An employer of record is a third-party service provider responsible for managing the legal and administrative operations related to another company’s employment processes ranging from hiring to off-boarding along with legal regulations and considerations.
There are several intricate considerations involved while choosing an employer of record (EOR). Make sure to define your goals and requirements, find good EOR teams, screen their processes and experience, get in touch with them and ask relevant questions, take time to review, and hire the EOR that aligns perfectly with your culture and requirements.
Some main factors to consider when choosing an employer of record EOR include expertise, cost, legal regulations expertise, regional coverage, hiring and onboarding, reputation among employees, smooth employee exits, software platforms or tech-savvy, tailored services, ability to scale, and clear communication.
Expertise
Proven experience is one of the most important things you need to consider when choosing an EOR. Find an EOR with a solid track record and collaborations with noteworthy names. Go through their portfolio, processes, and reviews to understand their credibility better. Ask them questions about the complexities associated with their services and management like payroll, employment, termination, and compliance. A good EOR will explain the processes and complications for different reasons and requirements.
It is important as it helps to ensure that the operations will be smooth as required and you will have confidence about the EOR’s credibility. While it is time-consuming and more expertise results in an extra cost, it offers perfect solutions with legit prior experience that shows reliability when it comes to handling all kinds of scenarios.
Cost
EORs have various pricing models based on the services they offer and their expertise. Set aside a budget you want to allocate for the employment process. Try to look for the EORs that come with the budget bracket you have set for this. Try to keep an exaggerated bracket so that you finalize a cost-effective team. When you find an EOR team that aligns with your requirements, ask for their pricing in detail like upfront cost, fixed prices, hidden cost, and any reliant or variable costing.
The cost usually varies based on the number or type of employees, locality, and the services offered. Ensuring transparent costing results in cost-effective and better financial planning. However, some hidden or unpredictable costs lead to disrupted budgeting for the company. Hence, before you start working with an EOR, discuss all the costs in terms of fixed pricing, variables, and hidden cost estimations to plan out a better budget allocation.
Legal regulations expertise
Make sure to check the EOR’s capabilities around legal regulations and compliance with laws like labor, tax, or employment benefits. Legal regulations are different in various localities and the company has to comply with the laws being practiced in that specific locality. The EOR has to ensure that the company is complying with all the laws.
EOR helps the company dodge any kind of fines or penalties due to violations of legal regulations and eventually helps to save the company’s reputation. Companies are often unaware of intricate laws that land them at big risks. Legally aware EORs help to reduce the chances of risk landing.
While it eliminates the need to have an in-house legal team and reduces the risk chances, it increases the reliance on the EOR team for all legal matters. Moreover, errors within legal estimations lead to high-value impacts. To avoid this, make sure to choose an EOR with high know-how regarding legal matters and proven expertise in helping other businesses within such legal grounds as well. Try to ask questions and a detailed overview of how they manage the legal regulations and complexities.
Regional coverage
Before choosing an EOR, make sure to check their regional coverage and the number of localities they have expertise in. Some EORs are experts within a certain city or a country only whereas some EORs cover various countries offering services on a global scale. The global coverage helps to ensure easy and reliable scalability when you want resources from various parts of the world. Good EORs help to manage global teams effectively and eliminate the need to work with different EOR teams to manage employees from different regions individually.
However, EORs offering global coverage are often costly and expertise is usually limited when it comes to lesser-known areas. So before, choosing an EOR, make sure to research their expertise coverage by asking questions and reviewing their portfolio. You will need an EOR that offers global coverage, especially if you are planning to scale globally and expand your workforce accordingly.
Hiring and onboarding
While choosing an EOR, make sure to consider the hiring and onboarding services offered by them. Ask about the whole process from finding new talent to screening, interviews, and onboarding processes. Smooth onboarding processes help companies and employees with an enhanced employment journey and that is highly reliant on the services offered by the EOR. A good start with efficient hiring and smooth onboarding enables a welcoming and warm relationship between the company and the employee leading to long-term mutually beneficial collaboration.
An efficient onboarding process by the EOR helps to improve the company’s reputation and create good first impressions while bringing down the timeframe required for hiring new employees. However, delays and disruption occur when a good EOR has not been selected. So make sure that you choose a team that aligns well with your onboarding requirements.
Reputation among employees
While an EOR’s relationship with the company is important, their interaction with the employees should be equally satisfactory. Before hiring an EOR make sure their dealings with companies and employees are fair, respectful, and professional. The EOR will be the main point of contact for the employees regarding matters like payroll, benefits, or HR support.
