benefits of EOR

EOR 101: Everything you need to know about Employers of Record

Posted on October 21, 2022 by temp

Global expansion is the logical goal for all businesses, whether it is for entering new markets, hiring global talent, or simply expansion. However, hiring across borders is no mean feat; it requires a deep understanding of local labor laws, the local taxation framework and other legal and regulatory compliance. In terms of the timelines, this can take anywhere between 3-9 months.

An Employer of Record, or EOR, is a mechanism to easily add employees in new international markets without having to incur the expense and risk of creating a corporation abroad. An EOR is a third-party organization that serves as the legal employer for a company’s foreign employees. The EOR undertakes the management of all workforce-related aspects – from hiring & payrolls to taxation, employee benefits, and legal compliances.

Functions of an EOR

By entering into employment contracts with your international employees on your behalf, EORs enable you to hire across multiple countries without having to set up a legal entity. While acting on behalf of the employer, some functions undertaken by the EOR include:

Ensuring compliance with all employment and labor laws: Every country has its own set of laws governing employment. Well versed with the legal regime of the country, the EOR ensures due compliance with all employment laws.
Management of payrolls: The EOR undertakes the process of negotiating compensation, and pays the employees through its local bank account. It is the responsibility of the EOR to ensure the application of the correct taxation framework in accordance with the country’s laws.
Management of perks and benefits: Being in the same geographical location, the EOR has a much better grasp of the perks and benefits, and ensures that your workforce has access to the benefits that are most valuable to them.
Connect with the local ecosystem: An EOR gives you direct access to the right resources within a specific geography – the right recruiting partners, legal and financial consultants, or even the workspace.

When speaking of functions of EORs, we often also hear another term – PEO. While they do have their similarities, they also have key differences.

PEO vs EOR

Professional Employer Organization – PEO

A Professional Employer Organization (PEO) offers a comprehensive range of HR services, including payroll processing, foreign transactions, tax preparations, employee incentives, employee benefits, and compliance management. To manage their employees, PEOs collaborate with a nearby business that is a registered organization. The PEO’s name will appear on the employee’s payment invoice and any HR communication materials.

Employer Of Record – EOR

An Employer of Record is a third party organization that specializes in handling all the legal and operational requirements of building a global workforce for its client companies, like management of payroll and taxation, employee benefits, and other such administrative and legal obligations.

While a worldwide EOR offers services comparable to those of a PEO, it also assumes all of the workers’ legal obligations. As a result, a company will be able to provide overseas personnel personalized HR services without worrying about compliance.

Choosing the right partner

Knowing the difference is crucial, but when choosing between EORs and PEOs, knowing your use-case is more important. Consider these questions before selecting your choice:

How big is your workforce?
An EOR is a common option if you want to recruit a small number of people in a country, irrespective of whether you possess a formal organization. However, the cost often rises when you recruit more personnel from a nation with a high level of talent. So, if you need to employ a large number of professionals quickly, a PEO is your best bet.
Do you own a local entity in the country of hiring?
If you don’t possess a legal business in the employee’s nation, your sole option is an EOR. Different nations have different levels of legal entity formation complexity, taxation requirements and employer compliances.
Are you hiring contractors, temporary employees or full time employees?
Typically, when working with interim and contractual personnel, firms opt for an EOR. This is due to the fact that EOR offers the crucial HR solutions that are ideal for contract employment. On the other side, a PEO offers you access to all of its services, which improves your management of full-time staff.

Now that you know which one to select, there are certain things that you must keep in mind before engaging and EOR. The costs, legalities & other considerations are important factors when considering which EOR to choose.

The cost of engaging an EOR

An EOR manages payroll, employee incentives, bonuses, benefits management, talent retention, complies with changing labor costs, offers consistent HR assistance, and acts as a liaison between the business and the employee, to name a few tasks.

Without knowing the specifics, the cost of an EOR cannot be calculated with accuracy. These might include factors like the hiring area, the amount of employees employed, and the type of person hired (contractual vs. full-time), among others. So let’s examine what often influences an EOR’s price.

EOR pricing models

EOR pricing schemes may be divided into two categories: flat fee structures and percentage agreements. Avoid any potential partners that charge a percent rather than a set number if you wish to work with an EOR.

EORs using percentage calculations dissuade their client companies from paying employees appropriately. When you levy a percentage, you must pay a third party more money in order to provide an employee a bonus or a raise. Despite the fact that percentage-based EORs were previously the standard in the industry, things are beginning to change.

