Andrew
Burak
CEO at Relevant

Employer of Record (EOR): Your Secret to Scaling Business Fast

Fintech

Today’s companies no longer care about their workers’ physical location, so long as they can deliver on agreed objectives. However, hiring a remote global team is no walk in the park. 

To build a successful global team without the hassle of setting up business overseas, most companies are turning to Employer of Record services. EOR provides the much-needed flexibility in scaling a dream global team. 

58% of respondents of the CFO Research’s Survey said that their companies engage an EOR to support their global business strategy or plan to do so in the next three years.

These numbers come with no surprise as EOR offers many great benefits to companies located across the globe. But which exactly?

When you finish reading this article, you’ll have a clear understanding:

  • What EOR is
  • What are its benefits
  • How EOR model works
  • How to choose the right EOR provider

What is an Employer of Record?

An Employer of Record is a firm legally established to deal with employee remuneration, including taxation, employment benefits, visa application, insurance, performance appraisals, and all other administrative tasks that would provide a logistical headache for global companies.

Modern companies often outsource these demanding tasks to EOR companies to avoid spending time dealing with unending logistics and paperwork. The Employer of Record provides the needed expertise to enable firms to run global operations while taking care of employee relationships.

According to IWG, up to 70% of the global workforce is open for remote work today. Practical EOR solutions will save time, money and connect your firm to a larger talent pool.

The challenges of growing a business. Scaling a team?

Growing a business to the desirable performance takes time and effort. Businesses face many challenges along the way, including: –

  • Talent recruitment
    Finding and hiring new employees who can match up to your standards is an involving process. Apart from advertising the vacant positions, you need time to sift through numerous applications and shortlisted candidates. Once you select your new talent, there is also a rigorous onboarding process to follow.
  • Talent retention
    Once you hire employees, you must find ways to retain your top talent. Otherwise, they will keep leaving for greener pastures, and you will need to find suitable replacement candidates every once in a while.
  • Establishing consistency
    Successful companies put in extra effort to remain consistent over the years. When customers are sure they will receive the same quality of service or product every time, they are more likely to stay loyal.
  • Finding support services
    Running a business involves some crucial non-core functions like HR administration, payroll management, and other logistical operations that require hiring more talent or outsourcing.
  • Delegation of duties
    Many CEOs may have difficulty finding a dependable employee to take charge of operations in their absence. Consequently, they lack peace of mind whenever they have to stay away from the office.

 What can an EOR do for your business?

An employer of record handles onboarding a company’s selected candidates in other jurisdictions, takes care of payroll, and offers benefit packages in accordance with local laws and regulations. 

That means the Employer of record significantly mitigates the subject company’s risk of incompliance. Moreover, EOR assumes all compliance responsibility, which is critical, considering the huge incompliance penalties in the modern-day. 

They also have the capacity to not only set up a single employee but fully staff an entire facility or office with hundreds of employees.

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Recently, a survey by CFO Research revealed some of the top benefits of an employer of record model, including:

  • legal and HR compliance assurance, according to 51% of survey respondents.
  • regulatory compliance assurance – (42% of respondents).
  • leveraging local knowledge (40%). 

A global employer of record’s knowledge of local language and etiquette means they can offer tailor-made onboarding videos and other facilities, which will go a long way in building a solid long-distance employer-employee relationship. 

Top 5 benefits of using Employer of Record services

EOR companies bridge the talent gap and provide the following benefits to help businesses achieve new heights:

1. Facilitate legal payroll management abroad

Hiring remote workers comes with legal implications, depending on the country. For example, taxation rates differ significantly, and with many laws changing every year, it can be challenging to keep track of all requirements. 

EOR firms stay up to date with state regulations to ensure their clients observe compliance with state regulations concerning taxation, staff welfare, and retirement benefits.

2. Promote immigration compliance

Starting a business abroad may necessitate global travel to and from multiple countries. Visa application is not always a straightforward process and may pose a challenge. 

Therefore, finding a local EOR who understands their way around immigration laws ensures you do not get into trouble with your host country.

3. Cost-effective operations

Without EOR companies, many companies would have to consider setting up physical offices for their global operational needs. EOR services eliminate the need to set up companies abroad, which translates to significant savings as EOR firms only receive payment for hours worked.

4. Save time

Dealing with employee matters is time-consuming, especially for large firms. EOR services help firms free up their time concentrating on growing the business and other critical operational functions.

5. Facilitate employee onboarding

Finding promising talent is one thing but helping them understand the core values and settle down to work is a nightmare for many businesses. This is where EOR companies step in to ensure a smooth and satisfactory employee onboarding process.

