What is an EOR? Everything you need to know

Global expansion and talent acquisition are becoming increasingly challenging. From talent shortages and rising labor costs to skill gaps, visa complications, and more, today's businesses face numerous obstacles. However, there's a solution that effectively addresses all these issues – an Employer of Record (EOR).

Here, we delve into what an EOR is, its benefits, and how it compares to other hiring options, so you can decide if it's the right option for your company. 

What is an EOR?

In short, an Employer of Record is a service provider that hires employees on your behalf in a foreign country. They handle all the nitty-gritty details, from onboarding and payroll to adhering to local labor laws, taxes and benefits. Essentially, they become the legal employer of your international staff while you maintain day-to-day control.

An Employer of Record (EOR) is more than a service provider - it's a strategic partner for businesses aiming to expand and hire globally. In essence, an EOR becomes the formal, legal employer of your international employees, taking care of a myriad of complex tasks on your behalf.

At its core, an EOR serves two main functions. 

• Firstly, it handles all employment-related tasks, which range from payroll and benefits administration to compliance with local labor laws. It ensures employees are paid on time, taxes are filed correctly, and all employment practices meet local regulations.
• Secondly, an EOR allows you to manage your global workforce without establishing a legal entity in the country. Despite the EOR being the 'legal' employer for compliance purposes, your company maintains full operational control. You dictate your employees' roles, responsibilities, and daily tasks.

This combination of features allows an EOR to facilitate quick and efficient international expansion, supporting businesses to harness global talent without the associated administrative burdens. In other words, an EOR allows you to overcome talent shortages, rising labor costs, skill gaps, visa complications, and other international hiring challenges. 

Top benefits of an EOR

Aside from providing a solution to combat international hiring woes, using an EOR offers multiple benefits. It provides transparency, simplifies international hiring and delivers significant cost advantages. With an EOR,  not only are costs often lower than the other alternatives, but you have an upfront understanding of costs, reducing the risk of unexpected expenses.

Moreover, EORs can help your company to save money by leveraging economies of scale. By managing employment for multiple clients, EORs can negotiate better rates for benefits and insurance, savings they pass on to you.

Additionally, time is a critical factor in business. Establishing a foreign entity or navigating the legalities of hiring contractors abroad is time-consuming. With an EOR, your international operations can be up and running in significantly less time.

EOR vs. other hiring options

In assessing the benefits of using an EOR, it's essential to compare it with other hiring options, namely outsourcing, owning a foreign legal entity, using a Professional Employer Organization (PEO), or hiring independent contractors. 

Each option has unique pros and cons. Let's take a brief look at each of them here. 

Outsourcing

Outsourcing has long been a popular option for managing international work. While it can decrease your administrative tasks and provide access to international talent, it doesn't provide control over the workforce. An EOR offers a similar decrease in administrative duties but allows you to retain full operational control over your employees. (There are also several well-known outsourcing problems to be aware of, like hidden costs, lack of transparency, etc. Check out a head-to-head comparison of EOR vs outsourcing here).  

Owning a foreign legal entity

Although owning a foreign legal entity gives you full control over your foreign operations, it's the most complex and costly option. It requires understanding foreign laws, setting up operations, and managing HR functions in a foreign language and culture - all time-consuming tasks that an EOR takes off your hands.

PEOs

A Professional Employer Organization (PEO) shares the responsibility of managing employees with your company. Although PEOs offer benefits like an EOR, they don't provide the same level of operational control. EORs allow companies to maintain complete oversight of their international employees, offering a more suitable option for businesses requiring tighter control. (Check out our head-to-head comparison of PEO vs EORs here). 

Independent contractors

Hiring independent contractors may seem like a simple solution. However, legal and tax complications can arise from misclassification of workers. Contractors may also lack commitment to your company compared to employees. An EOR provides a solution that combines legal compliance with the assurance of a dedicated workforce.

Fill your vacancies with Outstaffer

Having explored the definition, benefits, and comparison of EORs with other hiring options, it becomes evident that EORs offer a comprehensive solution for businesses looking to expand globally.

At Outstaffer, we make it easy to find, hire, manage and equip top employees from around the world in just a couple of clicks. As a Global EOR and #WorkFromAnywhere technology company, we give you and your global team everything you need to thrive. 

Want to learn more? Schedule your free demo today.