Factors affecting EOR quotes

Any taxes, required contractual perks, and other fees that the local authority may demand are costs to the firm when hiring an employee in a particular country.

The total cost to the company will vary based on the employing nation, specific area or region, and staff wages. For instance, in Canada, employers pay for the Canada pension plan, the occupational health tax, the parental health bonus, and workman’s compensation insurance.

Choosing the right EOR

If you’re ready to take the next step, the only question left for you is figuring out which EOR to choose, and how. There isn’t a lack of EORs out there, and they all offer different quotes and services. Here are some of the major things you need to keep in mind when selecting the EOR you’re going for.

Transparent costs & communication

When contrasting several companies, select a global Employer of Record that is transparent about its costs. They might add setup fees, taxes, or cancellation fees to their initial estimates. They may also later introduce hidden fees and surcharges, which would change your budget and have an effect on many departments inside your business. Request a complete price breakdown from prospective EORs upfront.

Accurate quotes & calculations

Pick an EOR that is honest and informed about employer burden costs. When calculating payroll expenses, the business must include extra social contributions like health insurance, social assistance, and paid time off. Due to the fact that these employer restrictions differ depending on the market, your EOR supplier must provide you specific rates on these parameters.

Track record

Read reviews on unbiased websites and get in touch with references to see whether current clients of the EOR are happy with the company’s services. Asking a potential partner for references from businesses that have goals and characteristics similar to yours, such as budget, industry, and types of people they work with, is also beneficial.

Pick a provider who has experience with EOR work and complies with global standards. This reduces the likelihood of breaching the law and angering the host country.

Help & support

Choose a proactive partner who can move quickly in response to your requests and the expectations of your team. Your EOR partner will regularly interact with both your present staff members and any future hires on your behalf. Make sure your EOR partner designates a client account manager who takes into account language barriers and regional time variations, reacts quickly to questions from your team, and onboards new supported people.

Businesses need a partner in EOR that can respond quickly and support your personnel. Look for a global EOR that offers a specialized client manager rather than one that will direct you to a chat window or a manual.

Hiring across borders becomes easy when you have the right global recruitment partner. An Employer of Record (EOR) helps you hire superlative talent across the world, without spending a fortune.

Let’s take a look at the different benefits of working with an EOR ~

Global talent made accessible

Although there are many advantages to creating teams abroad (competitive cost of labor, a broader applicant pool, workplace diversity), many business owners are hesitant to hunt for talent abroad due to the difficulties involved in establishing a corporate organization abroad.

It might take months to wait for the embassy’s clearance to begin commercial operations overseas in nations with a high degree of bureaucracy. Business owners have been in a limbo for a while, unsure of whether to keep attempting to break in or concentrate on hiring local people and give up on a worldwide office.

In order to avoid having to circumvent red tape, engaging an EOR vendor enables company owners to begin recruiting personnel overseas and working on projects immediately.

Save time

It takes a lot of time to manage paperwork, handle benefits administration, process paychecks, and end employee contracts. Business owners who attempt to balance dozens of management responsibilities on their own wind up not devoting enough time to the company’s essential operations, such as developing strategy, enhancing the product, and cultivating deep relationships with customers or partners.

Company managers may spend much more time doing useful things if they have a trustworthy vendor handle their tax filing, payroll, and other formalities. Instead of spending hours learning foreign rules and regulations, company owners may work with an EOR to advance their abilities in areas they are knowledgeable and enthusiastic about.

Cost-efficient

Opening an office overseas entails significant expenditures. Building a team overseas from the start ends up costing business owners a fortune.

Employers of Record enable company owners to save money by avoiding the costs of employing fiscal, HR, and judicial consulting firms. In case the relationship is not as successful as the business management first anticipated, the versatility of EOR agencies allows for the exploration of new markets and the closure of international offices without being concerned about maintenance and HQ termination fees.

Compliance with regional law

International enterprises frequently experience costly litigation as a result of failing to understand local trade and labor rules. Due to ignorance of the legal intricacies, a business owner may find themselves in hot water.

Organization managers rely on EORs to steer clear of such circumstances and manage teams in a way that complies with the law. EOR agencies will ensure that all corporate procedures are compliant since they have a thorough understanding of labor and business laws.

