An employer of record (EOR) is a service provider that legally employs people on behalf of another company, handling all employer-related responsibilities and liabilities. The 9 main services they provide are the following.
- Payroll Management
- Tax Withholding and Reporting
- HR Administration
- Employee Onboarding and Offboarding
- Benefits Provision
- Health Insurance
- Retirement Plans
- Compliance Support
- Regulatory Reporting Services
EORs manage complex HR tasks, ensuring compliance with local and international laws, and streamline the employment process across multiple countries. They offer accurate and smooth processing of employee-related data, allowing companies to focus on core functions.
Benefits of using an EOR include reduced legal risks, better compliance, and access to advanced HR tools and expertise, making it easier for companies to expand globally without setting up local entities.
Let’s explain these 9 main services in more detail.
1. Payroll management
Employer of Record providers offer comprehensive payroll management services, enabling companies to outsource the complexities of processing payrolls, especially when operating across multiple countries. These providers handle all aspects of payroll on behalf of their clients, ensuring employees are paid accurately and on time. Key services include calculating salaries, statutory contributions, and deductions while adhering to local regulations regarding minimum wage, overtime pay, and tax remittances.
EORs provide detailed payroll reports and documentation, crucial for auditing and compliance. Their expertise in local laws enables them to navigate the complexities of international payroll management efficiently, ensuring timely and compliant payroll processing.
By leveraging advanced payroll systems and timekeeping tools, EORs streamline the payroll process, from data collection to final payment. This integration with HR and workforce management tools further simplifies the flow of relevant information, making the payroll process more efficient.
Outsourcing payroll to EORs allows companies to focus on core business activities while having the assurance that payroll management is handled by experts. This results in a more efficient, compliant, and reliable payroll process, beneficial for both the employer and the employees.
2. Tax withholding and reporting
Tax withholding and reporting is a critical function managed by EOR providers, ensuring compliance with local and international tax laws. EORs calculate, withhold, and remit taxes on behalf of client companies, handling payroll taxes, social security contributions, and other relevant deductions from employees’ salaries. They’re responsible for accurate tax withholding to comply with the specific requirements of the countries they operate in, mitigating legal risks and penalties for non-compliance.
EORs file necessary tax forms and documentation timely, leveraging their expertise and knowledge of varying tax regulations across jurisdictions. They ensure accurate reporting and remittance of taxes to the appropriate government bodies, taking responsibility for complex tax calculations and filings. This service turns the complexity of international taxation into simplicity for companies, allowing them to focus on their core operations while ensuring full compliance with tax laws.
3. HR administration
HR administration is the process by which EOR providers manage and facilitate the various administrative tasks associated with employee lifecycle management. They handle the drafting of compliant employment contracts, ensuring that all documentation meets local legal standards and is tailored to offer competitive packages.
EORs maintain accurate employee records, manage background checks, and ensure that employment practices comply with local labor laws, including minimum wage and overtime regulations. They provide ongoing HR support and advisory services, offering guidance on cultural nuances and best practices for smooth employee management.
By leveraging technology, EORs can efficiently process and maintain a vast amount of data and information, facilitating better HR administration.
4. Employee onboarding and offboarding
Employee onboarding is the process of integrating new hires into an organization, ensuring they have the necessary tools, information, and connections for their role. Employee offboarding is the procedure for managing the exit of an employee from a company, ensuring a smooth transition for both the individual and the organization.
Employer of Record (EOR) providers manage the onboarding and offboarding processes comprehensively, covering various facets like the following.
Onboarding
- Documentation and Compliance: EORs ensure all employment documents are accurately completed and compliant with local laws. This includes contracts, tax forms, and background checks.
- Benefits Enrollment: They facilitate the enrollment of new employees into appropriate benefits plans based on their location, including health insurance and retirement accounts.
- Payroll Setup: EORs handle the setup of payroll, including tax withholding and compensation calculations, ensuring compliance with local regulations.
- Training and Integration: They provide access to training programs and support from specialists to ensure smooth integration into the company.
- Equipment and Access: EORs coordinate the distribution of necessary equipment, like laptops, and grant access to company systems.
Offboarding
- Termination Processing: EORs manage the complex process of terminating employment, including drafting compliant termination documents and conducting exit interviews.
- Final Pay and Benefits: They calculate and distribute final payments and handle the cessation of benefits, ensuring compliance with local laws.
- Asset Retrieval: EORs facilitate the return of company assets, coordinating with remote employees to ensure all equipment is returned.
- Documentation and Storage: They ensure all necessary offboarding documentation is completed and stored properly, adhering to legal requirements.
- Support for Departing Employees: EORs may offer support in transitioning to new employment, including verifying employment history and managing the continuation of health insurance coverage.
EOR employee management provides a seamless, compliant experience for both the company and its employees, managing the entire lifecycle from hire to terminate.
5. Benefits provision
Benefits provision is the process by which companies offer a range of employee perks, including statutory and supplemental benefits, to enhance job satisfaction and comply with local laws. EOR providers facilitate this by leveraging their deep knowledge of local regulations and employment practices across different countries. They ensure companies meet mandatory employment benefits, such as healthcare, pension, and disability insurance, required by law in each jurisdiction.
