What Can an Employer of Record Do?
An EOR advises firms in a certain nation or state on numerous employment and payroll issues. The EOR is in charge of these important employment concerns pertinent to the area in which they operate, as well as the following functions:
1. Onboarding of local workers
An EOR has the knowledge and systems in place to onboard local personnel while maintaining compliance with current rules.
2. Employment agreements
Employees’ employment contracts are drafted by the EOR provider. Such employment contracts are written in compliance with the appropriate local labor laws.
3. Payroll administration
The EOR is in charge of processing monthly payroll, which includes calculating necessary deductions, determining suitable work periods, and accounting for essential expenditure reimbursements.
4. Registration for taxes
When payroll is conducted by an EOR, the official employer is in charge of paying an employee’s taxes. The official employer, the EOR, is expected to make payments and comply with all reporting requirements and is registered with the applicable tax authorities.
After obtaining instructions from the employer, the EOR is responsible for dismissing an employee. The termination shall be carried out in accordance with the applicable law in that location.
5 Use Cases for an Employer of Record
Your firm will profit greatly from an EOR. An EOR can target certain areas and assist you in completing tasks based on your own objectives and limitations.
In most circumstances, a firm will benefit the most from an EOR while dealing with the complexity and compliance risk of a new foreign market.
Here are five scenarios in which your company will benefit from having an employer of record:
1. Expansion in the absence of a legal entity
Setting up a local organization through incorporation and registration may be time-consuming and costly when expanding, requiring experience and knowledge about the legal peculiarities of the new nation in order to remain compliant.
2. Hiring overseas is simple and legal
This is a fantastic chance for businesses to boost their diversity agenda, not just in terms of gender and disability but also in terms of race and origin, because individuals will not need to migrate to work for your organization.
3. Making the switch to remote-first
A growing number of firms are considering becoming hybrid or even “remote-first” organizations. According to a recent McKinsey report, the pandemic has accelerated the trend of remote work, with businesses preparing to migrate to more flexible workspaces.
4. Recruiting freelancers as employees
Many businesses benefit from alternative labor, such as freelancers and contractors. Yet, you may consider converting freelancers to employees to minimize your organization’s turnover rate, have better control over working hours, and prevent compliance concerns like misclassification, which puts organizations in danger of paying back taxes and benefits.
5. Giving your staff greater flexibility
Provide employees with as much mobility, independence, and flexibility as feasible after the outbreak. If an employee is considering relocating to another country, do not use this as a pretext to fire them.
According to ManpowerGroup global studies, 30–40% of companies globally had a labor shortage in 2017, with a worsening trend since 2020. This topic emphasizes the significance of attracting and retaining talent.