Author: Solomon Williams

In today’s fast-paced business world, companies are always looking for ways to grow and reach new markets. One solution that has become very popular is using an Employer of Record (EOR). But what exactly is an EOR, and why is it so important for businesses, especially in fields like biotechnology, video production, and software development, which often have remote teams?

What is an Employer of Record (EOR)?

An Employer of Record (EOR) solution allows companies to hire, onboard, and manage employees in multiple countries without having to establish a local entity. It manages all payroll-related tasks and compliance but leaves the supervision and work assignment to the client. It also handles all the legal and administrative tasks associated with being an employer, like paying salaries, withholding taxes, managing benefits, and processing onboarding. Apart from helping companies avoid the hassle of setting up a local entity, this arrangement helps in reducing legal risks and is also cost-effective as the fee paid to an EOR may be lower than the costs of fully employing contractors directly. It is widely used by medium and large enterprises looking to expand into new markets. EOR differs from a Professional Employer Organization (PEO) in the sense that a PEO acts as a co-employer, while an EOR is the legal employer of an organization’s distributed workforce.

According to a report by Statista, the global business process outsourcing market, which includes EOR services, was valued at approximately $232 billion in 2020, emphasizing the growing reliance on these solutions.

What are the Responsibilities of an EOR?

An EOR takes care of:

• Onboarding: Managing the hiring and onboarding process.
• Payroll and Benefits: Processing payroll, handling taxes, and managing employee benefits.
• Compliance: Ensuring all employment practices follow local laws.
• Employee Support: Assisting with HR-related issues.
• Termination: Handling the offboarding process legally and smoothly.

What are the Benefits of Using an EOR?

1. Compliance and Legal Safety: Dealing with different countries’ labor laws can be tough. An EOR ensures your business follows all local regulations, avoiding legal troubles and fines.
2. Cost Savings: Setting up your own legal entity in another country can be very expensive and take a long time. An EOR is a cheaper and quicker alternative. Gartner found that “Organizations leveraging EOR services reported a 20-30% reduction in administrative costs and a 50% faster time-to-hire internationally, significantly streamlining their global expansion efforts”​ (Deloitte United States)​.
3. Quick and Easy Hiring: An EOR allows you to hire employees quickly without needing to set up a local office. This is great for short-term projects or expanding into new markets.
4. Focus on Your Business: By letting the EOR handle all the administrative work, you can concentrate on what you do best – running and growing your business.

What are the Different Types of EOR Service Providers?

EOR providers come in different types:

• Local EORs: Focus on specific countries or regions and have deep local knowledge.
• Global EORs: Offer services in multiple countries, ideal for companies with wide international operations.
• Industry-Specific EORs: Cater to specific industries like biotech or software development, offering tailored services.

What’s the Difference Between an EOR and a PEO?

Both EORs and Professional Employer Organizations (PEOs) manage HR tasks, but they have key differences:

• EOR: Acts as the legal employer, taking on all employment-related legal responsibilities.
• PEO: Shares employment responsibilities with the client company.

When Should You Use an EOR?

Consider using an EOR when:

• Expanding into new international markets.
• Hiring remote employees in different regions.
• Undertaking short-term or project-based work.
• Dealing with complex local employment laws.

What is Included in an EOR Agreement?

An EOR agreement typically includes:

• Employment terms and management details.
• Payroll and benefits administration specifics.
• Compliance and legal responsibilities.
• Termination and offboarding procedures.
• Cost structure and service fees.

Five Key Steps to Using an EOR to Hire International Employees

1. Identify the Need: Decide why you need to hire internationally.
2. Select an EOR: Choose an EOR provider that meets your business needs.
3. Onboard Employees: The EOR will handle the recruitment and onboarding process.
4. Manage Employment: The EOR will take care of payroll, benefits, and compliance.
5. Evaluate Performance: Regularly check the EOR’s performance and employee satisfaction.

How Much Does an EOR Cost?

The cost of an EOR depends on the country, number of employees, and services needed. Generally, EOR fees range from 5% to 20% of the employee’s salary. For detailed pricing, contact EOR service providers based on your specific needs.

What are the Alternatives to Using an EOR?

Alternatives include:

• Setting up a local entity: Creating your own legal presence in the target country, which can be costly and time-consuming.
• Freelance Contracts: Hiring independent contractors, though this may involve compliance risks.
• PEOs: Sharing employment responsibilities while keeping more control over HR functions.

Success Stories from Major Industries Using EOR Services

Many industries have seen great success and significant cost savings by using EOR services. For example:

• Information Technology (IT) and Software Development: Companies like GitHub and Buffer have successfully used EOR services to manage their remote teams globally, saving time and money while ensuring compliance with local laws.
• Marketing and Digital Advertising: Firms such as Hootsuite and HubSpot utilize EOR services to quickly expand their international teams, leading to a substantial return on investment by tapping into global talent pools without the need for local entities.
• Finance and Accounting: Companies like Deloitte and PwC rely on EORs to manage their global workforce efficiently, allowing them to focus on core business functions and reduce operational costs.
• Customer Service: Major companies like Amazon and American Express use EORs to handle their remote customer service teams, ensuring consistent service quality across different regions.
• Education and E-Learning: Platforms like Coursera and Khan Academy benefit from EOR services to hire educators from around the world, providing diverse learning experiences without the legal complexities of international employment.
• Healthcare and Telemedicine: Organizations such as Teladoc Health and Doctor on Demand use EORs to expand their telemedicine services globally, ensuring compliance with various healthcare regulations.
• Consulting and Professional Services: Firms like Accenture and Capgemini leverage EOR services to manage their international consultants, enabling them to enter new markets quickly and efficiently.
• Creative Industries (Design, Writing, Video Production): Creative agencies and freelancers on platforms like Upwork and Fiverr utilize EOR services to handle cross-border employment, allowing them to focus on delivering high-quality creative work.
• Sales and Business Development: Companies like Salesforce and Zendesk employ EOR services to expand their sales teams internationally, achieving rapid market penetration and increased revenue.
• Research and Development (R&D), Biotech, and Pharmaceuticals: Industry leaders like Pfizer and Johnson & Johnson use EOR services to manage their global research teams, facilitating innovation and compliance with international regulations.

Stipenda EOR Services

Stipenda offers top-notch EOR services, providing everything you need to manage employees worldwide. They handle payroll, compliance, benefits, and support across multiple countries. Stipenda is a great choice for biotech, video production, and software companies looking to grow their global workforce.

Conclusion

An Employer of Record (EOR) can be a game-changer for businesses wanting to expand globally, hire remote talent, or manage short-term projects. By handling all the legal and administrative tasks, an EOR lets you focus on what you do best – growing your business. As the global workforce continues to change, EORs will play an even more important role in making international employment easier and more efficient.

If you’re ready to simplify your global hiring, contact Stipenda at sales@stipenda.com and visit www.stipenda.com for more information.