What Is an Employer of Record? (Answered)

An Employer of Record (EOR) is a solution that allows your business to hire workers in multiple countries/jurisdictions without opening a local entity. They take on legal responsibility for your workforce, handling compliance, payroll and more.

Using an EOR makes it easier to expand your global workforce and not worry about country-specific payroll laws or employment regulations. But, there are some things to keep in mind.

Employment Compliance

Keeping your business in compliance with local laws and regulations can be challenging when employing workers across borders. For example, different countries have various rules on when and how employees are to be informed about company policies like disciplinary procedures. If an employer doesn’t follow these guidelines, it can lead to legal penalties, including fines and even a loss of business.

This is why hiring global Employer of Record companies or PEO partner makes sense for companies looking to grow quickly and avoid compliance issues with a distributed workforce. An EOR will take on the responsibility of hiring your remote or international team members, so you can focus on building your business without worrying about local employment law.

An EOR acts as the legal employer of your employees, so they’ll be responsible for ensuring that your company follows local employment laws and pays any applicable taxes. They also handle HR functions like onboarding, payroll, and employee benefits. As an added bonus, an EOR can also help your business save on costs by reducing the need to set up a separate entity in each country where you’re expanding.

In addition to handling employee recruitment and HR, an EOR can also support your business by providing advice on the different employment regulations and practices in each region where you operate. This is particularly useful if your company is new to the world of global hiring, as each country has its own unique set of employment standards that you may not be familiar with.

A good EOR will have relationships with local banks, insurance providers, and training companies to help you set up accounts, get the necessary paperwork in order, and make sure your new employees are fully compliant in their role. For example, some countries have strict timeframes in which an employer must provide information on disciplinary policies to employees, and if you fail to comply, it could result in financial penalties for your business.

A PEO is similar to an EOR, as they are both a third-party company that handles the legal duties and obligations of your business. However, there are a few key differences between the two services.

Payroll Management

An EOR can be a valuable asset for companies looking to expand into new markets. It allows a business to tap into talent in other countries without the risk of violating local employment laws, and it helps companies avoid the heavy expenses associated with setting up an entity in another country.

A good EOR will handle everything from payroll taxes to registering employees with local tax authorities and filing all relevant paperwork. Additionally, they will provide advice on employment contracts, ensuring that they are fully compliant with local law. They can also help with benefits management, such as registering employees with pension funds, healthcare providers, and workers’ compensation insurance.

In addition to handling all of these administrative tasks, an EOR will also manage compliance with employment laws in multiple states and countries. This means that a business will no longer have to worry about keeping up with state and local rules regarding things like hiring, firing, workplace safety, or overtime pay.

While an EOR can be a great tool for businesses expanding into new markets, it’s not the right fit for every company. For example, some businesses prefer to maintain a direct employer-employee relationship in order to build company culture and loyalty. Furthermore, some businesses may have complex or unique employment needs that an EOR cannot accommodate, such as union negotiations or bespoke employee benefit packages.

Other companies may find that an EOR is too costly. A full-service EOR can cost more than a domestic PEO, so it’s important to weigh the pros and cons of each option carefully. In addition, a business that uses an EOR may find that it can be difficult to build a trusted partnership with the service provider, as they will not have complete visibility into the internal administrative processes of their employees. This can lead to mistrust and a loss of control within the organization. However, this can be mitigated by choosing a service provider who offers a transparent and collaborative working process. By doing so, both parties can have a smoother experience and achieve the goals of their project.

Employee Onboarding

An employer of record (EOR) is a third-party entity that legally hires employees on behalf of your business. This means they will handle all local employment regulations, taxes, payroll management, and employee onboarding. They will also provide the necessary documentation to comply with local laws like background checks, employment contracts, and insurance policies.

In addition to payroll and compliance, an EOR will help your company establish a presence in new countries or states without the risk of legal liabilities. In some cases, they will even act as a hiring agency to support your recruitment and talent acquisition needs.

Whether you’re starting a business in a new state or looking to hire a remote team member, employee onboarding is essential to a successful transition. A comprehensive onboarding process should cover all the legal paperwork, set up workstations and computer access, communicate role expectations, and make social introductions to help your new hire feel welcome in the workplace. An EOR can help your company streamline this process by managing all the legal details and facilitating the employee’s first day of work.

Global Employer of Record services, also known as a global employment organization (GEO), offer cost-effective solutions for businesses looking to expand globally while maintaining compliance with local laws and wages. A GEO will take on the liability and operational control of employment matters while ensuring payroll compliance, taxation, and workforce management.

A GEO can be particularly helpful for companies wishing to hire international workers or contractors who require a visa to live and work in the United States. However, it’s important to note that a GEO does not provide legal representation or immigration services for your employees.

Although using an EOR can be a valuable way to manage compliance risks and mitigate risk across borders, it’s not right for every business. In fact, it’s a good idea for businesses to consider an EOR solution only once they have finalized their hiring strategy and are ready to hire. A great EOR service will also be able to support your employees when they need to change their contracts, which could be due to a promotion or relocating back to HQ.

Employee Termination

Employee termination is when a company removes an employee from their position. There are many reasons why a company may choose to fire an employee, including poor job performance, violation of company policies (including theft or damage to property), insubordination, frequent absences without justification, and more. Whatever the reason, it’s important for companies to follow local and federal laws when carrying out an employee termination. Doing so will ensure that the process is carried out fairly and in accordance with law, as well as provide documentation in case a dispute should arise.

The most common reason to terminate an employee is due to poor job performance. A good way to improve productivity is to provide employees with training opportunities and clear expectations. An employee’s behavior can also be a cause for firing them, such as excessive absenteeism, unauthorized use of company property or software, or a breach of confidentiality. In either case, if an employee is not performing to the level of the position or is causing a negative impact on other employees, it’s best to let them go.

An employer of record, also known as an EOR, is a third-party provider that assumes all legal employment responsibilities and duties for your workforce, handling payroll, compliance, and management services. It’s a great option for businesses looking to expand into new countries or regions quickly with minimal risk.

In addition to providing a complete HR solution, an EOR can save time and money by taking care of payroll, taxes, and paperwork for remote workers. This allows your business to focus on core competencies while retaining the flexibility and competitive advantages of a remote or global workforce.

Some employers may prefer to maintain full control over their human resources tasks in-house, especially if they have complex or highly specialized employment needs. These might include unique industry regulations, union negotiations, or bespoke employee benefit plans.

For these situations, an HR software provider can serve as an Employer of Record, providing access to talent globally without the hassle of setting up a foreign entity or violating employment laws. A global employer of record, or PEO, is a third-party partner that understands the labor laws and payroll regulations of each market where your workers are located.