When Would Employer of Record Services Benefit You?

Today, international expansion is a much-used business strategy that promises new territories for growth and market diversification. However, it is also filled with employment laws, payroll management, and regulatory compliance challenges. So, what role do employer of record services play in addressing these challenges?

What is Employer of Record Services?

An employer of record (EOR) is a third-party organisation that acts as an intermediary and performs all the functions necessary to employ staff on behalf of a client company. This includes handling payroll, tax, employee benefits, compliance with local employment laws, and HR management. The EOR essentially becomes the official employer of the staff, while the client company retains control over the day-to-day management and direction of the employees.

Key Benefits of Employer of Record Services

1. Compliance with Local Laws
   All staff employment laws and regulations will be handled by EOR providers, which will prevent your company from running into any legal issues regarding employment management.
2. Cost Savings 
   In some cases, outsourcing is simply more efficient. Paying a third-party EOR to handle your HR functions means you don’t have to spend additional costs on setting up a legal entity in another country.
3. Time Efficiency 
   EOR services also add value to companies entering new markets by expediting the process of staffing an office for the first time. This way, businesses don’t have to wait weeks or months before forming a local entity.
   EOR services make it easier for companies to hire new workers nationally or internationally without the hassle of opening up an LLC in any country.

4. Risk Mitigation
   The EOR is legally responsible for paying employment costs, reducing the liability from the client company.
5. Focus on Core Activities
   By outsourcing activities, firms can free up their human capital to focus on their core business activities, ultimately increasing economic capabilities in pursuit of strategic goals.

When Would Employer of Record Services Benefit You?

Expanding into New Markets

 If your business is looking to expand into the next growth phase, breaking into a new global market is a major stepping stone – but moving into new territory never comes for free. If expanding overseas, you’ll need to deal with local hiring regulations, tax codes, and cultural differences.

Using an employer of record service, you can outsource all the work of employee administration in a new market. From hiring to payroll, administrative taxes, labour compliance, and even daily on-the-ground support, you can now seize opportunities at record speed.

Testing New Markets

Instead of investing large amounts of money in a full-scale market entry, companies will commonly start with a small presence to establish market eligibility. EOR services allow you to recruit a small team or individual employees to test the market without these financial and administrative overheads. You can then decide whether to invest in larger operations.

Navigating Complex Employment Laws

Uniform employment laws don’t exist across countries. While compliance is easy in some places, especially for those with large economies and stable legal systems, it can be more difficult for SMEs. One major concern is that tax withholding and social security contribution laws vary from country to country. We can’t completely escape them; we must contribute our portions of taxes and social security. The amount of this tax differs in various countries. It’s complicated. Additionally, companies must respect their employees' fundamental rights, which vary from place to place. Drawing upon their insight to stay on the right side of the law, EOR providers help businesses avoid fines, penalties and costly legal ramifications.

Managing Remote Teams

If your business is now embracing remote work and hiring talent worldwide, how can you pay and manage the administration for individuals based in different jurisdictions? Employer of record services make it easy, as they can take care of all your employment-related administration, allowing your company to take advantage of the best global talent without administrative hassles.

Seasonal or Project-Based Hiring

Some companies also have seasonal requirements for increasing their staff size or hiring staff to support a particular project. For example, construction often requires seasonal staff, with some sites operating only during the warmer months. EOR services can help here, too. They can take care of the administrative side of bringing in temporary labour without imposing the overhead of setting up and running a new local entity.

Cost-Effective Global Mobility

Global mobility programmes can be complex and costly to manage. A popular way to send employees on international assignments is to transfer them to a foreign subsidiary or second them to a project for a client. However, payroll, regulatory compliance, and visa and work permit management can be challenging and sometimes risky. By deploying the entire workforce through EOR services, a global mobility team can accelerate assignments and ensure compliance while reducing costs.

Reducing Administrative Burden

Keeping track of HR compliance issues is tedious and costly, and small businesses might not have enough HR staff to do so. These are some reasons why companies outsource HR functions, such as payroll, recruiting, employee benefits and many more, to an external service provider. An EOR provider should enable you to eliminate the unwanted chores from your to-do list, thereby minimising exposures to risks and allowing your internal resources to engage more in important strategic activities. This applies to startups, SMEs and even big companies.

Mergers and Acquisitions

The mechanics around bringing on or acquiring another business can be complex, especially when integrating employees into one organisation, potentially sharing workplace space with another. With an EOR service, it doesn’t have to get messy with employment and HR admin for new personnel, leaving you in a better position to provide a seamless onboarding experience.

How is EOR Different From a Recruitment Agency?

A recruitment agency brings together employers and potential candidates, screens and recommends candidates, and helps in the decision-making process but does not assume any employment duties. The recruitment agency assists employers in finding the right talent, but EORs take care of the process of employing this talent.

Applying the services will help improve operational efficiency and make your business more competitive in the international market. NES Fircroft, with offices in over 80 countries, has years of experience in international expansion, successfully sourcing and placing talent in workforces all over the globe.

Contact us today to make use of EOR services.