Choosing the Employer of Record (EOR) for your Global Workforce: Everything You Should Know in 2023

An Employer of Record (EOR) can be a way out if you are trying to expand your business globally but lack funds for multiple offices.

In this article, we’ll walk you through the functions, responsibilities, and benefits of an EOR. Further, you’ll understand how it helps startups, SMBs, and large enterprises build and manage their global workforce from under a roof.

So, let’s begin with the basics, shall we? And if you are already in the know, you can skip to the EOR service providers listed in the table below:

What is Employer of Record (EOR)?

An Employer of Record (EOR) is a third-party employment firm that handles every facet of recruitment for an organization’s cross-border employees. Be it compliance, payroll, taxes, and other benefits – EOR takes full responsibility!

A recent statistic showcases that the revenue of EOR agencies in the US will rise to 247.5 billion dollars by 2024.

Certainly, companies who aspire to global milestones are bailing out from managing employees in-house as there are several compliance issues involved. By steering towards EOR solutions, some of the burden is taken off them. 

Here’s why:

When a company decides to navigate global markets, the burden of HR tasks coupled with varied tax requirements gives business leaders sleepless nights. That’s when EOR steps in your shoes👞! The entity handles all personnel functions, including:

• Processing payrolls
• Filing taxes
• Issuing Forms W-2
• Doing background checks and drug screenings
• Employee onboarding (new hire)
• Creating and maintaining employment/freelance contracts
• Offering and administering benefits
• Terminating employees

Put simply, the EOR has to develop risk mitigation measures and ensure compliance with local regulations so the organization functions smoothly.

Functions and Responsibilities

An Employer of Record (EOR) has a diverse range of personnel functions.

Let’s have a look:

• Payroll processing: An EOR represents a company as a proxy entity and is in charge of funding and processing payrolls. Hence, it minimizes the burden on employers by a significant margin.
• Tax filing for the company: The EOR oversees the legal aspects of an organization’s functioning. On top of that, it ensures compliance with tax legislation and local labor laws without any bottlenecks.
• Filing tax for employees: More often, employers of global organizations don’t have time to fill them since they are engrossed with more important tasks. This is another area where an EOR’s services can prove beneficial. For instance, an EOR fills I-9, W-2, and other documents on the employer’s behalf.
• Employee onboarding: An EOR handles all the tasks associated with employee onboarding since MNCs and large-sized firms don’t have adequate time to accomplish all these. On top of that, most EOR agencies even perform background checks and drug screening as well.
• Arranging necessary documents: When a cross-border employee is willing to relocate, work permits and visa-related documents are no excuses. The EOR manages all these tasks seamlessly so the candidate and the organization don’t face any constraints.
• Consulting services: Organizations can also avail of HR, finance, and tax-related consulting services from the EOR. Further, EOR can help identify viable approaches to severance pay, employee onboarding, or termination of contracts in a particular region.
• Terminating employees: An EOR also has the right to terminate employees if they fail to meet specific requirements. It doesn’t consider unethical practices that will hamper an organization’s brand value. 

Thus, the organization does not have to dwell on the HR perspective when it comes to dealing with employees, as the EOR is there to handle these tasks, eradicating the need for HR management software.

Benefits of Hiring

Global companies coordinate with EOR vendors to reap multiple benefits without doing the heavy lifting. 🏋️

Just a recap: An EOR acts as an intermediary between businesses and employees in different locations. Let’s have a detailed look.

#1. Eliminate Market Entry Barriers

High-growth companies aim to build a global workforce nowadays. For good reasons, it has several benefits – a larger talent pool, affordability, and workplace diversity.

But running a business isn’t a bed of roses in nations where bureaucracy reigns supreme. 🏛️

An EOR has a solid understanding of local laws and regulations. Further allowing businesses to commence operations sooner. Moreover, it also has the authority to hire and pay the staff on the company’s behalf, ensuring payments in local currency and with legitimate tax deductions.

#2. Time-Saver

Undoubtedly, this is the most apparent benefit of hiring an EOR. Companies with global offices lack time to monitor paperwork, payroll processing, and other monotonous work.