An EOR having good relationships with the employees as well helps to improve employee satisfaction and retention resulting in better day-to-day operations and productivity. To ensure this, try to review the EOR’s history with other clients and how they deal with both; the company and employees. While it helps to increase employee satisfaction while bringing down the burden from internal teams, too much micromanagement results in disruptive operations so there has to be a balance between supportive and overseeing service.
Smooth employee exits
Whether it’s onboarding or offboarding, the EOR has to manage everything intricately so that it neither impacts the company operations nor employees’ experience. Exit laws vary based on region. Some localities require no notice period before exiting while some require 1, 2, 3, or more months prior notice. Moreover, there are other legal matters like proceeding with a smooth transition, or managing clearances that the EOR has to oversee in order to provide the company with a burden-free exit platform.
Before choosing an EOR, make sure to check if they provide legal services associated with exiting and termination. Ask about their processes and how they manage the offboarding processes both generally and legally. It helps to reduce risks like better offboarding and termination lawsuits. However, the cost of enhanced offboarding termination processes is often higher than normal services. So, while choosing an EOR, make sure that you ask questions about how they manage the employee exit process that results in fair outcomes for both; the company and the employee. Moreover, make sure they offer post-termination support as well so that it doesn’t come as a burden or damage the reputation of the company.
Software platforms and tech-savvy
With the increasing need for technology integration to ease processes, companies should have most of their processes automated through software. Before choosing an EOR check the software platforms and technology they use to manage their processes including payroll, onboarding, and compliance. Proceeding with an EOR that values the power of automation and technology ensures simplified and easy management of processes with smooth integration with your current processes. It helps to reduce manual efforts while managing the processes on a global level if need be.
A tech-savvy EOR facilitates better communication and data sharing while providing real-time insights with the power of the latest software tools to improve overall efficiency. It decreases the manual burden on teams and gives an exceptional experience to both the company and employees. However, EORs with the latest tech are often costly in services and less tech-savvy teams usually cause disruptive operations. Before choosing an EOR, make sure to check their technical processes and the software they use to manage their operations. This will give you a better idea of the EOR’s technical expertise before you start working with them.
Tailored services
Each company works differently and requires EOR service that is tailored to its operations and requirements. Before choosing an EOR, make sure to check their services if they offer custom services based on client requirements. Ask about their customization related to contracts, benefits, compliance, analytics and reporting, and day-to-day operations. This will give you a better idea of their alignment with your team, culture, and operations along with your basic requirements.
Tailored operations help to improve overall efficiency and experience for the company and employees as the EOR adapts efficiently to the company’s norms. While choosing the EOR, ask questions related to this and examples or portfolios where they have customized their services for other clients for clarity. While customization helps to address specific requirements and improves the overall experience, it often comes with additional costs and it is time-consuming to adapt to custom requirements. So before you choose to work with an EOR, make sure that they can efficiently manage the customization of their services to align with your requirements.
Ability to scale
All companies plan to scale at some point and require their operations to grow alongside. While choosing an EOR, make sure they have the ability to scale and enter new markets as you grow your company. Scaling processes often happen quickly and the need to scale along is important to ensure that a single process is not disrupting the growth scale. A reliable EOR should have expertise and capabilities around supporting the growth especially while entering new markets and going global.
During scaling, companies require hiring from different regions and the EOR is responsible for managing all the processes and expanding the workforce. This support helps to provide a smoother growth transition and offers long-term value to the company. While the ability to scale with the company ensures rapid growth and expansion along with reducing the administrative burden, the costs for scalable EOR often come at a higher price. While choosing an EOR make sure to ask for the previous experience where they had to scale their operations parallel to the expanding company they were working with. This will give you a better idea of how they approach scalability along with operations.
Clear and open communication
While choosing an EOR, make sure they have an open and transparent communication pattern with the company and employees. When working with third-party service providers, clear communication is highly important to ensure alignment between both teams and to reduce the risk of any disruptive operation. When selecting an EOR monitor how they are communicating their services and catering to your requirements. Ask about how they proceed with a transparent flow of communication. This will help you to get a better idea of their credibility regarding collaboration and trust.
Ask about the EOR’s preferred communication channels and regular update processes. A clear flow of communication helps to build healthy and long-term relationships while offering better resolution to issues and promoting trust. Poor communication flows lead to disruptive operations and regular issues. So before choosing an EOR, make sure their flow of communication and transparency aligns with your requirements, goals, and trust policy within your team.
What is an employer of record (EOR)?
Employer of record (EOR) is a service offered by third-party service providers who take legal and administrative responsibilities for the employment of individuals on behalf of another company. The EOR is responsible for managing the hiring process, payroll, benefits, exits, and adherence to legal regulations. The company gets engaged in managing their day-to-day operations and the EOR manages the employees.
