Employer of Record: Key Insights

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The primary reason to use an Employer of Record is to outsource to a specialized service provider a wide range of formalities associated with establishing a presence in another country and hiring/managing employees in that country. This makes your expansion significantly easier without missing a beat on compliance with local laws.

Hiring, or what many call “partnering with”, an Employer of Record (EOR) comes with several benefits. An EOR allows the client’s company to manage its time more efficiently and effectively. The client can see immediate effects regarding human resources operations, cost structures, payroll, employee benefits, and overall compensation, not to mention compliance issues when it comes to regulations that are both domestic and international. There are several benefits to using an EOR, as we describe below.

Efficient Time Management

Time is one of the most important resources you need to consider, especially when you are expanding to another country. There are timelines that you just can’t avoid, like establishing a business entity and passing the local banking institutions’ Know Your Customer (KYC) checks to open a business account. However, hiring and managing a local workforce using an EOR service with Engage Anywhere can save you a lot of time. If you are working on your own, you may have to spend a lot of time translating your hiring practices and compensation structures to a job market in another country. Even then, you may make run into compliance issues. An EOR eliminates the need for this research and the time required to understand and hire from the local talent pool, leaving you with just the parts of employee management associated with your business goals.

Effective Resource Management

Expanding into another country is a resource-intensive process. You have to spend a lot of money and also dedicate your existing workforce to handle the complications of an international expansion, including hiring and training the local workforce. An EOR can help you by effectively distributing the labor required to build a local workforce. This saves you time and funds. Imagine sending a team of six to a different country to advertise, vet, interview, hire, and train a local team. The process may take weeks or even months, and the cost of travel and accommodation may significantly pile up. An EOR can take most of these processes for you, allowing you to allocate perhaps just two or three people from the head office for orientation and training. This will also leave your team free to focus on other important aspects of their jobs.

Access To Top Talent

An Employer of Record will have a much better understanding of how to access the top talent in any given country. This requires knowledge of local compensation structure, hiring practices, certifications, job market, etc. On your own, if you are hiring employees directly from the country where you are establishing a presence, you might be ‘invisible’. The local talent pool might be uncertain about joining you, even if you offer competitive compensation and benefits. An EOR can get around this challenge far more easily by knowing which job boards and local hiring agencies to approach and how to tap into the local talent pool with compelling job postings. This saves you a lot of time and resources instead of going through a trial-and-error approach. 

Predictable Cost Structures

A couple of the challenges in building a new workforce in another country are budgeting and cost planning. Advertising jobs, conducting interviews, doing background checks, offering signing bonuses, etc., are all costs that may vary greatly from one country to another. It also becomes more complex if you are hiring foreign talent and need to pay some of the immigration costs as well. An EOR can offer a far more predictable cost structure. Since they will take on most of the duties of employee management, many of the costs associated with finding and hiring employees will be rolled into their fee. An EOR can also guide you on the best compensation plus benefit structures and practices in the country, making it easier to budget for the payroll expenses associated with an expansion.

Seamless HR Operations (Following Best Practices)

The time and resources required for a business to become familiar with the HR rules and customs in a country might be impractical, especially if you are working on a deadline. A far more efficient option is to use an EOR. This will allow you to manage the local workforce by following the best practices of the local job market. An EOR can even help you attract the top talent in a country by leveraging their international HR expertise. With an EOR managing the HR, you may have an easier time aligning the workforces of the two countries, i.e., the country where your business is headquartered and the country of expansion.

Navigating Compliance Challenges

Payroll compliance and labor laws differ in each country in both significantly obvious and subtle ways. Not adhering to these compliance laws, even if unintentional, can lead to negative consequences for the business. The simplest of these consequences would be financial penalties and warnings from the local governing bodies. But you can also invite investigation from the local taxation authority, labor court, etc. Even if it doesn’t translate into an infraction or formal reprimand, it may prevent you from attracting top talent in the country and may damage your reputation, which in turn, may hinder your ability to penetrate the local market effectively. An EOR can help you avoid all these problems. Most EORs specialize in local compliance regulations and laws associated with every facet of employee management, from hiring to dismissals. By adhering to these regulations, an EOR can ensure that your global employees do not become a compliance liability for your business.

International Employer of Records, also known as Global Employer of Records, such as Engage Anywhere offers the same services in several countries around the globe. This is ideal for businesses expanding into multiple countries at once or in stages. With Engage Anywhere’s EOR services, you can experience a smoother, resource-efficient, and faster expansion.

For more information regarding global compliance, regulations, and labor laws, visit the Global People Strategist blog.

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