While it does all that, the saved time can be redirected to:

😌Heaving a sigh of relief. 

🔍Focusing on core activities.

#3. Minimize Risks

Let’s be real: Organizations need to focus on productivity and revenue while handling legal matters precisely. Indeed, a hectic affair if managed in-house.

Outsourcing the legal paperwork and documentation tasks to a generous EOR makes things fall into place.

Simply put, the headaches of tax documentation negligence or non-adherence with local labor regulations fall to the EOR agency.

Key Takeaway: Research highlights that in the US, fines can go up to 20% of paid wages along with FICA taxes, which apply to employers and employees. However, this percentage varies across countries.

#4. Reduce Costs

Opening an office in a foreign country may sound fascinating, but there are several bottlenecks in the process, one of which is hiring costs.

When we say hiring, we’re far from just employee remunerations. Hiring costs technically involve more than salary. An organization has to incur expenses ranging from setting up a subsidiary to hiring financial and legal professionals.

The total cost to hire a new employee can be three to four times the position’s salary, according to Edie Goldberg, founder of the Menlo Park, Calif.-based talent management and development company E.L. Goldberg & Associates.

That means:

If you’re hiring for a job that pays $60,000, you may spend $180,000+ to fill that role.

“Of those costs, I would say 30 percent to 40 percent are hard costs, and the other 60 percent are soft costs,” said Goldberg, who is also the SHRM Foundation chair-elect and co-author of the book The Inside Gig (LifeTree, 2020).

This won’t be the case if the company opts for EOR services. These agencies are flexible in their approach, which enables global firms to explore new markets and shut down global offices if the collaboration isn’t up to the mark.

Use Cases 

Problem: A global manufacturing firm in the United States is looking to expand its operations into several European countries. The company has handsome funds, but setting up an office would invite a cash crunch.

Solution: While establishing an entity in Europe could have cost top dollar, the company utilized EOR software to navigate this expansion instead.

• The software handled payroll, ensuring accurate payments and tax withholding for employees across Europe.
• It facilitated mass hiring across European countries by automating job postings, applicant tracking, security checks, and employment contracts. 
• A team of legal experts was always available to assist in any lawful complication during the processes. 
• The EOR also managed benefits administration, offering health coverage choices, insurance, and retirement plans.
• Through centralized data storage, it maintained secure records, simplifying audits.

Outcome: The EOR software streamlined HR tasks, enabled international growth, and effortlessly ensured legal and financial adherence.

Parameters to Select Your EOR Partner

There are several EOR agencies ready for tie-ups with global organizations. However, not all of these EOR firms are reliable. Being the employer, you must be specific in choosing the Employer of Record (EOR) partner. Below are some of the parameters you should consider:

• Knowledge bank of the EOR: Usually, top-rated EOR partners have a talented team with extensive knowledge in diverse markets. Things will be difficult if your partner organization is inexperienced and lacks professional expertise. They will still be unaware if your firm is at risk of non-compliance and legal charges.
• Transparency: A trustworthy EOR is transparent in approach from the very beginning. Whether it is pricing or something else, your EOR partner should always present a clearer picture. Apart from initial quotes, EORs may also charge setup fees, termination fees, or taxes. However, you should ensure they don’t introduce hidden charges during the course of the affair.
• Data protection policy: Select EORs with an excellent track record of data protection. Generally, this encompasses compliance with privacy guidelines and round-the-clock infrastructure maintenance to provide a secure environment.
• Go beyond tax and legal benefits: An EOR helps companies to legally hire and pay the workforce in a new nation. However, some EOR agencies offer additional services besides the above-mentioned. These solutions will give your IT and HR departments extra wings.
• Track record: Before hiring an EOR partner, look into their track record. It’s advisable not to decide in haste. Go through reviews and read testimonials to assess if the clients are satisfied with the EOR’s services.
• Ability to handle foreign exchange rates: The foreign exchange market is volatile, and this unwelcome force is bound to increase your costs. However, you can curb this risk by choosing a global EOR firm that provides a fixed-rate structure when it comes to foreign exchange transactions.