Top benefits of working with eor
Source: CFO Research, Globalization Partners

Limitations to using an Employer of Record

Although there are many benefits to using an EOR, there can be a few limitations depending on the company’s business strategy and employment needs. Before you start looking into the possibility of Ukraine outsourcing or any other jurisdiction of your choice, consider the following factors: 

  1. It might not be suitable for a large number of employees per country
    For a company that is planning on expansion/entry into a country on a significant scale, incorporating an entity and hiring experts locally while managing the payroll on their own would probably be the best option. But, to hire employees quickly, an EOR could be a viable interim option.
  2. The employer has no control of the host country payroll process.
    Even though it is just for administrative purposes, some employers can be reluctant to let the local Employer of Record be the legal workforce ‘employer.’ This concept does not necessarily run like the traditional direct employment ideals. Therefore it can be entirely new to a company.
  3. Arm’s-length principle between company and employee.
    Because the company does not have a direct contract with the employee, but through an EOR, they rely on the EOR for claim handling and cannot directly assert their rights locally. 

However, if the EOR is under a Global Employment Organization (GEO), the company has the right to make sure the EOR acts in its interests and remains compliant. This is possible because of the contract the company would have with the GEO.

However, the above limitations have not stopped global EOR companies from growing and providing effective staffing services to top companies. 

Employer of record vs. Staffing agency

Hearing Employer of record service companies likened to staffing services is not uncommon. However, the two mutually beneficial services are separate entities with distinct responsibilities and functions. 

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A staffing agency (like any business) can have a collaborative relationship with an Employer of record. While clients hire a staffing agency to meet temporary personnel needs, they hire an 

EOR to take over the role of a legal employer for purposes of tax filing, payroll processing, and other administrative and HR functions. 

Read also:

Employer of Record vs. PEO

Although they provide different services, EORs and PEOs are quite similar on the surface. While an EOR takes over part of your employees and business onto its payroll, a PEO takes over control of all HR-related functions, including employees. 

Therefore, when working with a PEO, your business retains employment contracts, whereas an EOR holds the employment contracts and is engaged through a service agreement. 

The significance of the difference is the legal risk associated with confusing the two. An EOR cannot legally operate as a PEO without being registered as one. 

Therefore, a business needs to decide which model fits their needs best, EOR vs. PEO. Below is a comprehensive outline of how an EOR service model works for a satisfying and high-achieving HR experience.

How does the service EOR model work?

EOR providers use two main models to accomplish their client’s preferences.

Aggregator model: In this setup, one major company deals with sub-contracting companies for outsourcing needs. Some of these sub-contractors have limited experience and knowledge to help multinationals observe legal guidelines.

Wholly-owned model: With this model, a company is in charge of the entire process and hires staff under its payroll and management for its clients.

Finding the right EOR firm is necessary to help your business realize its full potential and succeed in the global scene. Here are some specific tasks that an EOR firm can perform on your behalf:

  1. Provide HR/Legal services: Dealing with legal requirements concerning hiring, onboarding, and salaries.
  2. Work on employee benefits: Including sick leave, maternity leave, dental, optical, and medical benefits.
  3. Perform payroll functions: Ensuring accurate and timely salary disbursement, complete with statutory deductions.
  4. Advisory services: Offer meaningful advice and insights on terminations, legal proceedings, and industrial action.
  5. Handle visas and work permits: Ensure employees’ work permits and Visas are ready when needed.

When does your business need Employer of Record services

Knowing where to start when choosing an EOR service provider requires evaluating your position and needs. Here are some pointers that your business is ripe for EOR services.

  • You wish to start overseas operations urgently
    If you want to establish your operations in a foreign country in record time, EOR service providers are an excellent consideration. 
    Their expertise will help you meet all legal requirements to start your business within a given time frame. This may be difficult to achieve individually, especially when you are unfamiliar with the laws.
  • You want to hire many employees
    The size of your operation matters a lot. However, dealing with many employees has its share of challenges, and finding an EOR provider will ensure you skip this challenging step and save time. 
    When you extend team efforts to other quickly hired experts with little to no onboarding process, you stand a better chance of beating the competition in providing services or bringing products to the market.
  • You want to create the best employee experience
    Creating a great employee experience is necessary if you want to retain your best talent. EOR companies take their time to answer staff questions and address concerns to ensure they remain happy and content working for you.
  • You want to meet world-class standards
    Global companies have a penchant for meeting standards that make them an attractive magnet to the ideal candidates. EOR companies are familiar with all these standards and are the driving force in many international businesses’ success.
  • You want to save time and money
    Top Employer of record companies take care of background checks, tracking timecards, drug screens, employee benefits, and more when handling payroll and HR functions. Employees stay productive as they are assured of on-time and convenient payment for their work. 
    Some EOR companies offer a wide range of salary payment methods, including direct deposit. This way, you pay solely for services rendered without taking on human resources, payroll staff, and office space-related expenses. Therefore, your business can expand as you invest in other areas with the money and time saved from hiring an EOR service.
  • You need to minimize risks
    There are legal issues involved with outsourcing, and the best way to minimize legal risk is to use an EOR. When outsourcing Human resources and payroll services, the EOR company is liable for all the legal issues involved. 
    These companies are well equipped to keep up with the ever-changing HR and payroll rules and regulations, using the latest technologies in their services. Therefore this is a cost-effective and efficient way to avoid potential hefty IRS penalties and fees as well as plugging the drain on potential lawsuits.
  • You need to focus on core business
    There is never a time a business doesn’t need to focus on its core business, yet distractions that it can quickly do away with continually exist. EOR implementation will take over a good deal of these non-profit-making functions that drag you back. 
    Experts at EOR companies deal with these payroll and HR-related issues for you daily and with top-notch dedication and accuracy.
when you need an employer of record