Each expansion into a new overseas market has its own set of complications that need an expert staff. At Talent500, we understand that the transition to location independent working is a multi-layered process involving numerous stakeholders and factors. Our team of experts and network of highly skilled professionals are here to help you build your global team in over 50 countries. Ready to take the first step? Set up a consultation with our team here.

PEO vs EOR – Which is better for you?

Posted on October 19, 2022 by shanthamurthy

Due to complicated labor laws, strict tax restrictions, and a number of compliance requirements, finding top personnel internationally is a difficult task. In an ideal situation, your company’s HR department would undertake these responsibilities and guarantee that you recruit international talent in compliance.

However, hiring across borders requires a multitude of pre-requisites and additional steps. Paying international personnel presents entirely different difficulties than managing them, since timely payroll releases and avoiding double taxation are required.

That is why you require more than just a standard HR setup. It’s time to start smoothly simplifying your administration of foreign employees. This is where a Professional Employer Organization (PEO) and an Employer of Record (EOR) come into play.

PEO & EOR – what are they?

When hiring remote teams and managing them, PEO & EOR are common terms that jump around a lot. So what do they mean?

Professional Employer Organization – PEO

To manage their employees, PEOs collaborate with a nearby business that is a registered organization. The PEO’s name will appear on the employee’s payment invoice and any HR communication materials.

Employer of Record – EOR

An Employer of Record, is a third party organization that specializes in handling all the legal and operational requirements of building a global workforce for its client companies, like management of payroll and taxation, employee benefits, and other such administrative and legal obligations. While a worldwide EOR offers services comparable to those of a PEO, it also assumes all of the workers’ legal obligations. As a result, a company will be able to provide overseas personnel personalized HR services without worrying about compliance.

Thus, EORs are generally more beneficial for small businesses that want to access the global talent pool without having to rely on a local employer to fill open positions.

Difference between EOR & PEO

Onboarding, payroll, benefits, and HR outsourcing are all phrases that are frequently used to refer to PEO and EOR. Although these notions may appear to imply the same thing at first look, there are really many variances. To better comprehend your needs, it is crucial to be aware of these distinctions.

An EOR oversees all aspects of global HR administration for your business, managing legal obligations, payroll and taxation, benefits and all onboarding formalities for your employees throughout the world. A PEO, on the other hand, partners with staffing companies across different countries so as to be able to provide these services.

Let’s discuss the key factors that clearly illustrate the differences among the two methods of global recruitment:

Benefits of PEOs

1. More control with PEOs

The level of control you receive is the main distinction among a Professional Employer Organization and an Employer of Record. While they may both handle your whole HR obligations, a PEO can provide you more operational control. All of your employees will get access to the PEO’s full range of HR operations, including quicker contract creation, designing the ideal employee benefits package, and facilitating onboarding. They also provide helpful advice that will enable you to decide on the best course of action for your overall HR management.

2. Better payroll compliance with PEOs

It becomes challenging to keep pace with the continuously evolving payroll regulations that exist in different countries around the world. A PEO, on the other hand, has specialists assigned to each nation who closely monitor compliance concerns and make sure you stay within legal regulations as you operate.

Putting together an internal team of legal and financial experts means investment of substantial time and cost in order to hire the professionals, gather the necessary information, construct a suitable system, and carry out on-time compensation for your international staff. Therefore, relying on a PEO in these circumstances is smarter and wiser.

Benefits of EORs

1. Better insurance with EORs

When it comes to insurance, an EOR is a considerably safer option as compared to a PEO. A PEO may advise you to obtain your own insurance if the sector your company operates in has a high incidence of property damage or workplace injuries, but will seldom undertake these duties themselves. An EOR is a preferable choice in terms of managing risk because they assume full responsibility for situations of this kind. Thus, for high risk industries, an EOR is a much better option.

2. Better hiring with EORs

When you choose an Employer of Record, you are relieved of the burden of establishing a company and a local bank account in the nation where you wish to hire personnel. In any nation, the EOR may serve as your local entity. This still holds true if you wish to simultaneously hire additional employees from 10 different nations. The quantity has no bearing at all, provided your EOR partner has a presence in the country.

So, which should you choose?

Knowing the difference is crucial, but when choosing between EORs and PEOs, knowing your use-case is more important. Consider these questions before selecting your choice:

How big is your workforce?
An EOR is a common option if you want to recruit a small number of people in a country, irrespective of whether you possess a formal organization. However, the cost often rises when you recruit more personnel from a nation with a high level of talent. So, if you need to employ a large number of professionals quickly, a PEO is your best bet.