Now, let’s have a look at some of the EOR service providers of repute that can help lower those employment costs!

EOR Service Providers

Deel

Deel‘s EOR services help you hire employees across 150+ countries while keeping a light hand on your pocket. It hires employees on your behalf and even handles legal, payroll, and other HR tasks.

Why Deel EOR Services?

• Handles contracts, minimum wage, terminations, and other local laws.
• Legal entities in 100+ countries and expert visa support
• Automate payrolls and directly deposit salaries in local currencies.
• Take care of local taxes, withholdings, deductions, and benefits in 90+ countries.
• Easily request, add, and store documents in our secure platform.
• A centralized dashboard to manage payslips, benefits, time off, and more

Deel is trusted by over 15,000+ businesses, including Shopify, Zapier, RedBull, Reebok, and more. Besides, the platform has excellent in-app customer support with a response time of under 5 minutes.

Multiplier

Multiplier is a global platform that deals with global workforce management. It handles hiring, payroll, and compliance for your business across 150+ countries. The platform stands out by administering employee insurance, ESOPs, and other benefits.  

Why Multiplier’s EOR Service?

• It provides payments in local currency (supports close to 120 currencies) while complying with local labor and tax laws. You can even link employees to their payroll cycles.
• Has legal experts for drafting multilingual compliant contracts and handling country-specific taxes even if you hire contractors or freelancers in case.
• It provides employees with regionally competitive insurance. On top of that, you can customize insurance policies with custom packages for individual employees.
• You can add freelancers directly to the platform and allow them to self-serve by raising invoices and expenses through Multiplier.

Multiplier is used by global companies like Uber, PwC, and more for global workforce management. Besides, the platform’s pricing is straightforward for organizations looking to hire full-time roles globally. For freelancers, the pricing doesn’t disappoint either. 

Remote

Remote is an easy-to-use EOR solution, perfect for startups, SMBs, and large enterprises looking to expand globally. The platform has its entities – HRs, legal, and finance corps. – spread across the globe, which makes running a global workforce easy.

Why Remote EOR Services?

• Haslee-free onboarding process with local right-to-work and identity checks.
• You are free to create customized job roles, probation periods, salary, benefits, and more.
• Off-boarding employees is equally easier. Remote’s expert team helps raise performance issues in confidence and through the entire termination process while complying with local laws.
• Option to reward and motivate your team by offering equity globally. Remote handles all the tax and reporting requirements.
• Expenses management – home office equipment, co-working allowances, learning, and more. Employees can easily submit claims and get reimbursed.

Best of all, employees can easily self-serve without tagging you for monotonous work. They can self-onboard, submit reimbursements, request documents, view personal details and salary slips, and more.

Just saying: Remote offers to refund your management fees for the first 90 days if you’re unsatisfied. 

PapayaGlobal

PapayaGlobal is a workforce management platform that takes care of payments, payroll, and hiring in over 160 countries. On top of that, the software caters to top companies like Microsoft, Shopify, Wix, and more.

Why PapayaGlobal EOR Services?

• Global Expert Alliance and a top-ranking legal team
• Manage your EOR, payroll, and payments under a one-intuitive dashboard.
• Papaya is a regulated financial institution with segregated accounts held at J.P. Morgan and Citibank. So your funds are always in safe hands.
• Integrated with leading tools such as Workday, Netsuite, Oracle, and other HRM/HCM software.

PapayaGlobal makes it easy to hire a diversified workforce from over 160 countries. It has its experts located over locations. They follow strict SLAs to provide the best competitive advantage and flawless workflows even without setting up an entity in the location. 

Wrapping Up

It won’t be an exaggeration to state that a reliable EOR partner gives your business an added dimension. Not only does it save time for the employers, but the agency’s professionalism also ensures that every facet of the documentation tasks is accurately carried out.

However, companies have to be careful when choosing an EOR firm since there are many, and employers are very likely to get burdened with options.

Next up, the best workforce management software to save time and resources.