Employer of Record

How does an EOR provide worker benefits?

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EOR providing worker benefits

An employer of Record (EOR) is a third-party organisation that legally hires and manages workers on behalf of companies in foreign countries. EORs function as intermediaries between businesses and their employees, to ensure that all employment laws are properly followed. 

The arrangement between an EOR and a company comes with 5 worker benefits. They include offering health insurance plans such as dental, medical, and vision packages, facilitating contributions to retirement plans, managing paid time off, ensuring employees get their maternity and paternity leaves, giving additional benefits such as educational reimbursement or a wellness program depending on the agreement with a company and the country of employment. 

There are 3 risks when dealing with an Employer of Record (EOR). First of all, there are data management concerns as some data of employees might be leaked if care is not taken. 

Secondly, EORs are likely to offer inconsistent benefit offerings, which leads to some employees not liking their jobs. Thirdly, when companies depend exclusively on EOR services, they risk losing direct communication channels with their employees. 

What is an Employer of Record (EOR)?

An Employer of Record is an organization that legally employs and manages workers for another company on its behalf. 

An Employer of Record (EOR) is a valuable intermediary between global workers and employers. It ensures that both parties receive the required benefits and that businesses comply with employment laws when hiring international staff. 

The global employer of record is responsible for numerous employment tasks, such as hiring international workers, running payroll, managing taxation obligations, and managing leave. They also guide businesses through all the steps of their operations, and this allows them to concentrate on their main activities. 

How does an EOR manage employment benefits?

The complexity of employing workers has greatly increased as companies continue to extend their operations internationally. Employer of record services take care of employment-related functions while also managing worker benefits which have become important in today’s workforce.

Management of employment benefits

An EOR manages employment benefits very well. Global employer of record facilitates the implementation of benefits while ensuring compliance with ever-changing employment regulations.

A well-structured EOR manages payroll deductions, tax withholdings, and other critical aspects of employee compensation.

Implementation and compliance

The implementation process includes putting in place different employee benefits such as health insurance, and retirement plans together with supplementary perks. The EOR confirms that employee benefits comply with legal standards and follow local and international regulations. 

They manage payroll deduction complexities to ensure employees get their full pay while staying compliant with state and national legislation. When businesses manage their compliance obligations effectively, they avoid legal risks, which creates a fair working environment. Following regulations establishes trust and contentment among employees. 

Worker benefits provided by EORs

What benefits does an EOR provide to workers?

The benefits provided by an EOR to workers are offering health insurance plans, facilitating contributions to retirement plans, managing paid time off, ensuring employees get their maternity and paternity leaves and giving additional benefits such as a wellness program and  tuition reimbursement.

1. Competitive Health Insurance

One of the benefits that come with EOR services is health insurance. Health insurance offered by EOR service providers might include dental, vision or medical plans.

They ensure that the insurance covers meet the local regulatory requirements of the country where the business operates.

These plans enable employees to manage their health needs and this results in a workforce that is both healthier and more efficient. Understanding the meaning of the employer of record role in this scenario shows an EOR’s commitment to employee well-being.

2. Retirement Plans

EORs typically facilitate contributions to retirement plans, including 401(k) options, which enable workers to save for their future. Many countries require retirement plans.

This benefit helps with employee retention and ensures long-term financial stability for the workforce. EOR companies ensure that the retirement plans they facilitate contribution meet local regulations in the country in which their clients operate.

3. Paid Time Off

Employer of record manages employees’ time off. This includes vacation days, sick leave, and holidays. This helps employees recharge and maintain their mental well-being.

The EOR provider tracks sick leaves and vacation days according to the company’s policies and the country’s law. However, the EOR service provider does not give leave as this is the company’s decision.

4. Maternity and Paternity Leave

Maternity and paternity leaves are essential worker benefits provided by Employer-of-Record (EOR) companies. These leaves support new parents as it allows them to care for and bond with their newborns.

When EORs ensure that workers get maternity and paternity benefits, this attracts talent, promotes employee well-being, and facilitates a family-friendly work environment, and this increases overall job satisfaction and retention.

5. Additional Worker Benefits

Workers may also receive benefits like tuition reimbursement, wellness programs, or flexible working arrangements. These additional worker benefits help a worker have better working experience, and increase job satisfaction.

This aligns with the idea of a modern global employer of record that recognizes the different needs of today’s workforce.

Summary of Benefits

EORs play a major role in managing worker benefits for small and medium-sized companies that don’t have the resources to manage workers in a foreign country. 

They provide a complete package that meets the various needs of employees. 

This enables international businesses to attract and retain top talent, improve job satisfaction, and enhance productivity. The worker benefits provided by EOR service providers show how they contribute positively to today’s competitive labor market.

Risks of using an EOR for managing worker benefits

What are the risks with an EOR in managing worker benefits?

  The risks with an EOR in managing worker benefits are Inconsistent benefit offerings, data management concerns and losing direct communication with employees.

1.       Inconsistent benefit offerings

Employee benefits such as retirement plans, paid leaves and maternity leaves are important as they increase employee satisfaction and retention. If different groups of employees receive different benefits due to the EOR’s policies, this creates discontent and feelings of inequity among the workforce.

It also creates an environment of division where some employees feel undervalued compared to their fellow workers. This affects teamwork and collaboration.

2. Data management concerns

When an EOR handles employee benefits, it deals with a lot of sensitive employee data. This includes personal details needed to provide benefits, health records, and financial information.

