For a lot of organizations, the question of “Why” when it comes to international expansion is crystal clear: to access a wider talent pool or customer base, acquire another firm, or further a mission. It is the “How” that is a bit of a challenge. But it does not have to be tough – thanks to EOR or Employer of Record services. An EOR or Employer of Record is a way to add workers a lot quicker in global markets without taking the risk and cost of establishing a company or organization.
How does an EOR work?
An EOR service provider will do the usual arduous and costly work of setting up companies – making sure all insurance, banking, Human Resource, and tax facilities, as well as contract requirements, are met. It has the local infrastructure in place to help hire and pay local staff.
Since Employer of Record services can hire staff in their company, that is precisely what services are offered to organizations that are planning to expand their operations into new markets: the ability to hire people without having a physical firm, along with the expertise to do it compliantly. When organizations use EOR services, they rely on them to hire staff on their behalf and take on legal responsibilities for complying with the employment and payroll laws in the country. This service:
Onboard employees with good and compliant contracts
Remits taxes, benefits, and salaries owed to workers
Support employees’ Human Resource needs
While EORs handle the payroll and Human Resources for the employees, the client organization is responsible for managing the workers’ day-to-day tasks. In effect, the client company will benefit from the employees’ contributions without taking risks to the client company.
To find out more about the hiring process, click here for more details.
Is an Employer of Record the same as a Professional Employer Organization?
Although EORs are similar to PEOs, they are not totally the same. In the United States, where they are prevalent, Professional Employer Organizations are usually co-employment arrangements, in which payroll and Human Resource administration are independent of employee management.
The Professional Employer Organization handles payroll and Human Resource, and the co-employer manages the team. When it comes to co-employment, both the company and the PEO need to be registered as an organization. Both company and PEO share legal responsibility for the workers.
When referring to the same kind of service for overseas workers, vendors usually refer to the service as international or global PEO. Bit these organizations are not referring to the co-employment agreement usually associated with PEOs in the United States.
What they are really referring to is outsourced services like EORs. The difference between the two is the requirements and shared legal responsibilities. Unlike PEOs, legal responsibility and entity establishment rely solely on the Employer of Record services.
When to use EORs
If companies are involved with the expansion planning, they know there is a lot to consider. When a lack of local expertise is one of the client organization’s primary concern, Employer of Record may be their best option to achieve global growth objectives. Listed below are some situations in which companies have turned to EOR service providers to help their expansion efforts.
As a platform when exploring new markets
EORs let companies evaluate their readiness to compete in new markets by hiring competent workers. They can test the waters by starting operations with the new team without committing the money and time required to establish a firm.
Check out https://en.wikipedia.org/wiki/Professional_employer_organization to find out more about PEOs.
To safeguard against con-compliance of independent contractor
If client firms rely on independent contractors as part of their growth plans, their job may be the same as what the local authorities prescribe for workers. These independent contractors could be putting the organization at risk of tax and employment violations. An Employer of Record service can hire contractors on the client organization’s behalf, in accordance with every local requirement in the area of operation, to prevent penalties of non-compliance.
As a firm stopgap
Maybe the company has identified a new growing market and decided to build an entity in that industry is the best way to move forward and expand. But they need to start operation as soon as possible, and an entity-setup process can be complex and lengthy. With the help of EORs, companies can have employees up and running in a matter of weeks while the client firm does the work of setting up the entity.
Suppose the firm has recently acquired workers in a new country but does not have a way to pay them because the deal did not include a legal business entity. In that case, EORs can pay the workers compliantly on behalf of the firm or until they set up their own entity.
What to look for in a service provider
When it comes to evaluating service providers, there are qualities people need to keep in mind to help protect the organization. Of most significant importance is the extent of the service provider’s knowledge in areas the company targets for their expansion. One way to evaluate this is by finding out how long the service provider has been in that area and whether they have direct entities and rely on local partnerships.
EOC on a global scale
With some employer of record servicing their clients for over a decade, experience in this industry is on their side. Companies around the world rely on their services to help expand in their target areas and hire quality employees around the world, compliantly and quickly. Some of these service providers have been in this game for so long, they have seen almost every employment situation imaginable.
With the help of their extensive local expertise, they know what it takes to get employment right away. If you are a client organization, make sure you find out if the Global Employment Organization EOC service is the right one for your firm by speaking with one of their solution advisors.