Do you own a local entity in the country of hiring?
If you don’t possess a legal business in the employee’s nation, your sole option is an EOR. Different nations have different levels of legal entity formation complexity, taxation requirements and employer compliances. Therefore, if you decide to use a PEO, you must take into account the time and money you have available.

Are you hiring contractors, temporary employees or full time employees?
Typically, when working with interim and contractual personnel, firms opt for an EOR. This is due to the fact that EOR offers the crucial HR solutions that are ideal for contract employment. On the other side, a PEO offers you access to all of its services, which improves your management of full-time staff.

There is no immediate result that quantifies one as better. Surveys say businesses relying on PEOs have increased hiring by 7%. Other studies say the EOR market will be valued at nearly USD 7,000 million by 2028 at a CAGR of 6.9%!

Calculating the cost of hiring an EOR

Posted on October 19, 2022 by temp

Remote work is the new normal. Organizations are no longer restricted to hiring within a 40-mile radius, and now have access to limitless talent from across the world. For any business aiming to scale and grow, entry into foreign markets is a priority.

But with entry into a foreign market, comes the hassle of compliance with local rules and regulations, tax policies, worker benefits and perk schemes, payroll management and more. Calculating and managing these things costs time and money. Partnering with an EOR changes this.

An employer of record (EOR) is a third-party organization that specializes in handling all the legal and operational requirements of building a global workforce for its client companies. Thus, traditional employment responsibilities like management of payroll and taxation, employee benefits, and other such administrative and legal obligations are undertaken by the EOR.

Cost of an EOR

Maintaining employees for another employer can get costly. This is because the EOR will take care of more than just hiring and onboarding. Their responsibilities include payroll management, employee bonuses, perks, benefits management, retaining talent, complying with evolving labor costs and providing steady HR support. In addition, the EOR will also act as a link between the employer and the employee.

Thus, the exact price of an EOR cannot be determined unless the specifics are known. These could include region of hiring, number of employees being hired, type of employee being hired, relevant taxation structure and the statutory employer benefits, (contractual/full time) among other things. That being said, let’s see what usually affects the pricing of an EOR.

Types of EOR pricing models

There are two types of EOR pricing models: flat charge structures and percentage arrangements.

In the flat-rate pricing structure, you only pay for the service per employee, regardless of the employee’s compensation. An EOR will typically charge $250 – $500 per employee monthly, depending on the requirements for each employee.

Under the percentage pricing, EORs get their own cost from your employee’s salaries. Thus, in the long run, a percentage-based pricing structure disincentives you from raising wages or hiring more employees. To offer an employee a bonus or a raise when you pay a percentage, you must pay a third party extra money.

This is why a flat fee costing structure will always be more beneficial, even though a percentage structure might seem more enticing initially.

Factors which affect EOR costs

The expenses to the company when recruiting a worker in a certain nation include any taxes, obligatory employer benefits, and other charges that the local government may impose.

Depending on the country in question, its taxation regime and statutory requirements, the overall employer cost will change. For instance, the Canada pension scheme, occupational health tax, parental health bonus, and workman’s comp insurance are all covered by employer costs in Canada.

Why should you engage an EOR?

The complexity of international employment legislation increases when you take into consideration hiring across multiple nations. It’s better to know when you will need to use an EOR, and when you can survive a DIY adventure into a foreign market.

EORs make the experience smoother and streamlined. However, engaging with an EOR is an integral part of your global expansion plan, and choosing the wrong partner can result in considerable loss financially. Here are the top benefits on engaging an EOR ~

Explore new markets

An EoR enables you to test out expansion into a new nation without the obligation of entity formation, if your firm wants to explore a new geographical market. It enables you to employ professionals in new international markets, create new income streams, and attract new clients. In short, it makes global expansion more achievable for companies of all sizes.

Attract & retain global talent

In today’s job climate, the flexibility to work from anywhere is a highly prized perk. Since it’s so difficult to find top talent these days, more and more businesses are choosing to employ remote workers. Additionally, recruiting without regard to location expands your talent pool and enables you to focus on a staff with the precise skill sets you need.

