Whether you own a conglomerate or small business, there are endless benefits to hiring foreign workers. Not only do you increase your cultural expertise, but you can strengthen your company’s presence around the world. Of course, it can be a complex process to manage employment in multiple countries, which is why a global Employer of Record (EOR) can be the cost-effective bridge you need to minimize risks and maximize rewards.
What Is a Global Employer of Record?
A global Employer of Record (EOR) refers to a third-party service that enables companies to hire foreign workers. The EOR acts as a local employer, and they do so at your request. Instead of your company assuming risk and liability, the EOR takes these concerns off of your plate.
As the responsible party, it’s their job to know the legal and compliance obligations of each country and region. It’s your job to maintain the employee-employer relationship, much as you would with any other team member.
It’s worth noting that global Employers of Record can also function within your country, and they’re especially useful in countries with states or provinces with different tax laws. You might find that EORs are invaluable for simplifying your payroll, administrative tasks, and compensation packages.
What Is an Example of an EOR?
Let’s say that you owned an ecommerce store in the US, and you want to expand your services to South Africa. However, you don’t know very much about the best marketing strategies. You can hire a local expert to market your products in a way that will connect with your core audience. You can use a global EOR to officially employ the marketer, instead of researching compliance rules and regulations in the country.
Benefits of an Employer of Record![]()
An EOR is more than just convenience. We’ll look at what you can expect from an EOR, whether you’re hiring full-time or contact workers.
- Labor regulations: If you were going to hire legal workers properly, you might need to set up legal entities in the respective regions. With an EOR, you don’t have to worry about the labor laws and tax regulations. Instead, you can focus on your core business offerings.
- Compensation packages: Paid leave, healthcare, retirement: there are certain benefits that workers are entitled to, and it varies by country (in some cases, it varies by state or even city). With an EOR, you don’t have to worry about missing anything.
- Onboarding: EORs make it easy to draft contracts, setup payroll, and get employees up to speed. Plus, you don’t have to worry about intellectual property theft because the contracts will cover all the bases.
- Contract workers: The nature of contract work is complicated no matter what country you’re in. An EOR not only helps classify workers correctly according to the country’s definitions, they also reduce much of the back-and-forth to ironing out the terms of each worker.
Difference Between EOR and PEO
A professional employer organization (PEO) handles HR tasks, meaning anything from international payroll to reporting, which can make an EOR and a PEO seem like the same service. However, you can only use a PEO if you’ve first established legal entities in the country where you wish to hire. With a PEO, you’re more of a co-employer, meaning you need to sign a contract with PEO and thus assume liability for compliance and legal laws.
You can think of a PEO as more of an administrative team that can drastically reduce your paperwork. However, should the PEO make a mistake, the final fallout will typically be on your shoulders. If you don’t already have legal entities set up, it usually makes more sense to hire an EOR. The initial costs for an EOR may be more expensive, but the decision can end up saving you a lot more in the long run.
When Should EORs Be Used
There are numerous scenarios where you can use an EOR to save time and money, while reducing your liability.
You’re on a time crunch.
Setting up a legal local entity can take months, and it can cost tens of thousands of dollars. If you have an employee who wants to relocate or you largely employ remote workers and you have a country in mind, you don’t necessarily have the time to fight with bureaucrats who are likely much more lackadaisical than you about the whole process.
You’re confused about worker classification.
Temp, contract, contingent workers, full-time, part-time, salaried: employees can be referred to as practically anything. With an EOR, you don’t have to worry about who should be classified as what and what they need to receive to fulfill the terms of the contract. Enforcement and definitions can be very different from country to country, so it’s critical not to make assumptions.
You don’t want your intellectual property stolen.
Opening up your company’s inner workings comes with plenty of inherent risk. If the worker does take advantage of your IP, you may not have a lot of recourse if you don’t have the right protections in place. An EOR can both set up the right boundaries and take action should a worker violate one of those boundaries.
How to Find an Employer of Record
The best way to find an EOR is to do your research. At Monument, we rely on our vast network (and excellent relationships) with proven suppliers. As you’ve likely already guessed, it takes a lot of expertise to dot all the i’s and cross all the t’s. Any time a labor or tax law changes, the EOR has to be both aware of the bigger trends behind the shift and on the ball when it comes to adjusting their own practices.
If you’re asking what is an EOR or you’re in search of a reputable EOR, contact Monument Consulting to learn more about who our partners are, where they are, and why they’ve managed to meet our highly selective criteria.