An employer of record can help you expand internationally without the need to set up a legal entity in the respective countries
The global market size of employer of record services is expected to reach $196 million by 2028.
What makes EORs so popular? The answer is simple: an employer of record is a time-efficient and cost-effective business alternative to expanding your business internationally, without establishing a legal entity.
We’ll share the services that an employer of record offers, the benefits of working with an EOR and how to choose the right partner for your business.
Plus, our DesignRush experts will recommend a top employer of record company distinguished for its variety of services and proven track record in numerous international destinations.
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An employer of record (EOR) is a third-party company that hires and pays employees on behalf of another organization.
An employer of record is typically used when a company wants to work with employees from a new state or country where it has no local entity.
The employer of record company serves as the registered employer for the employee and is liable for employment issues and compliance with tax and payroll laws. However, it has no management or supervisory role over the employee’s position.
The company where the employee works remains responsible for the business operations and workplace safety.
Using an employer of record allows organizations to:
Legally engage with out-of-state or out-of-country employees
Transfer formal employment tasks to a third party
Avoid local employment laws violations
Though employer of record companies are similar in some ways to professional employer organizations (PEO), there are certain instances that differentiate them from PEO companies.
Typically, PEOs handle payroll, recruiting and HR together with the co-employer, while both companies are registered in the country where the employees work. In addition, both the employer and PEO share legal responsibility as far as employees are concerned.
When an employer of record is used, terms associated might include “local EOR,” “local partner,” “local employer,” “back-office staffing” and more. In China specifically, you might come across the term FESCO, which stands for a Foreign Enterprise Service Company.
What Does An Employer Of Record Company Do?
The responsibilities of an employer of record depend on the legal requirements in the country where they operate.
An EOR can cover the whole cycle of business administration or significant sectors to help your operation.
A global employer of record can offer invaluable support for companies that:
Want to expand into new markets quickly
Have between one and 20 international employees
Don’t possess the financial and internal resources needed for global expansion
Need an intermediate solution between an acquisition date and entity readiness
Are not confident they will stay in business for 5+ years due to fierce competition and market uncertainty
If you fall under one or more of these categories, hiring an employer of record might be right for you.
Why Use an Employer of Record?
Using an employer of record allows you to hire a global workforce in countries where you don’t have the necessary knowledge of the local rules and regulations.
For example, maybe you are new to the market and are not planning on following through with the legalities necessary to employ staff for your company. Or, your global expansion strategy is to hire international talent and your employees in the respective countries need to be paid according to the country’s legislation.
Or, the country in which you want to hire has complex laws that are not familiar to your HR department and you don’t want to spend time and resources to acquire expertise in this particular field.
Whether your business operates under a hybrid model, remote model or global model, the employer of record is a simplified solution for global hires.
Benefits of Using Employer of Record Companies
There are numerous points in favor of using the employer of record company's services.
1. No Need For A Local Entity
Setting up a local entity via registration and incorporation may be expensive, time-consuming and dependent on expert accounting and legal support to stay in line with the local legislation.
Hiring an employer of record with proven expertise is an alternative that ensures efficient handling of employment, immigration and payroll requirements in the host country.
2. Compliant Tax And Payroll Administration
Typically, a company with employees in the respective country should run their payroll according to the local legislation.
A local payroll ensures that taxes, health care and other benefits are calculated and withheld properly. An employer of record guarantees compliance with local laws and authorities.
3. Centralized Management For International Hires
Partnering with an employer of record ensures all employee documentation is kept in one place. This makes accessing, reviewing and managing employee information quick and easy.
4. Overall Employee Management
From hiring and onboarding to background checks, employment contracts and timesheets and more, the employer of record handles various matters related to overall your employees.
5. Immigration Compliance
With constant changes in immigration rules and policies, foreign governments are focusing more and more on companies hiring activities, such as visas and work permits.
Violating immigration requirements is likely to result in serious consequences for both employees and the company.
Working with a local employee of record ensures that employees are legally allowed to work in the host country, with no need for business visas, multiple entries in the country, remote payroll or expensive business trips.
6. Reduced Operational Costs
Setting up a local subsidiary, onboarding employees and managing payroll can be a time-consuming process.
Using an employer of record allows you to save time and resources to reduce operational costs.
7. Risk Mitigation
Serving as the legal employer, the EOR ensures there are fewer risks for your company such as employee misclassification and inaccurate payroll.
8. Ease Of Global Expansion
Without the need to set up a legal entity, employees can be hired and settled in no time. This allows you to expand your business to multiple locations around the globe. This will facilitate your business growth, allowing you to benefit from top talent residing and working in various corners of the world.
9. Diversity And Innovation
Having an international workforce ensures diverse and innovative ideas that will add to your business growth beyond the traditional limits.
Working with an employer of record ensures reduced operational costs, compliance with the local legislation and workforce diversity
How to Choose an Employer of Record Services Company
So how can you find the best EOR company for your needs?
Here are 10 questions to help you find the best match:
Is the EOR company global and does it cover the countries where you plan to expand?
How long has the EOR been in business and do they have all their systems set up and running?
Are the EOR services their core service or a side service?
Do they offer a full life cycle of services?
Does the EOR contract include clauses on confidentiality and data security?
Does the EOR company have a proven track record with companies in your industry?
How does the EOR deliver their services?
Who will be the point of contact to ensure timely and efficient communication?
Are the EOR requirements and fees clear and transparent?
How easy will it be to leave your EOR partner if things don’t work out the way you planned?
DesignRush Recommends: The Value Of International Talent
Companies that want to expand globally without opening legal entities in respective destinations can turn to employer of record organizations with a proven track record.
As a B2B marketplace for finding agencies, DesignRush works with 10,000+ verified agencies, providing unique insights and professional advice in various category listings.
Based on detailed service research and reviews, DesignRush can help you choose the right employer of record for your company.
Take Remote for example. Founded in 2019, the company has 900+ employees in 75+ countries. It works with people of 75 different nationalities and 35+ payroll currencies.
From Australia and Canada to Hong Kong and Mexico, Remote offers employer of record services only in destinations where they own legal entities. Their EOR services allow you to:
Hire full-time employees in other countries on a legal basis
Manage international contractors
Onboard employees and contractors quickly and easily
Pay employees and contractors compliantly in 60+ countries
Handle benefits administration
Distribute employee stock options to international employees
In addition, Remote can advise you how to integrate your remote employees or how to implement a global compensation plan.
The company offers a top global employment payroll software that allows you streamline your onboarding, documentation, HR operation and compliance procedures. Remote ensures strong data security and IP protection.
With Remote, you can hire any number of contractors and employees without having to pay minimum fees. There are no set-up or onboarding fees.
Remote’s services range from $299-$599 per month, per employee, when billed annually, depending on the country. When signing an annual contract, Remote offers the first employee free of charge for the entire year!
When billed annually, the pricing for the UK, Ireland and Canada is $299 per employee, per month and $349 if billed monthly. The price for all other countries is $599 per employee, per month on an annual basis and $699 when billed monthly.
Key Takeaways on Employer of Record Services
An employer of record is a flexible and affordable solution that can allow your business to expand globally, work with international talent and comply with the local rules and regulations in locations where you are not represented through your own entity.
From handling contracts and onboarding to payroll and filing taxes, an employer of record can save you time, money and human resources.
To choose the right employer of record, check if they are represented globally, explore the services they provide and make sure fees are transparent.
Remote can help you explore the value of international talent and expand your global reach through the employer of record services it provides.
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