An Employer of Record (EOR) is an organization that officially hires employees on behalf of another company. This means the EOR handles everything related to employment, such as ensuring compliance with labor laws, managing payroll, processing taxes, and providing employee benefits.
An EOR can operate in the same country as the business it supports, or it might be based in a different country where the employment laws differ.
Join the HR Pulse Community
Get expert insights, HR news, and practical advice delivered weekly. Join our community for exclusive content and live events
What does an Employer of Record (EOR) do?
The responsibilities of an employer of record can differ based on the service provider and location. Here are some of the key tasks that a typical EOR manages:
Compliance with Local Employment Laws
An EOR helps businesses navigate the complexities of hiring employees in adherence to local laws in various countries or jurisdictions. They provide compliant employment contracts, allowing the company to feel secure knowing all legal requirements are being met.
Onboarding New Team Members
After a company hires a new employee, the EOR takes charge of the onboarding process. This includes managing the employment agreement and establishing all the essential procedures for the latest team member to join the organization effectively.
Running Payroll Internationally
The EOR oversees payroll and ensures that employer and employee taxes are correctly managed. Team members will be paid directly by the EOR and receive their payslips.
Managing Compensation and Benefits
EORs typically provide a range of benefits, which can vary widely by service. These benefits might include health insurance, leave policies, parental leave, and more.
Processing Contract Terminations
When an employee's contract needs to be terminated, the EOR takes care of all the necessary aspects involved in that process.
Discover how Paismo automates HR processes from weeks to seconds
Example of Employer of Record
Here's a practical example that illustrates how using a remote employer of record can significantly ease the administrative load for international companies: Imagine a U.S.-based software company called TechBridge looking to grow its engineering team by hiring developers in Ireland. However, creating a subsidiary in Ireland would be lengthy, costly, and complicated.
Instead, TechBridge decides to partner with a global EOR that already has a presence in Ireland, making that EOR the official employer for the new Irish hires. The EOR takes care of all the necessary administrative tasks, including ensuring compliance with local laws, managing employment contracts, and assisting with work permits where required.
Additionally, it handles payroll, taxes, and employee benefits. On the other hand, TechBridge maintains control over the everyday activities of the developers, allowing them to oversee projects, provide guidance, and assess performance. By utilizing a remote EOR, TechBridge can expand its workforce in Ireland without the hassle of setting up a local entity.
This arrangement lets the company concentrate on its primary business goals while the EOR ensures compliance with Ireland's employment regulations.
Advantages of Utilizing an Employer of Record
Streamlined Hiring Compliance
Partnering with an employer of record can significantly reduce the time and costs associated with hiring. They manage all the necessary paperwork and administrative tasks, such as payroll in local currencies and employee onboarding. However, business owners need to verify that the EOR they choose offers all the specific services they need before committing.
Adherence to Local Employment Laws
An employer of record brings local expertise that ensures compliance with employment regulations. This means they manage all employment-related matters in accordance with local laws, keeping businesses protected from potential legal issues.
Enhanced Staffing Flexibility
Using an EOR makes it easier for companies to adapt to their staffing needs. Businesses can engage international contractors on a temporary or project basis, giving them the agility to respond to shifting demands, which is especially beneficial for startups.
Financial Savings
Engaging an employer of record is typically much more cost-effective than setting up a legal entity in a foreign country. For instance, a global employment service can help you build teams around the world without the hefty expenses of establishing entities in multiple regions. Additionally, compensation expectations may vary significantly between locations, allowing businesses to pay competitive salaries while optimizing costs.
Accelerated Growth
The efficiency of an employer of record in onboarding new team members, combined with access to a global talent pool, enables companies to expand more quickly.
Diversity in Talent Acquisition
A diverse workforce contributes to a more dynamic and innovative organization. Building a global team naturally introduces a variety of cultural backgrounds and perspectives, enhancing the overall strength of your business. In conclusion, leveraging an EOR offers numerous benefits, and it’s crucial to consider all the advantages and potential drawbacks before making a decision.
Become a part of the Paismo community
Paismo HR software can help simplify your HR processes. In today's dynamic economic environment, efficient HR and automated payroll management are no longer a luxury but a necessity. Paismo is a comprehensive solution transforming traditional HR complexes into streamlined and automated workflows. Paismo and its paired biometric devices can be used for your business to mark employee attendance and record their timesheets accurately.
Paismo simplifies your tasks with its core HRMS, timesheets, and attendance management, as well as biometric attendance, payroll automation, and leave management system.
Take the first step toward modernizing your HR and payroll processes and explore what Paismo can do for you. Book a demo with our exceptional sales team here.
