What is an Employer of Record (EOR)?
An Employer of Record (EOR) is an external entity that takes care of onboarding and administrative activities on behalf of your organization. EORs allow you to recruit internationally without having to establish an entity in different countries.
Now lets understand, how an EOR does it.
EORs have legal entities in the countries available for their recruitment services. This means companies partnering with Employer of Records can mitigate risks by hiring international employees because of EORs responsibility for legal compliance in those countries. In essence, they act as external HR departments as they shoulder the responsibility of legal compliance for employment internationally.
Functions of Employer of Record
A global employer of record (EOR) is a third-party service that enables small, medium, and enterprise-level businesses to outsource recruitment and employee management activities. It can handle everything from legal compliance to payroll processing for your employees working in different countries.
The Employer of Record’s main services includes employee onboarding, record maintenance, payroll, tax filing, commissions, health insurance, and other employee benefits for your business.
Employer of Records can also greatly assist in the global expansion of your company. With their help, you can hire international candidates seamlessly. Their legal presence in other countries makes compliance easy while employing full-time overseas employees.
Employer Of Record Vs. PEO
Professional Employer Organization (PEO) is similar yet has differing functions compared to Employer of Record. PEOs and EORs handle employee management and administrative activities such as tax compliance, payroll, benefits, and HR. PEOs, however, do not have legal responsibilities for employment.
Since a PEO is a co-employment organization, you are only “leasing” their employees to work for your company. This means that when you want to hire internationally, you need to establish legal entities in your target countries, entailing more risk for costs and compliances.
With PEOs, you are provided the services for employment but not compliance. If you want a more thorough service without upfront costs, it’s best to choose Employer of Records solutions. If you have established entities in other countries and need assistance in the hiring process and employee management, then PEOs will work for you.
Benefits of Using an Employer of Record
HR activities from hiring new employees to processing payroll demand your constant attention. Time-consuming tasks such as processing individual payments, taxes, commissions, reimbursements, and other employee benefits require you to be detail-oriented to avoid hefty penalties. With EOR, you have access to reliable services for managing these activities on your behalf. This way, you save time for other processes you can focus on to grow your business.
When you entrust EORs to important tasks such as employee management, payroll processing, and other HR-based activities, you have the benefit of availing the services of a highly competent organization. EORs have the experience and knowledge within this field. Their tested and proven processes make them more than capable of delivering precise calculations for payroll and compliances.
The Employer of Record takes care of maintaining all your confidential data for each of your employees. More often than not, they have a reliable and efficient system with dedicated personnel for data management that makes it easy to update your records.
Reduced International Regulatory Risks
International employee and payroll management involve maintaining legal compliance for every country of operation.
One of EORs main services is keeping up-to-date with the various labor laws and tax tables they have legal entities in. With experts such as lawyers and accountants handling these activities, EORs significantly reduce their clients' compliance risks.
How to choose an Employer of Record Service
While there are many EOR service providers out there, finding the best one for you means asking the right questions while analyzing the providers’ reputation and compatibility with yours.
Ask the Right Questions
When choosing an EOR, having a clear idea of your company’s recruitment, HR, or other administrative activities can help you understand what processes require solutions. Asking yourself these questions below can bring forward the specific EOR services you need to help bolster your company.
- Do you need to hire internationally but don’t want to spend more resources on establishing entities in other countries?
- Is your payroll team experienced enough to handle everything? Or do you need experts for legal compliance with your payroll processing?
- Do you need the whole EOR service package, or do you just need to plug in the deficiencies in your payroll system?
- Have you considered the long-term costs of partnering with Employer of Record instead of investing in your own company?
Answering these questions truthfully aids in evaluating priority solutions for your company. By focusing on the primary issues, you get to be more efficient with your resources. You lessen the costs of services when you fully understand the needs of your company.
Ultimately, you know your company the best and can accurately evaluate the requirements. With a deep knowledge of your company, you can allot better investments and improvements, pushing your growth forward.
How much does an Employer of Record cost?
EOR pricing structures have two types: percentage rates and flat rates.
Percentage rates get their costing from your employees’ salaries. This structure seems to be a good option with a small workforce; however, in the long-term, retaining experienced employees through promotions, incentives, and wage raises, can prove more costly.
Percentage rates used to be the industry standard; however, more and more companies are transitioning to flat rates due to the affordability of this structure long-term.
With flat rates, you only pay for the service per employee. An Employer of Record costs typically ranges between $250 - $500 per employee monthly, depending on the requirements for each employee.
The flat rate pricing structure may be more expensive upfront but will cost you less in the future. Knowing this can open up more opportunities to budget your resources or invest in better projects for your business.
Check for Trustworthiness and Compatibility
Make sure you do a thorough background check on the EORs you have your sights on. An EOR’s reputation determines the overall quality of the services they provide. Their branding cannot fully reflect how they service their clients. That’s why checking for reviews online, asking for client feedback, and assessing your interactions with them can lead you to form your decision to partner with them.
However, finding the right fit for your company requires a deeper analysis between your company and the EOR you’ll partner with. Company culture is a key component of compatibility. Your EOR can prove a perfect fit if you share the same values and culture with them.
This will not always be the case in every scenario. You want shared principles and a similar mindset with your preferred EOR. This way, you can at least have a common ground, making it easier to relate to and work with.
Why choose Multiplier?
We, at Multiplier, provide Employer of Record services through our SaaS platform readily available for you. You can automate your payroll processing and employee management through our software. Rest assured that our user-friendly approach can help you implement our technology seamlessly in your business.
Offload international hiring complexities and risks through us as we operate in more than 150 countries. Focus on hiring the best overseas candidates for your role, and we’ll handle the rest. No need to set up your legal entity in the countries you’ll hire.
Simplify everything with a click of a button. Simplify with Multiplier.
Ready to streamline your HR activities with a trusted EOR partner? Talk to our business consultants at Multiplier today.
How much does Employer of Record (EOR) cost?
It typically costs around $250 - $500 per employee, depending on the services and company you partner with.
Which industries use Employer of Record (EOR)?
All industries can use Employer of Record locally and internationally.
Can you employ international workers without an EOR?
Yes, you can. However, when employing full-time international workers, you need to establish legal entities in their countries.
What are the responsibilities of an Employer of Record (EOR)?
Most EORs provide employee management, payroll processing, and other HR activities. They can help with international legal and tax compliances, provided they have entities operating in other countries.