A worldwide EOR enables businesses to recruit people from all around the world. A worldwide EOR also enables you to retain your top people without having to create an organization when workers desire or need to migrate.

Hassle free tax and payroll management

The EOR is listed as the employee’s employer with the tax authorities. This indicates that they must deduct specific taxes from employee paychecks. They must also adhere to any reporting obligations and regularly submit such sums to the appropriate authorities.

All workers’ payroll is processed by the EOR in accordance with the local laws that are in effect. Managing appropriate deductions, cost reimbursements, and leave entitlements are all included in this.The manner and cycle of payment will be determined by the client company’s preferences, local tradition, and regulatory requirements.

Most people may assume that employing an EOR will be expensive, however this is frequently a cost-effective choice, especially for new firms. The taxes that must be paid when recruiting staff are already included in the cost of an EOR.

6 Reasons why you need an EOR

Posted on October 19, 2022 by shanthamurthy

Every company, regardless of its size, dreams of increasing its global presence at the right time. Recruiting people globally is a great way to enter new worldwide sectors, and a global Employer of Record (EOR) can assist you in this endeavor.

An EOR is a third party organization that specializes in handling all the legal and operational requirements of building a global workforce for its client companies. Thus, traditional employment responsibilities like management of payroll and taxation, employee benefits, and other such administrative and legal obligations are undertaken by the EOR.

Consider a global EOR as your multinational HR staff that is familiar with the intricate payroll rules and labor laws of the many countries where your personnel is situated. The benefits they provide are crucial for any multinational organization to achieve their growth and scalability goals.

6 reasons to engage an EOR today

No longer restricted by geographical barriers, companies today are ready to dive into the pool of global talent. However, hiring outside your home country comes within certain pre requisites.

Most businesses partner with an EOR in order to create a successful worldwide workforce without having to deal with the trouble of setting up offices abroad. An EOR offers the crucial flexibility required for growing an ideal international team.

Here’s how~

Ease of global expansion with an EOR

Establishing a local company through incorporation and registration in a new country can be highly time-consuming, expensive, and compliance-riddled.

An EOR solves this problem by managing the employer’s payroll, employment, and immigration needs in the host nation. Through its network and experience, the EOR acts as a liaison between the client-company and potential employees, also assisting in ensuring compliance.

Thus, engaging an EOR is highly beneficial for companies that want to access new geographies without the permanence of setting up a corporation.

Remote-first operations

According to studies, as many as 70% of companies are considering becoming hybrid or remote-first organizations, enabling both current and prospective workers to work remotely. However, managing teams remotely is a very complicated process that must take into account a variety of factors, including the labor laws in each nation and potential inexperience.

Your business will be able to test this strategy out with no restrictions on team strength, thanks to an EOR. This would lead to a smoother transition that would be better prepared, as well as significant time and money savings.

Better compliance across multiple countries

Every country has its own set of employment and taxation laws, non compliance with which can result in hefty fines and penalties. Thanks to presence across multiple countries, global EORs are able to undertake the fulfillment of all these regulatory and legal requirements on behalf of their clients and ensure smooth functioning.

Limited risks

All employment agreements are between the Employer of Record (EOR) and the employee, therefore managing benefits, claims, employee remuneration, and termination are under the legal purview of the EOR. Additionally, the EOR manages work license application and renewal adherence if you are recruiting foreigners, making it even simpler for your business.

Easy payroll management

For the purpose of taxation and management of foreign exchange, most countries mandate that salaries to local residents be disbursed from bank accounts within the host country. Additionally, management of payroll also requires the factoring in of taxation and employee benefits, which vary for every country. The EOR undertakes end to end payroll management to free you from these tasks.

Access to global talent

One of the biggest advantages of partnering with an EOR is the ability to hire across country borders. By undertaking the end to end management of all hiring responsibilities, a global EOR enables you to build your distributed team without having to invest a major chunk of time and capital into registering and operating a local entity. Companies can take advantage of the competitive cost of hiring and the wide range of talent present across the countless emerging talent hubs throughout the globe by partnering with EORs.

Employers of Record are becoming an important resource for firms looking to hire personnel internationally. It offers a hassle-free hiring, onboarding, and working experience for a firm. Companies are reaching their scalability and expanding goals more quickly than before.

If you are planning to expand business operations internationally, an EOR can help you deploy services quickly without risking non-compliance with local laws. Our team of experts at Talent500 can help you with this. Set up a consultation here.