What is an Employer of Record?

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Employer of Record

In the globalization process, an Employer of Record is one of the most ideal tools. Many companies have chosen to hire this type of organization obtaining positive results. Therefore, if your company is not only on the path of internationalization but of improvement, you should know what it is about.

In this article, you will know the definition of employer of record, as well as what functions it fulfills. In the same way, you can see the benefits that you will obtain if you decide to work with this type of employer. Let us observe:

1. Employer of record definition

2. What functions does an employer of record perform?

3. Why should you hire an employer of record?

4. What are the differences with other employment organizations?

5. How do we help you hire the best EOR?

1. Employer of record definition

An employer of record (EOR), also known as the local legal employer, is an organization contracted to handle the formal tasks of employment. This type of entity is useful when a company does not want to directly hire an employee. It is normally used when hiring staff in another state or abroad.

In addition, the original employer handles the entire relationship with the employee and makes assignment, project, and termination decisions. The EOR, despite being the employer for the worker, does not supervise or manage them. Thus, that organization handles the legal aspects of the client company in another country or state.

2. What functions does an employer of record perform?

The EOR is the legal entity in the country where you want to contract. This means that it is the intermediary in that country between your company and the employee who will be hired. Therefore, it will legally act as the employer in that territory, in addition to fulfilling other obligations.

  • One of the duties carried out by this type of organization is dealing with any Immigration requirements. This makes it easier for your company to carry out all the legal procedures that this process entails since the EOR is an expert in them. This saves your company many complicated paperwork as well as time, money, and valuable resources.
  • Establishing a registered entity in a country where you are going to establish a business is a long and expensive process. With the hiring of the best employer of record services, you will obtain this entity without the expense that it entails. This type of organization will handle local payroll and compliance with all legal matters.
  • Compliance with local laws. Each state or country has different local laws regarding employer-employee relations. For this reason, one of the advantages of having an EOR is that you do not have to worry about these issues. Consequently, you can trust that your company is in the best hands to manage this type of matter.
  • Advice on the subject of employee management. This refers to the rules for the termination of contracts, to the advance notice, and in some cases, to dismissals.

3. Why should you hire an employer of record?

When considering contracting the services of an EOR, you should know their benefits. It is easy to understand that the costs of hiring staff in another country are quite big. Also, time is an important factor to consider in international recruitment.

The advantages or benefits of hiring an EOR do not only refer to these two aspects. Others simplify the decision to hire these employers. The benefits of this type of employer are defined below:

3.1 You will be able to focus on your business

An EOR is in charge of all the administrative tasks of your organization related to the hiring of employees. In this sense, your company will be free of these processes, allowing you to focus on other aspects of your business. For example, make it grow and thus manage to enter the world of business globalization.

Likewise, you can focus on the design of new action plans, the launch of new offers, and products, among others. Meanwhile, the management of its employees and administrative matters remains in the hands of qualified professionals. This is one of the great points to take into account when deciding on the services of an EOR.

3.2 Hire top talent

Every company wants to have among its employees the best talent available, to raise its prestige. This is another advantage of using an EOR, they will hire the greatest staff. The globalization of work (especially remote work) allows top talent to be found anywhere in the world.

Likewise, companies make this type of hiring to guarantee to have the best professionals. Previously, the hiring of personnel from other countries was somewhat difficult due to the procedures and requirements involved, but this has changed. Thanks to the appearance of the figure of the employer of record, distances and procedures are not a problem.

In the same way, an EOR also handles some human resource matters such as employment contracts. This is a very important issue when finding the best professionals available. In addition to this, there are other advantages of this type of employer concerning hiring talent.

  • Better chances of hiring the best staff: thanks to the use of the EOR, the requests are expanded and therefore the possibilities grow. 
  • Project Improvement – ​​Again, as the EOR takes care of the hiring process, you will get the best results in the performance of your company. Granting you, not only satisfactory results in the immediate present but also in the future.

3.3 Compliance with local labor laws

As stated above, an EOR specializes in knowledge of local laws. This guarantees your company compliance with each of them when hiring international employees. This will avoid possible problems due to unawareness of the labor laws of the host country.

Therefore, the employer of record is in charge of managing leaves such as vacations, medical assistance, compensation for accidents, or medical insurance. In addition, this helps improve the work environment because your workers will be sure of the guarantee of their rights.

