An Employer of Record (EOR) is a third-party organization that manages important employment responsibilities on behalf of a company. EOR allows businesses to hire and manage employees in different countries without opening a legal office there. An EOR makes sure companies follow local labor laws and makes HR tasks easier for employers.
You gain access to a range of important services, including payroll management, tax obedience, employee benefits administration, employment contracts, visa and work permit processing, following local labor law, onboarding and offboarding support, termination assistance, expense management, and time tracking when working with an EOR. These services make sure that your company follows local regulations while reducing administrative burdens.
The 11 main services you get when working with an EOR are listed below.
- Payroll management. EOR handles accurate employee salary calculations, deductions, and timely payments while following local tax regulations.
- Tax compliance. EOR makes sure that all important tax filings, withholdings, and payments are made in accordance with local tax laws.
- Employee benefits administration. EOR service providers manage benefits such as health insurance, retirement plans, and leave policies according to the local market.
- Employment contracts. An EOR creates and manages employment contracts that follow local labor laws.
- Visa and work permit assistance. EOR supports employees in getting important visas and work permits to legally work in a specific country.
- Onboarding and offboarding support. EOR manages the processes for hiring new employees and smoothly ending employment and follows local rules and best practices.
- Local labor law compliance. An EOR makes sure companies follow local laws about working hours, minimum wages, and employee rights.
- Risk management. EOR service providers reduce legal and compliance risks by keeping up with changes in labor laws and handling disputes if they arise.
- Time tracking and expense management. EOR helps monitor employee work hours and expenses, which ensures accuracy.
- Termination assistance. EOR manages employee terminations lawfully and respectfully, which minimizes risks and makes sure the company follows the laws.
- Global expansion support. EOR makes the process of entering new markets by managing local HR and employment requirements easy, so companies focus on growth.
Payroll management
Payroll management means calculating employee salaries, handling deductions, and making sure payments are made on time while following local tax rules. An EOR takes care of these tasks, reducing the workload for businesses. EOR service providers ensure employees are paid on time, which builds their trust and keeps them happy. It also helps businesses avoid mistakes or fines related to taxes. Using an EOR makes it harder to customize payroll systems for specific business needs, which is a drawback.
Tax compliance
Tax compliance is an important service provided by an EOR. The service provider makes sure all required tax filings, deductions, and payments follow local tax laws. Tax compliance helps businesses avoid fines and focus on their major business tasks. The EOR keeps financial operations running smoothly by handling tax processes and reducing legal risks. The main drawback is relying too much on an EOR for complicated tax tasks limits a company’s own understanding of tax regulations.
Employee benefits administration
Employee benefits administration ensures employees get benefits such as health insurance, retirement plans, and leave policies that meet local rules. Employee benefit service helps companies attract and keep talented employees while following labor laws. Employee benefit administration also improves employee happiness and loyalty. Offering good benefits increases costs, especially in countries where benefits are expensive, so it can be challenging for companies.
Employment contracts
Employment contracts handled by an EOR follow local labor laws and clearly outline job terms. Employment contracts help avoid legal issues and protect both the employer and the employee. The EOR reduces risks and makes hiring easier by managing the complex rules. Businesses find it hard to add customized terms to the contracts because EORs often use standard templates.
Visa and work permit assistance
Visa and work permit assistance is an important service for companies hiring workers from other countries. The EOR helps employees get the visas and permits they need to work legally. The permit assistance ensures the company follows immigration laws and avoids any issues. Businesses focus on growing by making the process easier. Delays in getting visas or permits slow down projects.
Onboarding and offboarding support
Onboarding and offboarding support from an EOR helps new employees start smoothly and ensures a proper process when employees leave. These tasks follow local rules and best practices, save time, and create a good experience for employees. Onboarding and offboarding support also reduce paperwork and keep the company safe from any legal actions. The EOR’s standard methods do not always match a company’s style or way of doing things, so it can be challenging.
Local labor law compliance
Local labor law compliance makes sure companies follow rules about working hours, minimum wages, and employee rights. The EOR keeps track of changes in these laws, which helps businesses avoid legal problems or fines. Local labor law compliance service improves the company’s reputation and ensures fair practices. EORs help companies understand local labor laws, such as safety rules and overtime regulations, which vary between countries. This is helpful for businesses working in different regions with difficult laws. Companies also benefit by offering training or sharing knowledge to improve their own understanding of these laws. Relying too much on the EOR means the company does not build its understanding of local labor laws.
Risk management
Risk management is an important service where the EOR reduces legal and compliance risks by keeping up with changes in labor laws and handling disputes. Risk management service helps businesses run smoothly and avoid financial problems. The EOR provides stability and peace of mind by managing risks. The cost of this service is a challenge for smaller businesses. EORs help by checking for potential legal problems early before they become big issues. They also assist during audits and inspections to make sure businesses follow local laws. For smaller companies, the cost of risk management is balanced by the money saved from avoiding fines, penalties, or legal troubles, which makes it an important service over time.
