Global Employer of Record (EOR) | Meaning, Roles & Benefits

An Employer of Record is an organization or entity that hires an employee to carry out certain tasks on behalf of the main hiring company. Hiring international talent creates possibilities for new market penetration, improved range of skills, and creativity, to mention but a few.

However, fully comprehending and ensuring compliance with international labor laws, operations of the payroll system, and employment regulations is often challenging for businesses.

Thus, a Global Employer of Record (EOR) can assist in ensuring businesses fully meet all compliance requirements. This article explains what EOR means, how firms can utilize EOR services, and further details the benefits of engaging the services of a global EOR.

Also read: Benefits of PEO

What Does Global Employer of Record Mean?

Global Employer of Record or global EOR is an organization that focuses on the recruitment and payrolling of employees for foreign outfits without physically setting up branches across the world. It is especially helpful for managers that want to grow their business fast, cover more sales markets, introduce products and services, attract customers, and clients worldwide, and at the same time avert distinct legal complexities and high expenditures.

Does Employer of Record Same as Co-employment?

Employer of Record also referred to as a co-employment provider is a third party that fully and legally employs workers for another company. As part of all employer-related affairs like human resources management, employee introduction and orientation, employees’ salary and wages, and labor laws of the country.

Whereas the EOR handles these duties, those targeting and hiring the employees remain in charge of how the staff is run and directed. In other words, an EOR can help free up resources in a business so it can concentrate on its strategic objectives and at the same time, manage all the employees’ legal responsibilities.

Learn more about Co-employment Laws, Risks and Benefits.

What Are the Major Roles of an Employer of Record?

An EOR offers many services that allow companies to lawfully and effectively harness talents in the worldwide market. Here are some of the primary functions an EOR performs: 

• Drafting and Maintaining Employment Contracts: This way an EOR will be certain that any employment contracts in operation do not infringe any local employment laws. Thus, contracts are drafted, reviewed, or amended from time to time to ensure that they conform with the current legislation and governing policies of a firm.
• Payroll Management: Payroll issues in the EOR institution encompass salaries, taxes, and social security including but not limited to the following. They make a surety of the fact that employees are being paid correctly and right on time.
• Benefits Administration: EOR offers medical, vision, dental, and other benefits that depend on the legislation of the country of operation. This can range from medical cover, pension schemes, and other required figures as demanded by the law.
• Compliance with Employment Laws: This means that the EOR assists the companies in avoiding legal problems and subsequent penalties concerning local laws and regulations on employment.
• Employee Onboarding and Offboarding: An EOR oversees the hiring of staff and their training program; the firm makes sure to follow the legal discharge of employees.
• Ongoing HR Support: By getting the EOR involved, one obtains continuous help and advice on staff performance remunerations, staff relations, and legal concerns.

Benefits of Working With an Employer of Record (EOR)

The services of a global EOR are advantageous to companies that seek to expand their operations in different countries.

These benefits include:

• Faster Onboarding: This means an EOR is an efficient way for businesses to bring on new employees in a new market faster.
• Cost Savings: Organizing its structure in a foreign country may be costly and longer about time. An employer of record offers a lower-cost solution by taking on employment obligations without entity formation.
• Compliance Assurance: An EOR makes sure that everything that is being done regarding the employees conforms to the law of the particular country, and this will greatly help to avoid situations whereby an organization will be on the receiving end of the law and be forced to pay hefty fines.
• Focus on Core Business Activities: When using an EOR to outsource the responsibilities linked with HR and payrolling, the companies will have more time for their main lines of work and objectives.
• Access to Top Talent: An EOR assists businesses in getting the best workforce due to benefits provision and the ability to create a work structure.
• Scalability: With an EOR, one is in a position to upscale or downsize depending on the business environment, and manage a company without having to deal with several local legal entities.

When Employer of Record Is Useful?

An EOR is a very useful partner for different reasons, especially when it comes to dealing with a dispersed staff and when participating in the international market.

