What is EOR (Employer of Record ) in Business?

For businesses, expansion is a major step towards achieving success and long-term stability. It can be both intimidating and gratifying for businesses. The entire procedure of setting up a business in a whole new country may require extensive planning and may make businesses consider outsourcing payroll services or partnering with an EOR. There are many underlying elements that affect the decision of business expansion such as legal and financial analyses, relocation or recruitment of staff, and managing payroll according to the region’s law. The complexity involved during the process of business relocation makes businesses partner with an Employer of Record (EOR) instead of establishing an international entity for handling HR.

What is an EOR (Employer of Record )?

An Employer of Record or EOR works in partnership with a business as a third party organization facilitating businesses with hiring new human resources and establishing an entity in a new country. When a business expands itself to a new country it is considered a wise move to partner with an EOR which appears as a legal employer for the client on papers. The EOR deals with hiring and remuneration of clients’ employees however their role and decisions related to employee dismissal are carried out by the client company.

In what ways does EOR help businesses?

During a business expansion, an Employer of Record can facilitate businesses through the following services:

  • Quicker entry into the market
  • Reduction of costs and risks
  • Work permits and visa processing
  • Filing of insurance and tax
  • Arranging employment contracts
  • Payroll services
  • Management of timesheets and expenses

One of the core reasons behind choosing an employer of record is that they enable businesses to enter and establish in new markets very quickly. In many cases, it also takes as little as 48 hours.

Read also: A Guide On Global EOR (Employer of Record)

What are the benefits of partnering with an EOR?

Through partnering with an EOR in UAE, foreign businesses can immediately start their operations right after hiring in UAE is completed. EOR also gives businesses the edge of acquiring global talent which may not be available in their region. It gives them an opportunity to explore skillful employees from different regions of the world contributing towards their business goals.

Some of them quite worthwhile benefits of collaborating with an EOR are listed below:

  • The amount of risk involved while entering into new markets is notably minimal.
  • Cost is greatly saved by not setting up a physical entity in a new country.
  • The risk of non-compliance with local employment laws and regulations is mitigated.
  • Businesses are able to enter multiple markets of different countries at the same time.
  • Partnering with an EOR of the host country means businesses will not have to worry about any kind of change or amendment in local legislation governing the host country.
  • Quick and efficient hiring of talent in the new market who are familiar with local culture, language, etc. becomes an advantage.
  • With an EOR your business will have local HR experts who can run and keep track of your employee’s payroll.

What are the limitations to using an Employer of Record?

Despite numerous benefits of working with an EOR, there are few limitations to using an EOR which depend upon the employment requirements and business strategy of the client company.

Following are some common limitations to using an Employer of Record:

1. It may not be suitable for more than 10 employees in one country

When a company intends to expand/enter into a new market of a new country, they probably would prefer to incorporate an entity, hire local experts and consultants and manage the payroll process by themselves. In this scenario, the EOR may only be a temporary or short-term solution to get employees hired fast.

2. Employer may give up on control of host country processing payroll

Some companies are reluctant to consider EOR companies as the legal ‘employer’ although it is only for administrative roles while the authority for decisions stays reserved with the client. For some companies, this is a completely new concept that may run counter to the traditional concept of direct employment.

3. Distant Employment Relationship for company

Since the contract of employment is established between the EOR and the employee, the client company will not have any standing to declare its rights locally and it will always be dependent on EOR to manage any claims.

Need a reputed EOR for your business in Dubai?

If you wish to expand your business in the Middle East then it would be best for you to choose a reputed EOR for partnership. It will not just make things easier for you but will also help you to understand local regulations and business culture in the longer run. Payroll Middle East is one of the most reputed EOR companies in UAE with its operations all over the Middle East. With over 100+ clients from across the globe, Payroll Middle East has marked successful relationships with its clients through unmatched EOR services.

Read also: How EOR companies and PEOs help businesses?