Poor management of this data results in privacy breaches and loss of trust between the employer and employees. Also, any incorrect data entry or miscommunication about benefits brings about mistakes in enrolling of workers, claims processing, or benefit distribution. This increases employee frustration and adds to a company’s administrative load.

3. Risk losing direct communication

When companies depend on Employer of Record services, they lose direct contact and interaction with their employees. This brings misunderstandings, unity is lost, and a lack of feedback from employees.

What are the compliance responsibilities of an EOR in providing worker benefits?

The compliance responsibilities of an EOR in providing worker benefits are local employment registration,handling employment contracts, worker classification, and on-time payroll and pay slips.

An Employer of Record (EOR) has many responsibilities when providing worker benefits to make sure that both the company and its employees follow legal standards especially during the entity setup phase.

It must follow local employment laws by continuously updating their knowledge of regulations related to wages, working hours, and employee rights. They draft and manage employment contracts that specify employment terms, such as compensation details, benefits packages, and employee responsibilities.

To avoid legal complications, an EOR needs to properly classify workers as per local regulations by distinguishing between employees and contractors. Timely payroll processing and pay slip distribution are required while salaries must be calculated accurately to include taxes and other deductions.

Employers may need to perform occupational health evaluations if the job demands it to verify employees meet necessary medical standards. Local laws govern employee benefits packages which include health insurance and retirement plans. Companies must ensure employees receive clear information about these benefits.

The company retains full responsibility for workplace safety maintenance along with quality control of products and services and employee performance management even though the EOR manages most compliance-related duties.

The compliance responsibilities of an EOR in providing worker benefits are:

1.   Local Employment Legislation

EORs must maintain compliance with all legal requirements and regulations that protect workers’ rights according to local employment legislation.

2.   Employment Contracts

Eor providers must prepare and handle employment contracts which define employee terms.

3.   Worker Classification

EORs need to properly classify workers and independent contractors according to legal guidelines.

4.   On-time Payroll and Pay slips

Employees need to receive their pay on schedule and clear pay slip details about earnings and deductions.

How does an EOR calculate labor burden to provide worker benefits?

When an Employer of Record (EOR) calculates labor burden to pay for worker benefits, they account for all the costs of employment. The process starts by calculating direct payment costs (salaries and wages) and then indirect employee costs (benefits, taxes and overhead).

Note that an EOR calculates the labor burden for worker benefits by adding up all employee-related costs. These costs include:

  • Base salary
  • Payroll taxes
  • Health insurance premiums
  • Retirement contributions and any other mandated or voluntary benefits.

Then, these are totaled and divided by the number of employees to reach a “per-employee cost.” It’s then added to the individual employee’s salary to determine full labor burden.

How do companies select an employer of record for worker benefits?

When companies look for an Employer of Record (EOR) to manage worker benefits, they usually consider a few key things.

Knowledge of Local Laws

First, they check if the EOR knows the local labor laws and regulations which is key to compliance in different markets. A good EOR has experience in navigating complex legal terrain, to ensure employees get the benefits they are entitled to and minimize risk for the company.

Cost

Cost is another big consideration. Companies look at the pricing of potential EOR partners and weigh this against the services offered, health benefits, payroll management and taxes.

Customer Service

Customer service is key to a successful partnership, especially for companies expanding globally. An EOR with good customer support helps streamline the onboarding process and resolve any issues that come up quickly. This responsiveness will increase employee satisfaction and retention as employees feel supported and heard.

Also, good customer service allows companies to adjust their benefit offerings based on employee feedback, to create a positive workplace culture.

How does an EOR provide benefits through payroll management?

EOR provides benefits through payroll management by making sure that there is a proper payroll system. With a proper payroll system,  an EOR provides important worker benefits such as health insurance coverage, retirement plan contributions, and paid time off.

Through payroll management,  employees receive worker benefits in a timely and accurate manner which increases workforce satisfaction and productivity.

How can an EOR prevent worker misclassification?

EOR prevents worker misclassification by taking all the responsibility of hiring workers, managing their benefits, Payroll, and complying with employment law.

By taking on all the responsibility of hiring and managing workers, a company reduces the risk of misclassifying them. Workers will be classified as employees rather than independent contractors.

The EOR maintains compliance when they oversee employment terms, which minimises the risk of misclassification as independent contractors.

How does an EOR help with global mobility?

EORs help with global employee mobility by handling international worker hiring complexities such as visa sponsorship and local regulatory compliance.

Companies are able to send their staff on international assignments and even hire workers of different nationalities as EORs take on all the duties of hiring and managing them. They include HR administrative duties, managing taxation obligations, managing worker benefits, and running payroll.

When an EOR operates as a legal employer, it simplifies the employment process for international workers. Businesses are able to grow internationally because they don’t need to handle labor laws in different countries.

Does the EOR secure your confidential information?

Yes. The EOR secures your confidential information by use of data protection measures such as encrypted systems and strict access controls. They also adhere to local data privacy laws because they keep sensitive employee and business data secure from unauthorized access.

Can you hire international workers without an EOR?

Yes. You can hire international workers without an EOR. However, you must establish a legal entity in the country where you intend to hire your workers. This is very costly, especially if you want to hire workers from different nationalities.

Hire international workers with an EOR. It will protect your business from legal risks related to compliance with labor laws, visa regulations, and tax obligations in the foreign country.

This is because it takes on behalf of your company all the compliance and legal obligations so you can concentrate on other important matters of running your business.

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