The employer of the record creates and maintains contracts as per the company requirements and local labor laws. Along with deductions and legal regulations, EORs provide employees with benefits like health insurance, leaves, and increments. From hiring and onboarding the employee to the termination and resignation process EOR manages everything efficiently while taking off the burden from the client.
Some of the main key service highlights related to an employer of record EOR are listed below:
The EOR is responsible for managing the payroll processes, including the calculation of salaries, deductions, salary distributions, or any issues regarding the payroll like delayed management, or miscalculations resulting in disruptive operations.
- EOR handles all the taxation related to the laws of each locality. They manage the filing of proper taxes including income tax or social security contributions along with other tax laws.
- An EOR helps companies find new talent based on their requirements, screen the employees, interview them, and proceed with the hiring or onboarding processes. Based on the company requirements and EOR’s expertise, the EOR facilitates local and global hiring as per legal regulations.
- An EOR helps to manage employee benefits that comply with labor laws. They help companies to meet employee expectations by offering medical insurance, retirement plans, and satisfactory leave policies.
- Good EOR helps companies comply with local laws and regulations like minimum wage, overtime policies, and more labor laws that often result in fines or penalties if violated by the company. The EOR stays updated with the latest laws and policies to keep the company away from any risk landing or policy violation.
Working with a good EOR team helps companies reduce the burden of hiring multiple entities for individual tasks like legal regulations or hiring. Moreover, they get access to local and global pools of talent that facilitate a smooth scaling transition when the company plans to grow and expand Its workforce. When choosing an EOR, make sure you hire a team that facilitates a good long-lasting relationship between your company and employees and offers an uplifting experience to both entities.
What is the history of EOR?
The history of EOR is related to global expansions and the need to hire and retain international talent. The evolution of EOR services initially emerged in early 2001 when remote work and global workforces gained popularity and there was a need for international hiring, and better use of technical resources. While expanding into new markets, the businesses needed detailed know-how about the local laws and workforce management. This led to companies looking for solutions that outsourced the hiring and employee management processes while offering them a smooth global expansion. This resulted in the emergence of employer of record (EOR).
What are the responsibilities of an employer of record (EOR) service provider?
The responsibilities of an employer of record (EOR) revolve around legal and administrative processes regarding employment that help companies manage their day-to-day operations separately. Some of the main responsibilities of an EOR include management of salary processing, incentives, taxes, and deductions, compliance with labor laws and legal regulations associated with employment, and management of employee benefits like health insurance, leaves, and retirement plans. Moreover, the EOR is responsible for managing onboarding and offboarding contracts, offering support to employees and the company, and assisting with legal permissions and documentation for global expansion.
What are the benefits of using an employer of record service (EOR)?
The benefits of using an employer of the record (EOR) include easy expansion into global markets with legal regulations, reduced risks of lawsuits and violation of legal regulations, cost-effective operations, smoother transitions, and contracts, greater access to a global pool of talent, speedy global operations with technical expertise. The advantages and disadvantages of using an EOR depends on the services provider you are working with.
What are the drawbacks of using an employer of record service (EOR)?
The drawbacks of using an employer of record EOR include higher operational costs, reduced control over employee contracts, reliance on EOR for legal and administrative matters, lack of expertise in certain regions, and disruptive employee relationships if not managed correctly. To ensure reduced risks and drawbacks while working with an EOR, make sure to screen the team properly before hiring and ask all the relevant questions to ensure credibility.
Which services do employer of record (EOR) provide?
The services that employer of record EOR provides include payroll management, tax processes, employee benefits, compliance with legal regulations, onboarding and off-boarding management, HR support, and assistance with global expansion. Before choosing an EOR, comprehensively go through all the services they offer and the extent of customization they provide for those services. Select the services that you require or the ones that benefit your operations.
Do all EORs operate globally?
No, all EORs do not operate globally. Based on the services offered, some EORs operate within a certain city or country only whereas others have expertise in global operations and adhere to international laws as well to ensure global operations. Make sure to review the EOR services and ask them about their global services.
Who are the top EOR providers?
The top EOR providers include Remote, Safeguard Global, Deel, Globalisation partners, and Velocity Global. To hire the best EOR services providers, get in touch with their teams and review their services or expertise to ensure that it aligns with your requirements or not.
What support does the Employer of Record offer for termination?
The support that the employer of record offers for termination includes adherence to legal regulations like documentation, notice period, and dues clearance. Moreover, the EORs reduce the risk of wrongful termination, management of intricate termination communication, and post-termination support. For clarity, before choosing an EOR, make sure to ask them about the services they offer regarding terminations and employee exits.
