What Is an Employer of Record EOR? How It Works, Benefits & When to Use One
An Employer of Record (EOR) lets you hire globally without setting up legal entities. A large manufacturing company sought to expand its operations into emerging markets in Southeast Asia. While excited about the potential for growth, the company was concerned about the complexities of hiring in unfamiliar territories, including cultural differences and regulatory hurdles.
Employer of record vs PEO
No matter the level of involvement of the EOR, handing over ownership of core administrative processes can feel challenging. Israel struck one of the main hospitals in the Gaza Strip with a missile and then fired another as journalists and rescue workers rushed to the scene. The attack killed at least 20 people and wounding scores more, according to local health workers in Hamas-run Gaza. Federal Reserve Chair Jerome Powell cited risks to the labor market in opening the door to cutting interest rates. As a starting point, organisations should ask the EOR whether its contracts with workers include such provisions, and whether the provisions reflect the laws of the specific country. A global EOR supports hiring from anywhere and helps retain top-tier talent, even when relocation is needed.
What is the difference between an EOR and PEO?
Handing over core processes and inviting another entity into the employee relationship could impact the employee’s view of the employer. This can be mitigated as long as the company is aware of this challenge and actively working to build (and maintain) a culture that aligns with the vision and values. The economy and immigration are two of the biggest issues on the minds of Americans, but we rarely get a look behind the scenes to see how these key forces in American life intersect. CBS News Race & Culture and CBS Reports reveal the connection between immigration and food prices by following the journey of the people, both legal and undocumented, bringing America’s milk to market.
- An EOR employee works for your company operationally but is legally employed by the EOR provider.
- As America grapples with an escalating plastic crisis, the city of Houston, ExxonMobil and other partners announced a new program that promised to recycle nearly all of the city’s plastic waste.
- An employer of record is a third-party organization that employs workers legally on behalf of another company.
Scope of service
Anyone hired this way is a leased employee, which means the staffing agency is generally responsible for payroll, taxes, benefits, etc. PEO providers are generally more focused on domestic HR solutions within the client’s home country, although some PEOs also offer international services. If you’re not clear on the fees involved, such as per-employee costs, transaction fees, or additional charges for services like relocation support or benefits management, the total expense can quickly add up. Here’s everything you need to know including key benefits, risks, how they work, and advice for choosing the best partner for you. Both EORs and staffing agencies can handle payroll for their client companies’ workers, although staffing agencies tend to do this only for temporary workers. However, an EOR is designed to handle a broad range of human resource functions than that of a staffing agency.
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By outsourcing HR functions, organizations avoid the costs of setting up a local entity, hiring additional HR staff, or dealing with legal and compliance issues. This makes it easier and faster to hire internationally and expand into new countries while ensuring compliance with local laws. An EOR becomes the legal employer and is ideal when you don’t have a local entity. A PEO supports your HR function, but only if your business is already registered in that country. Navigating employment law across borders is one of the biggest risks of global hiring. It’s also one of the most time-consuming elements of planning a global expansion.
Enhances Flexibility in Workforce Management
- A PEO supports your HR function, but only if your business is already registered in that country.
- The EOR handled all payroll, benefits, and compliance requirements, ensuring that all employees met the necessary licensing standards.
- Here’s everything you need to know including key benefits, risks, how they work, and advice for choosing the best partner for you.
Also, labour lending rules may prohibit one company from providing staff to act under the control of another entity. Engaging contractors is a common, cost-effective method for hiring remote, international talent. An EOR serves as an intermediary solution, offering hiring support and insights into entity establishment while you finalize requirements. Quickly hire teams in new global markets, create new revenue streams, and reach a broader customer base without committing to entity establishment. Working with an Employer of Record can help companies reduce risk, increase cost savings, and significantly improve worker experience.
While this isn’t inherently a bad thing, it can mean many jobs are being outsourced and HR won’t be as heavily involved in the day-to-day operations. Companies using an EOR may need to rethink the setup of the in-house HR department to ensure it remains effective. Find answers to common questions about our services and the contingent workforce management. Before deciding how to proceed, organisations need to talk to potential EORs to establish their understanding and approach to all these issues and risks. It also makes sense to undertake some independent research into the legal and tax frameworks of any new country.
Payroll Processing
Optimise your hiring process with HiPeople’s AI assessments and reference checks. Additionally, a PEO typically requires a minimal number of employees, while an Employer of Record can work for an organisation of any size. According to the experts at Remote, as EOR models become more and more popular, it’s also becoming a more efficient and compliant solution. In their view, organisations who have otherwise employed a host of freelancers are making the move to this relationship. From labor shortages to environmental impacts, farmers are looking to AI to help revolutionize the agriculture industry.
When choosing an EOR, evaluate their global coverage, entity structure, compliance expertise, technology platform, service model, pricing transparency, implementation What Is An Employer Of Record process, and customer support. Employer of Record services, by contrast, are designed for ongoing employment relationships with workers you’ve already identified. An EOR enables compliant employment of your selected candidates in locations where you don’t have an entity, providing full employment benefits and protections under local law.
This is precisely where the significance of an Employer of Record (EOR) emerges. Beyond the base monthly fee, carefully evaluate what’s included in the standard service and what might trigger additional charges. Common additional costs can include onboarding fees, foreign exchange fees, termination processing fees, and charges for specialized HR support or benefits administration. While EORs and PEOs both support employment administration, they operate under fundamentally different models with important distinctions in their legal structure and service scope. Understanding these differences is crucial for selecting the right solution for your global workforce needs.