to track their accountability and productivity.
Do You Need an EOR?
An employer of record is a fantastic partner, especially when it comes to navigating a distributed and global workforce.
- EORs can help the business attract and retain top talent globally.
- It can help you scale the team in new global markets, helping it generate new revenue streams.
- EORs can help you get hiring support in administrative and HR-related tasks while managing local regulations in the country it is hiring from.
The Checklist to Select the Best EOR for Your Needs
Some factors to consider when choosing an EOR include the range of services offered, the countries in which they operate, their fees and pricing, and their reputation and track record.
Here is a look at each of these factors in-depth:
1. Services offered:
Consider the range of services offered by the EOR. Do they handle payroll, taxes, and other employment-related matters, or offer additional services such as benefits administration and HR support?
2. Countries of operation:
Make sure the EOR operates in the countries where you want to hire workers.
3. Fees and pricing:
Compare the fees and pricing structures of different EORs to find the most cost-effective option.
4. Reputation and track record:
Research the EOR’s reputation and track record. Are they known for providing reliable and professional services? Do they have a good track record of helping companies navigate employment laws and regulations?
5. Contract terms:
Carefully review the contract terms offered by the EOR. Ensure you understand the agreement’s terms and any potential risks or liabilities.
6. Customer support:
Consider the level of customer support offered by the EOR. Do they have a team of HR professionals available to assist with any questions or issues that may arise?
7. Flexibility:
Think about how the EOR’s services might need to change or evolve with time as your company grows or your needs change. Choose an EOR that is flexible and able to adapt to your changing needs.
It may be helpful for a company to research and speak with multiple EORs to find the one that best fits their needs.
The Process of Working with an EOR (List of Steps Starting with the Identification of Need)
The process of working with an Employer of Record (EOR) typically involves the following steps:
1. Identify the need for an EOR:
The company determines why it needs to hire workers on a temporary or contract basis and how the EOR model will be beneficial in this regard.
2. Research and compare EORs:
The company researches different EORs and compares their offerings, including the range of services offered, the countries in which they operate, their fees and pricing, and their reputation and track record.
3. Select an EOR:
The company chooses an EOR that best fits its needs.
4. Sign a contract:
The company and the EOR sign a contract outlining the terms of the arrangement, including the responsibilities of the EOR and the fees the company will pay.
5. Hire the worker/s:
The company hires the worker/s and provides the EOR with the necessary information, such as the worker’s name and job duties.
6. The EOR handles employment-related matters:
The EOR is responsible for payroll, taxes, and other employment-related matters for the worker.
7. The company manages the worker:
The company is responsible for managing and overseeing the worker, but the EOR handles the employment-related tasks.
8. Ongoing communication:
The company and the EOR maintain ongoing communication to ensure that the arrangement works effectively and any issues are addressed.
Types of Relationships between EOR and the Company
The relationship between an Employer of Record (EOR), a company, and an employee can be complex. Here is a description of the relationships:
EOR with a company
The EOR acts as a third-party employer for the company, taking on the responsibilities of payroll, taxes, and other employment-related matters for the worker. The EOR may also provide HR support and other services to the company. The company pays the EOR a fee for these services.
EOR with an employee
The EOR is the worker’s employer responsible for payroll, taxes, and other employment-related matters. The worker is paid by the EOR and is subject to the EOR’s employment policies and procedures.
Company with an employee (wherein an EOR acts as a payment agent)
The company is the actual employer of the worker. Still, the EOR acts as a payment agent for the company, handling payroll, taxes, and other employment-related matters on behalf of the company. The company is responsible for managing and overseeing the worker, but the EOR handles the employment-related tasks.
Responsibilities of an Employer of Record
Given below are the core responsibilities of an EOR include.
- Payroll and processing
- Taxes
- Employment-related matters
- Offering administrative benefits (in some cases)
- Managing employee benefits
- Compliance with labor laws
- Employee training (in some cases)
- HR support (in some cases)
- Doing background checks on employees
- Maintaining employment contracts for the company
- Collecting & processing timesheets
EOR- Pricing Structure
The pricing structure of an Employer of Record (EOR) can vary depending on the services offered and the specific needs of the company. Some EORs charge a flat fee for their services, while others charge a percentage of the worker’s salary.
In general, EORs charge a fee to the company for handling payroll, taxes, and other employment-related matters for the worker. The EOR may also charge additional fees for benefits administration or HR support services. The EOR pays workers their salary minus any applicable deductions for taxes and other employment-related matters.
EOR and the Challenges of Employing an International Workforce
Employing an international workforce can present a range of challenges, including legal and regulatory compliance, cultural differences, language barriers, and managing a remote workforce.
Using an Employer of Record (EOR) can help a company navigate these challenges, as an EOR is typically knowledgeable about the local employment laws and regulations in the countries where it operates and can assist with compliance.