Here are some specific situations where an EOR can be particularly beneficial:

• Exploring New Markets: If your company is interested in entering a new market but is not prepared to establish an in-country entity an EOR is perfect for beginning your market entry process compliantly. Allowing one to quickly obtain a team in new markets, create new revenues, and reach new consumers, an EOR eliminates the commitment and cost of entity establishment.
• Attracting and Retaining Talent: With so much competition for jobs nowadays, getting a job that will allow one to work from home is a bonus. An EOR means you can select candidates from anywhere in the globe, for this, the talent database is expanded. Besides, if the employees require mobility, an EOR ensures that the company can keep the best talent as it facilitates international recruitment.
• During Entity Setup: To set up a local company it takes time, capital, and legal assistance to understand the legal systems of the country. An EOR can act as a stop-gap measure since one can recruit employees and start operations as one forms the entity. Thus, depending on the specific stage of the entity establishment, the EOR can give suggestions or even submit some kind of assistance.
• Avoiding Contractor Misclassification: Contracting people abroad may be affordable if the contractors are hired from overseas. However, the case changes when the company expands, and there is a higher chance that workers are misclassified. The misconception of wrongly classifying the employees as independent contractors brings legal/financial repercussions. For this reason, an EOR reduces this risk as they work under the contractors as employees thus, following the laws of the land.

How Can One Choose the Right Employer of Record as Partner?

Choosing the right EOR company is one of those things that must be done properly if you are going to successfully navigate your business into other countries. Here are several important considerations when selecting an EOR partner: 

• Transparent Pricing: That is why ensure that the EOR you hire has an appropriate policy on prices that you have to pay. In this case, one should avoid such partners as they are usually characterized by hidden costs that are likely to be charged at their discretion.
• Accurate Employer Burden Calculations: An EOR should be able to provide accurate estimations on the employer’s cost liability in terms of social security, health care, labor insurance, and several leaves, among others. These costs are variable in the various markets and through the engagement of an EOR partner, you should be able to obtain these correct approximations.
• Worldwide Coverage: Ideally, your EOR should have information as to the various markets you are planning on hiring in. A good partner also minimizes compliance risks while at the same time decreasing the likelihood of various operational disruptions in the business.
• Responsiveness and Support: Therefore, it is possible to go through all the EORs and determine which of them offers help as soon as possible and without delays. When they choose an EOR partner, they should allocate a client account manager who can address the needs, the new hires’ orientation, and their time and language zones.
• Independent Third-Party Validation: Assuming you have an EOR partner who has been defined as such in the foregoing reputable bodies. In this case, it is important to find the right EOR solutions for the management of international employees or use the industry experts’ analysis, which involves the comprehensive study of the target customers.

Difference Between Employer of Record and PEO

The reader should be aware that EOR and PEO are not the same, but the differences of the services to the organization can at times cause confusion regarding which of the services suits the organization best.

• Employer of Record (EOR): It is a legal employer-distributed workforce i.e. all the Human Relations activities including hiring, administration of payroll as well as taxes, and the overall management of employee benefits. This legal responsibility is for all the employees and it is discharged by the EOR.
• Professional Employer Organization (PEO): In essence, the mechanism of a PEO involves establishing a working relationship with SMEs to become the business’s co-employer. It provides some services that fall under HR Though it is an employment agency that does not take corporate legal responsibility for the staff. However, it is divided between the company and the PEO as long as the employer’s responsibilities are concerned.
• Employer of Record vs. Staffing Agency: One can, therefore, score features as a tool in natural language processing that is enclosed by theoretical boundaries but applied in the concrete world of texts. An EOR and a staffing agency are thus, markedly different from each other. It is such differences that have to be considered to deciding between the two services.
• Employer of Record (EOR): Specific, predictable, and enforceable employment commitments for the world’s working population are within the purview of an EOR. The staffing service that provides the personnel acts as the legal employer ultimately collecting the fees, handling the off-clan employees’ payments, addressing the legal issues, and organizing all the benefits.
• Staffing Agency: A staffing agency is an organization that seeks for employees for hire intending to fulfill a certain need of a company since they have a temporary need for workers. Sometimes, it is used to place people in organizations to work for certain projects, for some time off in a certain organizational or company schedule, or for some skills that certain businesses need, whereas the employees of those organizations do not have. Thus, the agency is not assuming legal guardianship for the employees concerning the carry-on of this legal practice.

Learn more about PEO vs EOR.

Final Thought

Employer of Record is often a complex service that relieves businesses from all challenges associated with employment. Engaging a reputable EOR ensures effective expansion across borders in compliance with all statutory regulations. Thus, contact us today and we shall be glad to assist you. 

One of the most well-known and reliable employers of record companies in the MENA region is Payroll Middle East. Our team of experts has years of expertise in assisting companies like yours to expand and be successful in new markets. We are prepared to assist you in overcoming the difficulties posed by international expansion because we are aware of them.

Contact us right away if you want to learn more about our global employer of record services or our employer of record payroll services in the UAE.