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What Can an Employer of Record (EOR) Do for You?

August 31, 2023

Summary

Navigating the complexities of global workforce management has never been more accessible, thanks to the invaluable role of an Employer of Record (EOR).

This article explained what EOR is, its seamless operation, numerous benefits, distinctions from traditional hiring, a comparison with PEOs, and its overarching purpose.

Whether you're a seasoned multinational or a startup, you can harness the power of EORs to unlock your organisation's full potential in the global arena.

Businesses are constantly looking for novel solutions to streamline operations and stay competitive in today's dynamic and changing job market.

The Employer of Record (EOR) idea is one such solution that has gained attention in recent years. However, what precisely is an Employer of Record, and how can it help global businesses?

This knowledgeable content will demystify the myths surrounding the EOR by examining its definition, how it works, its purposes, benefits, the difference from traditional hiring, and justification for choosing EOR companies.

What Is an Employer of Record?

An Employer of Record is a service provider who assumes the legal responsibilities and obligations of employing a workforce for global companies that do not need an entity in the labour country.

When a company hires an EOR, it outsources to the EOR some HR-related tasks. These tasks include processing payroll, withholding and reporting taxes, adhering to employment laws, and managing employee benefits.

How an Employer of Record (EOR) Works

You must understand the following essential concepts to comprehend how an EOR works :

Co-Employment Relationship

When you partner with an Employer of Record, an exceptional co-employment relationship is created.

In this arrangement, the EOR assumes the role of your workforce's legal employer while your business retains managerial authority and day-to-day management of the employees.

Legal Compliance

One of the responsibilities of an EOR is to ensure that all employment-related activities adhere to regulations by managing employment contracts, tax laws, and labour laws to lessen the burden of compliance on your company.

Payroll & Benefit Administration

EORs handle Payroll processing, benefit administration, and other administrative duties relating to human resources.

Employer of Record enables your business to concentrate on its core functions while ensuring that workers are duly paid and receive the benefits they are entitled to.

Immigration Compliance

Using an EOR's team of legal specialists and HR professionals familiar with each country's ins and outs will simplify obtaining work visas and permits.

By keeping abreast of changing labour regulations, an Employer of Record will position you for success right from the start, reducing the risk of paying fines and facing legal action.

A Point of Contact

An Employer of Record serves as your go-to source for all questions relating to hiring and benefits for your international employees, giving you one less thing to worry about as you enter new markets.

Benefits Of Using an Employer of Record (EOR)

Let's examine the compelling benefits of including an Employer of Record in your business model now that you have a basic understanding of what an EOR is and how it functions

Global Expansion Made Easy

Employer of Records provide an effective way to navigate complex global employment regulations, taxes, and compliance requirements for businesses looking to expand into new markets or hire international talents.

Risk Mitigation

Your organisation can significantly lower the financial and legal risks of employment-related lawsuits or legal fines by transferring some employment liabilities to the Employer of Record (EOR).

Focus on Core Competencies

Your business can allocate more time and resources to its core competencies and strategic goals by pushing the burden of HR duties and compliance management to an EOR.

Enhanced Employee Benefits

Employer of Records frequently give access to robust employee benefit plans, assisting you in attracting top talents without adding to your administrative burden.

Scalability

Services from Employer of Record are very scalable. EORs can adjust to your workforce needs, whether you need to hire one person or an entire team, providing flexibility in your growth strategy.

Purpose of Employer of Record (EOR) Services

Employer of record services streamline and improve your workforce management. The EOR concept serves several crucial functions, whether you're a multinational expanding into new markets or a startup looking to offload HR burdens.

Some businesses want to avoid dealing with remote employment's additional tax and legal complexities. An EOR is helpful in this situation.

By collaborating with an Employer of Record, your business can hire internationally, enter new markets, sponsor work visas, and more—all without dealing with the challenges of managing global human resources.

How Employer of Record (EOR) Services Differ from Traditional Hiring

You have learnt about the advantages and purpose of Employer of Record (EOR) services through our insight.

In a traditional hiring process, talents are hired directly by your business. You oversee all facets of the employer-employee relationship, including hiring, onboarding, processing payroll, and compliance.

Let's now get into a crucial point: how EOR services differ from traditional hiring practices. Making decisions about your workforce management strategy requires an understanding of these distinctions.

EOR Services Traditional Hiring
There is shared responsibility between your organisation and the EOR.
The business model solely controls HR processes, decision-making, and employee management.
You can outsource all HR-related and compliance tasks to experts at an affordable cost and also focus on the business core.
You will have in-house experts at a higher cost to handle all HR-related and compliance tasks
You can simplify Global expansion without establishing an entity in each location.
You must establish a legal entity in each target location.
Without administrative burden, you can easily adjust your workforce size
There is a high administrative burden
Employer of Record helps you mitigate all business risks
You will have to worry about operations, social, financial and legal risks for your business.

PEO vs. EOR: The Difference

The real question is: What is your business strategy, and what does your company need as a result?

The decision of whether to work with professional employment organisations or employers of record companies depends mainly on the international business expansion strategy you have chosen to pursue.

If you prefer to set up a local entity in each country where your talent may be based and would like someone to manage the HR and payroll burden, an international PEO would probably be appropriate for your needs.

However, if you don't want to set up local entities abroad, it would be best to work with an international EOR that will act as the legal employer for your remote workers.

In addition, an EoR helps you reduce your liabilities when you enter a new market. This can help to create lower overhead costs overall.

Is An EOR/PEO Right for Your Business?

Based on your company's unique requirements, size, and long-term objectives, you should consider hiring an EOR. You can consult HR professionals to make the right choice for your company.

Contact our experts for more information and personalised guidance on how an EOR can benefit your needs. We're here to help you navigate the complexities of the modern workforce landscape.

For a consultation, kindly send an email to hello@workforceafrica.com  or  schedule a free consultation here.

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