Demystifying the Global, Legal, and Tax Landscape associated with an Employer of Record
The use of an Employer of Record (EOR) is generally legal globally, provided that it is done in compliance with local employment laws and regulations.
Some legal or taxation challenges to using an EOR can arise depending on the country where the worker is employed, which include:
Employment laws
Employment laws and regulations can vary significantly from country to country. Companies using an EOR must comply with these laws, including laws related to minimum wage, overtime, leave, and other employment-related matters.
Taxes
Taxes can also vary significantly from country to country. Companies using an EOR must ensure that they comply with local tax laws and correctly withhold and remit taxes for their workers.
Contract terms
Companies must carefully review the contract terms offered by the EOR and ensure that they are fair and comply with local laws.
Liabilities
Companies must consider potential liabilities when using an EOR, including the risk of disputes or claims related to employment or taxes.
Employer of Record (EOR) laws can vary significantly from country to country and state within the United States. It is essential for companies to research and understand the local laws and regulations that apply to their use of an EOR and to ensure that they comply with these laws.
International/ Global EOR
When considering Employee of Record Services, you can find two primary types:
- Local EORs are typically organizations that help a company scout talent in a particular jurisdiction. They excel in local compliance and hiring. However, given their limitation to one country or territory, you can only hire foreign talent in the location where the EOR is present.
- Global EORs, on the other hand, focus on providing excellent services worldwide. Global EORs are the ideal option for a company with a global footprint since they can have the same EOR in each country rather than scouting local EORs in each country. It helps streamline operations and get world-class talent onboard with lower overhead costs.
Employing Global Talent without an EOR
Although EOR is the ideal step for managing and remote and globally distributed workforce, there are a few options for employing global talent without using an Employer of Record (EOR).
One option is establishing a subsidiary or branch office in the country where the worker will be employed. It allows the company to be the worker’s direct employer and handle all employment-related matters. However, this option can be time-consuming and expensive, requiring setting up a legal entity and complying with local employment laws. Setting up a subsidiary of a branch office also is an ideal step if the company plans to expand in the new geography. However, this path can be complicated and taxing for the organization if that is not the case.
Another option is to use a local payroll provider or employment agency to handle the payroll and employment-related matters for the worker. It allows the company to outsource these tasks without using an EOR. The company would still manage the worker and oversee the work, but the local provider would handle the administrative tasks.
There is also the pathway of going with a PEO. The benefit of using a PEO is that it can provide a wider range of services. In addition to payroll and employment-related matters, PEOs often offer various human resources services, such as benefits administration, compliance with labor laws, and employee training. This can be particularly useful for small and medium-sized businesses that may not have the resources or expertise to handle these tasks internally.
Finally, the company could hire the worker as an independent contractor. In this case, the worker would be responsible for their taxes and employment-related matters. This option can be less burdensome for the company, but it is essential to ensure that the worker meets the criteria for being classified as an independent contractor and that the company complies with local employment laws.
Top 5 EORs for a Seamless Employee Experience
Given below are the best EORs you can find in 2023:
1. Remofirst
Remofirst is a global EOR platform that is available in 150+ countries. Its extensive footprint and expertise in managing global employees and contracts across locations make it the ideal option for accessing global talent. The services provided include international payroll processing, benefits management, invoice management, and employee support with visas and immigration documentation as well.
Pricing: Remofirst’s EOR plan starts from $199 per employee per month, and they also have a free forever plan with limited features.
2. Multiplier
Multiplier is a comprehensive EOR that takes care of your global teams’ payroll, taxes, and social contributions, including insurance policies. It has a network across 150+ countries and 100+ legal experts to ensure that you comply with all local labor and tax laws.
Pricing: Free demo, $300 per month per employee starting price
3. Deel
Deel is an international EOR platform that manages your compliance, payroll, HR, and other activities in 150+ countries and has several features that make managing global and remote teams simple and efficient. Deel’s platform, 24/7 support, employee liabilities, GDPR-compliant regulations, and the ability to control and retain your team’s IPs and invention rights make it an excellent option for entities looking to scale.
Pricing: Starts from $599/employee/month
4. Remote
Remote is a global EOR and HR solution for distributed teams, which helps companies hire contractors and employees, run payrolls, offer benefits, and expand their teams globally. It offers several integrations and features while managing onboarding, contracts, legal, finance, and benefits in over 150+ countries.
Pricing: Starts from $299 per employee per person, while you can have a Contractor Management Plan that is $29 per contractor per month
5. FoxHire
A complete EOR platform for onboarding, payroll, and compliance, Foxhire is present in 84+ countries globally. Their services include payroll, onboarding, W-2 document filing, Insurance, dental, medical, vision, 401(k), Compliance (Immigration, IRS, Employee Contracts, Client Contracts), and legal.
Price: You can sign up for free, and there is no monthly or annual fee, as Foxhire earns its fees through the services you contract.
