What is an Employer of Record?

Offshore Development
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7 min

What is an Employer of Record?

Tapping into the global talent pool is a sound strategy for any business, as establishing a global presence considerably enhances the opportunities for growth and revenue. But this expansion comes with inherent challenges due to foreign market conditions, local legal and taxation pitfalls, employment laws, etc. This is where an employer of record services company comes to the rescue. 

This piece delves into the employer of record (EoR) concept, with particular emphasis on how a partnership with an EoR can help businesses expand globally.

What is an EoR?

In the simplest of terms, an EoR is a global employment services provider. This means that the EoR helps the client business to employ staff in the country the EoR is operating in, assuming all legal and administrative responsibilities on the client's behalf, including hiring, payroll, taxes, compliance, etc. The EoR thus effectively becomes the employer for the client's local workforce, but crucially, an EoR is not directly involved in the day-to-day running of the employee's professional duties. The EoR's role is limited to HR and administrative functions.

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Benefits of an EoR

Many businesses seek to expand into new markets, but often find multiple barriers to entry that might delay this expansion. Such delays might lead to higher costs and the business might potentially miss out on time-sensitive opportunities. An EoR specifically addresses these challenges and offers a multitude of benefits, including, but not limited to:

  • Fast onboarding service
  • Significant cost savings for the client, when compared with setting up a local entity
  • Drafting of locally-compliant employment contracts
  • Continuous support of HR functions
  • Better talent attraction and retainment through competitive benefits and perks packages
  • Expert advice on integrating remote workers into client's teams
  • Management of international contractors
  • Providing support for local labor laws and regulations
  • Handling taxes and payroll functions

Differences between an EoR and a professional employer organization

There often is a discussion about employer of record vs PeO. While there are some similarities between these two organizations, there are also some marked variations in how they operate.

A professional employer organization (PeO) provides some of the services that an EoR does, but with a crucial difference: an EoR can hire staff in other countries on the client's behalf, while a PeO cannot.

There are other differences also. An EoR can employ staff in a given country without the client needing to create or operate a local entity in that country. PeOs do require that the client own such entity. And an EoR is the staff's legal employer, while staff working through a PeO do so under a co-employment arrangement between the client company, the PeO, and the employee. Therefore, there is more complexity involved. 

In light of these differences, it usually is far more cost-effective to partner with an EoR, particularly if the client does not own a legal entity in the country.

Why using an EoR

Remote working has almost become the de facto rule post-pandemic. Millions of employees worldwide have taken advantage of this and have started working from anywhere. Companies know this and know that tapping into the global talent pool will support faster expansion and growth. Businesses further understand that an EoR is specialized in navigating the complexities of foreign markets, so when it comes to creating a balanced and distributed workforce, partnering up with an EoR is a rather sound idea.

Criteria for selecting an EoR partner

Choosing an EoR partner is an important business decision, as this partnership can have direct bearing on business outcomes. As such, the decision to pick one partner over another should be based on a set of criteria that apply to your own organization, but there are some basic requirements that all EoR partners should fulfill:

Does the EoR have insightful knowledge of a country's labor and legal framework, particularly in the countries that you're planning to expand into?
As an example, ALLSTARSIT has entities all over the world (CEE, LATAM, Middle East, India, US.)

What level of support can the EoR provide?

This is an important consideration, as some EoR agencies may offer adequate support at the start of the partnership but then fail to maintain such support going forward. ALLSTARSIT fields a large team of customer success managers, people & business partners, financial & legal managers in each country to cover every angle and ensure that every partnership is maintained and supported in the long term.

Does the EoR have a proven track record of success?

A long-standing history of success is one the key indicators to suggest the suitability of a particular EoR over another. To this end, ALLSTARSIT currently has an expansive portfolio of clients that can attest to the company's ongoing success.

Dealing with multiple foreign exchange rates

The exchange rates for foreign currency vary all the time, often more than once a day. This can exert pressure on financial aspects and lead to rising costs. An EoR can help you alleviate these costs through established financial mechanisms.

ALLSTARSIT's EoR services

Apart from the advantages stated above, ALLSTARSIT offers a whole range of EoR services, including:

  • Quick & legally compliant hiring services, irrespective of worldwide location, and 
  • without the need to open a legal business entity in that location.
  • Management of the day-to-day potential of your international talent
  • Generation of locally-compliant employment contracts
  • Management of on-boarding, off-boarding processes, and payroll administration
  • Responsibility for compliance matters
  • Provision of ongoing support to you as client and the hired employee/s

Please find out more about how AllSTARSIT by visiting our expertise page.

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