How to choose an Employer of Service provider

Succeeding in international ventures boils down to the team you choose to work with, including your EOR service provider. There is a vast pool of upcoming and established EOR companies and selecting the perfect partner is crucial.

Questions you should ask

As you start your search for an EOR company, here are some vital questions to ask: –

  • Is the EOR company reputable enough?
    Finding a company that cares about its global standing is crucial. Online reviews and recommendations can help you conclude about the company’s reputation. An EOR that attracts many negative comments from clients is a red flag, so find social proof before committing to an EOR company.
  • Are their charges straightforward?
    EOR’s charge varying fees for their services. Before signing that contract, ensure that the company is transparent concerning charges. Hidden fees and costs are unacceptable, and your EOR provider needs to state all costs from the beginning.
  • What is the EOR’s Global Track Record?
    If you intend to launch operations in several countries, you need to find a provider with experience handling EOR tasks and meeting global standards. This service minimizes the risk of operating outside legal confines and getting into trouble with the host country.
  • Does the EOR provide unique employee benefits?
    With multiple EOR companies wanting a piece of the cake, it pays to find a provider that goes out of their way to provide a unique employee experience. This will enhance your company’s image and attract leading professionals to join your team and stay.
  • Do they have the latest technology?
    EOR companies handle complex paperwork and tasks that require accuracy and consistency. Appropriate software and tech expertise ensure all operations meet set deadlines. Storage and retrieval of documents are fast and dependable with the perfect software.
Questions to ask when choosing an employer of record

Why Relevant Software?

Dedicated software development teams can help you focus more on core business operations. Relevant software helps you take charge of your tech hiring needs by linking you with the best developers. 

So whether you are wondering how to hire a mobile app developer or don’t know where to start, Relevant software will guide you and ensure you find your ideal developer.

We have a seamless and efficient dedicated software development team set-up process with the following steps:

  • Requirement gathering
    First, we listen to your requirements, which incorporates a project outline, job descriptions, team size, and required work process to bring together the ideal specialists for your project.
  • Team assembly
    Work can start right away if there are unoccupied specialists in-house. However, when the desired talent is not available, we hire externally, which takes about a month. To cover your urgent needs of a software development team, our partners all over Ukraine provide us with a talent pool from which we can set up a team for you in less than a week. 
  • Selection of talent
    Background checks, tech skills, English level, and soft skills of potential candidates are all assessed by our HR team. Therefore, only the best-fitting candidates make it to the final interview with you. 
  • Team integration
    Years of experience enable us to smoothly and seamlessly integrate our team into your ongoing project. The management approach and tools are to your discretion. We recommend an in-person meeting with the team either by getting them to you or you taking a trip to us.
  • The result
    When you hire a dedicated software development team in Ukraine, the result is as good as having these needed top specialists working with you in-house. You have complete management control, and the only difference is the team works remotely, and we handle all the administration on your behalf.

Summary

Overall, If you seek to handle as little as possible liability and stress in running your business, the decision to hire an EOR should be fairly easy. 

Why these 200 tech companies & startups outsource to Ukraine
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What determines what suits you better is how complex your payment schedules and insurance policies are, as well as the number of jurisdictions involved in your staff. 

Outsourcing is generally cheaper, and most businesses are making use of it to fill in positions. But, if you are time conscious and need to out staff as quickly and effortlessly as possible, this is the best way to go. 

So why not engage an EOR and get world-class services like the dedicated software development teams at Relevant today. 

Lastly, when deciding, bear in mind the costs involved in setting up companies overseas in terms of time and money. Your scope of liability is extended as well as the jurisdictions where you can be sued. 

This will most likely exceed the difference in the price for service provision between doing it yourself and having an EOR to handle your hiring and HR functions.

FAQ

Your Next Read

https://relevant.software/blog/how-long-to-hire-an-offshore-software-developer/

Tags: outsourcing
Written by
Andrew Burak
CEO at Relevant
My company has helped hundreds of companies scale engineering teams and build software products from scratch. Let's connect.

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