In addition, this will make your job offer more attractive and the professionals who are at your disposal will be grateful. Without a doubt, this represents a great benefit of hiring this organization as an intermediary between you and your employees. They will grant the accomplishment of the local laws, for your convenience.

For example, if a foreign company hires personnel in the UAE, the EOR will be in charge of fulfilling labor commitments. These will be different if you carry out international contracting in another country in the world.

3.4 Registration in the country of destination

Another advantage of having an EOR is that your company does not have to worry about registration in each country. In order not to incur legal problems that affect your business at an international level, rely on an employer of record. The globalization process of your company may be affected if you do not comply with local laws.

If these problems occur, by not abiding by local regulations there can be great risks. In this sense, infractions will be incurred that will lead to large fines, preventing compliance with the growth and expansion of the business. The EOR will allow you to get rid of the creation of registration or foreign entities.

3.5 Resource savings

One of the keys to business growth is the optimization of resources, both money and time. Perhaps, within your company, you prefer to spend more money on technology and employee training than on hiring staff. Therefore, this saving can be achieved through the hiring of an EOR.

This type of employer will guarantee the saving of many resources. The profitability of hiring new workers improves substantially since the EOR is synonymous with saving resources. This is thanks to you having the real talent for each job to keep expanding.

Thanks to all the advantages offered by an EOR, the productive capacity of your business will increase exponentially. At the same time, you will obtain better results in your projects by having the best international talent available.

4. What are the differences with other employment organizations?

There are different types of employment organizations that can be hired for different situations. In addition to the employer of record (EOR), there are organizations such as the Professional Employer Organization (PEO), as well as the Global Employment Organization (GEO). Many times, when talking about an international PEO, it refers to an EOR.

4.1 Differences with the PEO

There are 4 main differences between an EOR and a PEO even though they are both extensions of your company. Depending on your business needs, these may be:

  • Replacement or complement

In the case of a PEO, their functions include employee onboarding, health insurance, taxes, among others. This supplements much of the work of the human resources staff, almost replacing that department.

On the contrary, the employer of record only takes care of some functions of the HR department. This makes the work of this particular department much easier. In addition, here you only place a part of your employees and their business on your payroll.

Instead, when you use a PEO, all of your employees go on that payroll of the organization.

  • Quantity of employees

The other difference lies in the minimum number of employees that each organization requires. In the case of a PEO, the minimum is usually between five and ten, while with the EOR there is no minimum. This is because the latter organization is typically used for fluctuation or a contract-based workforce.

The usefulness of this is based on the fact that the human resources department will need to be an expert in international employment law. Since an employer of record fills this need, you should not be especially concerned when employing short-term contractors.

  • Insurance coverage

An important difference between an EOR and a PEO is that the former provides insurance coverage. Instead, when a PEO is hired, they will request that you comply with the insurance requirement of your employees.

  • Business registration

An employer of record allows you to recruit internationally without registering your company in the host country. On the other hand, a PEO forces you to go through this process.

4.2 Difference with a GEO

A Global Employment Organization uses an EOR at every place of employment. This organization supervises that the employer of record complies with all processes. Likewise, once the GEO has completed the initial approach, the EOR becomes involved in the employee onboarding process.

A significant difference is that the GEO researches the local talent of the country, but an EOR does not do this.

The fact that these differences exist does not mean that one is better than the others since they all have advantages and disadvantages. Hiring one of them will depend on the needs and goals of your company.

5. How do we help you hire the best EOR?

When we have seen the definition of an EOR, it is easy to understand its usefulness. The benefits linked to your hiring one can lead your company to enter or strengthen the globalization process. Ideally, you should understand all these aspects to make the best use of this type of employer.

In PEO Middle East, not only do we offer you the best employer of record services in the Middle East but also other types of assistance. You can also count on our specialized advisors to simplify the hiring process in the UAE. Something that sets us apart is our passionate team of sales and business development managers.

Would you like to know more about an EOR? You can contact us by writing an email to [email protected] where you will be gladly assisted.

Do you want to be part of our team of professionals? Write us an email to [email protected]. You can also go to thetalentpoint.com website and check out hundreds of vacancies.

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