Why International Organisations Need An Employer of Record | EOR
International organisations (or those looking to expand globally) are likely to experience difficulties when staying on top of local regulations. While hiring and managing globally distributed teams has always been a complex task for multinational organisations, there’s likely to be a lot of confusion surrounding Brexit and challenges brought on due to restrictions over the past year.
An Employer Of Record (EOR) can make it easier to branch out internationally and decrease HR-related complications that many international organisations experience when expanding.
If you are new to the foreign market, hiring remote workers in other countries, outsourcing your employment, outsourcing your administrative functions or are finding the employment laws of a foreign country are complex, you are likely to need an Employer of Record.
What is an Employer of Record?
An Employer of Record is a third-party organisation, like XML International, that provides a registered entity and becomes the registered employer of your workers, without you losing complete management control or supervision.
Having an EOR is an invaluable service that ensures your business stays in compliance with regulations and local laws when it can otherwise be complex. An Employer of Record can take out a chunk of the legwork by taking on responsibility for formal employment tasks, including arranging work permits, visas, local contracts, notice periods, termination rules, and much, much more.
They act as the host country interface between the local authorities and your employees, by employing workers on your behalf and taking on the responsibilities of day-to-day employment. Using an Employer of Record has proved to be effective in international recruitment and globally distributed teams.
Choosing an EOR for Your Business
If you have decided that you’d like to find an Employer of Record, you will now need to choose an EOR that works effectively with your organisation. It’s important to find an EOR that is relevant to your needs and aligns with your strategic vision.
We do advise researching the choices available and taking your time to make a decision. It can also make sense to look for an Employer of Record with a local presence in the country you intend to expand to.
When choosing an Employer of Record, you’ll need to find an EOR that has policies aligned to your business, otherwise, you may encounter some difficulties along the way. We recommend creating standard policies for an EOR to follow, which is why we recommend finding an EOR with flexibility.
Most importantly, your EOR will be dealing with sensitive employee information, so it’s strongly advised to choose an EOR with sufficient infrastructure that is able to ensure complete security, protection and confidentiality.
Benefits of an Employer of Record
There are countless benefits of having an Employer of Record for your business.
Increased Efficiency and Effectiveness
An EOR can strategically boost your efficiency and effectiveness in global employee management by keeping the focus on day-to-day operations. They can manage work permits, visas, local contracts, notice periods and termination rules, allowing you to manage your time more effectively.
Free up the Time of Business Owners
They can take over recruiting and handling, freeing up small-business owners to focus on other critical tasks. And, while they do take over smaller tasks that you no longer need to worry about, you are still in full control with complete supervision.
Fewer HR Complications
Busy organisations can hugely benefit from an EOR as there are fewer complications of HR-related operations, meaning that the recruitment process is far smoother and the payroll for international employees is completely managed, alongside sponsor work visas and benefit systems.
Access to New Markets
Some other key benefits include access to new markets that previously were not possible, opening doors to new opportunities.
Compliance With Local Regulations and Laws
Of course, it can be extremely complicated to understand local laws and regulations in other countries, particularly if you have multiple workers operating around the world. An EOR can take care of compliance and will be aware of new regulations that may be introduced in other countries.
As a business owner, this also means no paperwork to deal with, making it easier to keep on track without stacks of contracts and other unnecessary paperwork.
Liability: EOR VS PEO
A Professional Employer Organisation, also known as PEO, is an employee management service that takes over the administration of payroll processing, benefits, recruitment and HR support.
A PEO co-employs teams to work alongside you and take full responsibility and accountability for administrative tasks, leaving you to focus on your core business. A global PEO can also take care of recruiting through their own local entities.
Although they seem similar, PEOs and EORs provide different services. An Employer of Record only takes over a small percentage of your business and employees, whereas a Professional Employer Organisation takes on HR-related functions and administration of all employees.
And, more importantly, an EOR takes full legal responsibility, whereas a PEO acts as a co-employer and will only help you recruit the right people and handle your HR needs, meaning that you will still be the legal employer of the hired service providers.
Compliance: EOR VS PEO
As the EOR becomes the legal employer of anyone recruited through them, they manage compliance better than a PEO. With a PEO, you’ll still be in charge of legal compliance.
The Employer of Record does all the work for you, including recruiting, taking care of contracts, benefits and insurance. This means that they have more control over your HR services.
Some Professional Employer Organisations are not able to provide full compliance with local regulations, which is mandatory on your behalf. An Employer of Record is more involved with these regulations and is able to reduce compliance headaches, unlike a PEO.
Insurance: EOR VS PEO
With a PEO, you will be required to provide insurance for your employees as a PEO does not cover legalities.
Whereas an ERO has its own insurance, leaving you with less paperwork and more time to focus on what’s important. Employers of Record also take on the full liability of recruitment and of your employees.
An employer of record provides General Liability, Workers’ Compensation and anything else that might be required by the country they’re operating in.
Business Registration With EORs
Expanding your business is easy with an Employer of Record. For international expansion, there’s no need for you to set up a branch office in a new country, as an EOR acts as the host country on your behalf.
Most EORs are registered in locations that they operate in, meaning that there’s no requirement to register your business in these locations.
Is an Employer of Record Better Than Professional Employer Organisations?
Strictly speaking, there’s no right or wrong answer. For some companies, an Employer of Record may work better, whereas, for other companies, they may benefit more from Professional Employer Organisations.
The best way to identify which solution is best for you is by understanding the time and costs involved with both solutions and the liability and stress you would like to handle.
We are an Employer of Record that employs workers on your behalf through our local entity in the required country.
If you are an HR leader, Head of HR or if you’re in charge of an international business, or even preparing to establish operations in new territories anywhere in the world, we would love to see how we can help you as an Employer of Record.