Time tracking and expense management
Time tracking and expense management is a service where the EOR helps track employee work hours and handle other expenses accurately. Time tracking makes operations more successful and avoids mistakes in payroll. Time and expense tracking also provides businesses with better transparency. The EOR’s standard tools do not always fit the specific needs of a company, which is challenging. This service is especially beneficial for companies with remote or international teams, as it makes the process of managing work hours across different time zones easy. EORs use advanced software for tracking, which reduces manual errors and saves time. The benefits of accurate time and expense tracking are greater than the challenges for businesses managing HR tasks.
Termination assistance
Termination assistance helps ensure that employee exits are handled legally and respectfully and follows local labor laws. Termination assistance reduces the risk of disputes or legal problems and protects the company’s reputation. EORs help with sensitive situations such as layoffs due to company changes or dismissals for poor performance. They make sure these are done according to local laws, including rules about severance pay and notice periods. Termination assistance is helpful in countries with strict labor laws, as it lowers the risk of legal or financial problems. Companies have less control over customizing the process to match their own values or practices, which is challenging.
Global expansion support
Global expansion support makes it easier for businesses to enter new markets by handling HR, payroll, and compliance tasks. Global expansion services let companies grow without the need to set up a legal office in another country. EOR makes operations easy and helps businesses expand faster. The cost of this service is a challenge for smaller businesses with limited budgets. Global expansion support also allows companies to test new markets without committing to long-term investments. The EOR’s local expertise ensures that businesses handle cultural differences and local practices properly.
What is an EOR?
An EOR is a company that takes on the legal responsibility of employing workers on behalf of another business. This means they handle tasks such as payroll, taxes, benefits, and ensuring compliance with local labor laws. An EOR allows businesses to hire and manage employees in different countries without the need to set up a local legal office by acting as the official employer. EOR service providers help companies expand globally, reduce administrative work, and stay loyal to local regulations.
What are the benefits of using an EOR service?
The benefits of using an EOR service are taking care of payroll, taxes, benefits, and following local labor laws, reducing the workload for businesses. EOR helps companies expand into new countries without setting up their own legal workplace, which saves time and money. The EOR also keeps up with local regulations, reducing legal risks and ensuring smooth operations. EOR provides local expertise, which makes it easier to hire and manage employees in different countries. The benefits of EOR service also include the fact that it is a helpful option for businesses that want to manage HR and focus on growing even with these challenges.
What are the drawbacks of using an EOR service?
The drawbacks of using an EOR service are related to cost and flexibility. EOR services are expensive for smaller businesses with tight budgets. The fees for managing HR tasks and ensuring legal fulfillment add up over time. Businesses have limited control over customizing HR processes, such as payroll structures, benefits packages, or termination procedures, as EORs use standardized practices. Another challenge is over-reliance on the EOR, which limits the company’s internal knowledge of local labor laws and HR management. Delays in processes such as visa approvals or adapting to sudden regulatory changes in some countries impact businesses. The ease and legal support provided by EOR services make them a better choice for many businesses despite the challenges.
How much does an EOR typically cost?
The cost of Employer of Record (EOR) services varies based on factors such as the country of employment, the number of employees, and the specific services required. The EOR services range from $199 to $1,500 per employee per month.
When to use an employer of record service?
An EOR is used when a company wants to hire employees in a new country without setting up a local legal workplace or office. An EOR makes the process of international expansion easy by managing HR tasks such as payroll, benefits, and compliance with local labor laws.
What tools are often used in EOR services?
EOR services use different tools to manage their responsibilities properly. These tools include payroll processing systems, compliance management software, benefits administration platforms, and time-tracking applications. These technologies and tools help ensure the accurate handling of employee-related processes across different regions.
How does an EOR differ from a PEO?
Both EORs and Professional Employer Organizations (PEOs) help with HR tasks, but they are quite different. An EOR serves as the legal employer of the workforce and allows companies to hire employees in countries where they do not have a legal workplace. On the other hand, a PEO works through a co-employment setup, which means the client company must already have a legal office in the country where it operates. This difference between EOR and PEO means that EORs are more suitable for companies looking to expand globally without setting up local offices, whereas PEOs are good for businesses that already have a legal presence and need help with HR tasks.
Can an EOR hire independent contractors?
Yes, EORs can hire independent contractors on behalf of a company, managing contracts, payments, and compliance with local regulations. EOR service ensures that the engagement of contractors is parallel to the legal standards, which reduces the risk of misclassification (calling an employee a contractor), fines, and other legal problems.
How do EOR services ease labor law compliance?
EOR services help businesses maintain compliance and avoid legal issues by staying updated on local labor laws and regulations. EOR takes care of employment contracts, taxes, and benefits based on local rules, so companies can focus on important tasks without worrying about EOR’s legal implications.
What are the top companies providing EOR services?
Some of the top companies providing EOR services include Employborderless, Deel, Oyster HR, RemoFirst, Omnipresent, and Velocity Global. These providers offer smart solutions for global hiring and employee management in various countries.
Are EOR services cost-effective for freelancers?
No, EOR services are not always cost-effective for freelancers. The fees associated with EORs are structured per employee and are relatively high for individual contractors. Freelancers find more value in EOR services for freelancers and independent contractors, which offer necessary support at a lower cost.
