An employer of record, or EoR, means a company or entity that handles all legal and regulatory obligations concerning another company’s employees – like taxes, benefits, and payroll.
EoRs tend to be used by companies hiring employees outside their own country but don’t want to deal with the expenses and time that go into opening a new entity in a foreign country. Hiring foreign employees consists of providing them with all the benefits required in their country, as part of managing their global payroll.
Benefits and risks of choosing an employer of record
An employer of record also known as a global PEO, can be beneficial for a lot of companies.
For one, there’s the reduced risk of legal breaches concerning employee benefits and taxes. The market entry process, too, can be made significantly shorter with an employer of record. Finally, there’s the flexibility – since the EoR is the one taking care of local compliance, you can put your focus on more important business matters.
Still, there are some risks companies need to take into consideration when choosing an EoR.
Service quality, for example, can be hard to determine. And if the EoR’s services aren’t up to standard, that can impact your own company’s reputation. Additionally, there’s the matter of limited control – since you’re relying on a third-party vendor, it may be harder to get visibility concerning what’s going on with your employees. This also extends to data privacy and security.
Choosing the right employer of record
It’s important to make sure you’re doing your homework when choosing an EoR. To help, we’ve put together a quick checklist of points to keep in mind:
- Expertise: Your EoR should be able to demonstrate extensive knowledge and expertise in the regulatory environment of the country in which your employee(s) reside(s).
- Reputation: Make sure you choose an EoR with a reputation as a reliable third-party partner
- Transparency: Your EoR should be transparent about all its fees and services so that you won’t get an unpleasant surprise regarding hidden expenses.
- Responsiveness: Your EoR should be able to offer top-notch customer service and availability so that you aren’t left in the dark regarding what’s happening with your employees, payroll, or any other factors.
- Legal compliance: Finally, there’s the matter of compliance. Make sure your EoR is in aware of and compliant with all relevant local laws and regulations needed to employ workers.
