The workforce has evolved dramatically. Over the past year, more workers have gone remote, and collaboration has increasingly moved online, fundamentally changing work and hiring practices.
Top companies now recognize global hiring as a strategic advantage, allowing them to gain insights into new markets and foster greater diversity. International hiring also helps address challenges in finding and retaining talent among workers who wish to relocate. However, it brings risks and complexities that have traditionally created barriers for recruitment teams wanting to hire across borders.
Why Use an Employer of Record?
Many recruiters know the frustration of finding the perfect candidate only to turn them down because of their location. An Employer of Record (EOR) solves this problem.
What is an Employer of Record?
An EOR is an entity through which you can legally employ your ideal hires, regardless of their location. While the EOR acts as the worker’s employer on paper, your hire works for your business like any other team member. The EOR manages hiring, compliance, payroll, benefits, and more for your foreign employees, eliminating much of the cost and complication of global hiring.
Why Businesses Need Employers of Record
Most companies lack the resources or expertise needed to make global hiring work, and mistakes can come with significant risks. According to Sean Page, a talent branding and hiring expert, “Global hiring is a resource-intensive process… It can take a minimum of six months to plan thoughtfully, get a vendor to set up an entity, and align IT, finance, people, talent, and legal teams.” For companies with the resources, setting up an entity may not be the best use of their time or money. Partnering with an EOR that has established entities in target countries is often faster and more cost-effective.
Reducing Costs and Complications
Hiring managers must be mindful of the risks of misclassifying workers or violating foreign labor laws. Christy Zajack, a talent acquisition expert, notes that “Labor laws are often very confusing, different in practice than in writing, or ill-defined until court decisions.” An EOR can help navigate these complexities by leveraging local expertise.
What Makes an Employer of Record Different?
Many recruitment teams have experience with staffing agencies, payroll companies, and professional employer organizations (PEOs), but these providers are not the same as EORs. Understanding the differences is crucial for global hiring solutions.
- Staffing Agencies: Focus on matching businesses with talent, usually for temporary or medium-term needs. They cannot hire employees on behalf of clients.
- Payroll Companies: Offer software services for processing payroll and taxes but are not equipped to hire employees globally.
- PEOs: Handle payroll and benefits but require the client to own a local legal entity and enter a co-employment arrangement.
Use an EOR to Stay Safe When Hiring Internationally
For businesses making their first global hires, an EOR is the safest and easiest solution. EORs protect your business throughout the hiring process and the lifespan of employment agreements.
Avoid Misclassification and Other Mistakes
Misclassification of employees as independent contractors can result in significant financial penalties. An EOR helps switch misclassified workers to legitimate employees, avoiding these risks. Staying up-to-date with local labor laws is another challenge that EORs handle, ensuring compliance and protecting your business.
Locally Compliant Benefits Packages
Offering compliant and competitive benefits packages is crucial for attracting top talent. An EOR can tailor benefits to match local expectations and legal requirements.
Assistance Managing Terminations
Terminating employees in foreign countries involves navigating different legal requirements. An EOR understands these protocols, helping manage terminations smoothly and protecting your business from legal disputes.
Intellectual Property Protection
Hiring internationally introduces risks around intellectual property (IP) ownership. EORs work with local legal experts to handle IP transfers and protect your rights.
Centralized Management of International Hires
An EOR centralizes all documentation for your hires, making it easy to manage and review employee information. They ensure compliance with local record-keeping requirements, simplifying management for your business.
Selecting the Right Employer of Record
Choosing the right EOR involves evaluating their global HR solutions, security measures, and how they handle IP protection. Ensure they own entities in the countries where you want to hire, as this provides better control and lower costs.
Questions to Ask an EOR
- Do you own an entity in this country, or rely on third parties?
- How do you handle IP transfers and protection?
- Are you sharing our data with third parties?
- Is all documentation centralized in one software hub?
Getting answers to these questions will help you make the right decision for your international hiring needs.