EORs offer significant advantages by handling the complex administration and compliance aspects of benefits provision. They negotiate with local insurance and benefits providers to secure competitive rates, allowing companies to offer better packages than they might independently obtain. This includes comprehensive medical plans, retirement savings options, and wellness programs tailored to meet the localized cultural and statutory needs of their workforce.
By offering a complete benefits package, EORs help companies attract and retain talent, especially in new or foreign markets where understanding local employment laws and customary benefits can be challenging. They operate on a global scale, providing a consistent employee experience while ensuring compliance with country-specific regulations.
EOR providers also offer supplemental benefits, extending beyond the statutory requirements to include perks such as private health insurance, extended maternity/paternity leave, and customized retirement plans. These benefits are designed to meet the diverse needs of the global workforce and provide a competitive edge in attracting top talent.
In addition to offering robust benefits packages, EORs handle the ongoing administration and liability of these programs, giving companies the power to focus on their core business activities. This includes processing claims, managing enrollment periods, and ensuring that all benefits are administered in compliance with local laws.
6. Health insurance
EOR providers help with health insurance by leveraging their scale and expertise to offer comprehensive coverage options. They operate globally, understanding local statutory and cultural health insurance needs, allowing them to design plans that meet individual and company requirements. EORs handle the complete administration and compliance of health insurance, ensuring policies adhere to legal mandates in different countries. This includes minimum coverage standards and any required supplemental or disability insurance.
By negotiating with insurance companies, EORs secure competitive rates, providing significant cost savings compared to small companies purchasing independently. Their deep knowledge of the health insurance market allows them to offer robust packages, including private medical insurance and wellness benefits, which might be beyond the reach of employers operating on a smaller scale.
EORs also manage claims processing, offering a better experience for employees and reducing the administrative burden on companies. Their ability to offer tailored solutions, from basic statutory coverage to more comprehensive plans, gives employers flexibility and power in providing employee benefits. This is particularly beneficial for companies expanding into new markets, where understanding and complying with local health insurance regulations can be complex.
In addition, EORs often provide additional health-related benefits, such as mental health support and wellness programs, enhancing the overall well-being of the workforce. By offering a range of health insurance options and managing all aspects of coverage, EOR providers ensure employers can focus on their core business activities while employees receive high-quality health care benefits.
7. Retirement plans
Localized retirement plans are crucial for Employer of Record providers, enabling them to offer tailored retirement options to employees across different countries. EORs leverage their global presence and local expertise to navigate country-specific laws and regulations, ensuring compliance while providing competitive retirement benefits.
They typically negotiate better rates and terms due to their scale and purchasing power, benefitting businesses and employees alike. By handling the complex administration and processing of retirement plans, including contributions and disbursements, EORs ensure plans comply with local norms and vesting requirements.
EORs’ extensive networks and understanding of local markets empower them to provide complete retirement solutions, considering the specific needs and regulations of each country they operate in.
8. Compliance support
Throughout all these different services, compliance support ensures EOR providers help companies maintain adherence to local and international laws and regulations. They offer comprehensive guidance on employment, legal, tax, and immigration issues, allowing businesses to operate compliantly in multiple countries.
By assuming the role of the employer on behalf of their clients, EORs mitigate risks associated with labor laws, worker classification, and tax obligations. They actively monitor legal changes and implement necessary adjustments to maintain proper documentation and practices. This proactive approach to compliance support includes detailed auditing and reporting, ensuring accurate record-keeping and minimizing potential fines related to misclassification or non-compliance.
9. Regulatory reporting services
Regulatory reporting, handled by EOR providers, is crucial for companies hiring internationally. They maintain accurate records, including income, social security, health, and retirement contributions, adhering to statutory requirements. EORs’ expertise in local and international regulations allows companies to stay compliant, minimizing legal risks. They actively monitor legal changes, implementing necessary adjustments to remain compliant.
EOR services offer benefits like handling documentation, ensuring proper reporting to governing authorities, and assisting with audits. Their teams work to navigate the complexities of regulatory obligations, leveraging knowledge to provide detailed reporting and transparency. EORs contribute to companies’ adherence to government programs, including unemployment benefits, by ensuring accurate and compliant record-keeping. Their ongoing compliance efforts assist companies in managing the risks associated with global employment, offering a streamlined approach to regulatory reporting.
What is an employer of record?
An employer of record is an organization that legally employs workers on behalf of another company, taking on the responsibilities and liabilities associated with employment. This arrangement allows companies to quickly access global talent without establishing a local entity.
EORs handle all employment-related tasks, including tax withholding, employee benefits administration, labor law compliance, and drafting employment contracts.
Are EOR services delivered through software?
EOR services are typically delivered through a combination of software platforms and human expertise, ensuring a balance between technological efficiency and personalized support. Software platforms offer centralized access to HR portals, payroll management, and compliance tools, enabling efficient data flow and integration with existing HR systems.
These platforms allow clients to manage international employees’ pay, benefits, and employment documents in a streamlined manner, leveraging technology to navigate complexities of local tax and employment laws.
What are the benefits of using employer of record services?
Using an employer of record service gives companies the flexibility to quickly hire and manage a global workforce compliantly. EORs benefit companies by enabling them to expand into new markets without the need to establish local entities, simplifying entry into multiple countries.
