HR, Employment, & Benefits
HELP YOUR CLIENTS HIRE GLOBALLY IN MINUTES WITH AN EMPLOYER OF RECORD (EOR)
The future of work is borderless and the everywhere workforce is here to stay.
In today's interconnected world, scaling globally and building an international workforce offers numerous advantages — from accessing new markets to tapping into diverse talent pools — however, many companies struggle to figure out how to hire global talent easily and compliantly.
Fortunately, there are several routes companies can take, depending on expansion goals, business infrastructure, timeline, and budget. But how do you determine the right way forward for you and your clients?
Let’s walk through some of the common considerations.
THE PATH FORWARD: ENTITY SETUP VS. EMPLOYER OF RECORD (EOR)
Business needs and goals will dictate the best way forward, but the majority of companies that hire internationally lean to either doing it themselves – oftentimes a cumbersome, lengthy process – or working with a partner to lighten the lift and get in market quickly and compliantly.
Establish a legal entity, such as an overseas branch or subsidiary: This grants your business a tangible and lawful existence in a different country. If you decide to set up a subsidiary, you’ll have to incorporate an entity, register the entity with the local authorities, have enough capital requirements to open a local bank account, and build a team of legal, HR, and financial experts to help your company ensure compliance with local laws and regulations.
Partner with an employer of record (EOR) with established entities in different countries: With an EOR, you don’t need to have a legal presence in-country. The EOR has established legal entities in-country and serves as the legal employer, handling payroll, taxes, benefits, and HR matters, while you manage the employees’ day-to-day activities. This model shifts many of the responsibilities that stem from setting up your own legal entity to the EOR. In addition, you can leverage the local expertise of the EOR in managing your global workforce.
“How long does it take to expand globally?” is a big question on every growing business’ mind.
Imagine your client is experiencing exponential growth, and although they have consolidated a strong local presence, the company wants to reach new heights and explore international markets. To achieve this, the company needs to grow their sales teams in different regions, but employment laws and tax regulations can be difficult to manage in unfamiliar jurisdictions.
Taking the entity set-up route, your client would first have to conduct research, develop a budget, and learn everything about the local laws, regulations, culture and customs. The next step is entity formation, business and tax registrations, and setting up a local bank account. Some of these processes may require a director of the company to appear in-country to sign various documents in person. Then, they would have to establish a framework to operate in each country, which includes implementing payroll processes, setting up a billing and payment system, obtaining various benefits and insurances, and creating locally compliant employment contracts and documents. All in all, moving from the planning stage to a fully functional international company can take a year or more and be very costly.
Partnering with an EOR allows you to go to market and engage global talent much faster. Since the EOR already has legal entities in place that are operational and serves as the legal employer, the client could start hiring their sales team in minutes — saving time, costs, and stress along the way. An EOR helps companies scale without the headache of dealing with administrative work and can mitigate legal risks. This strategy allows you to get your foot in the door and secure the best talent right away.
SO, HOW CAN YOUR CLIENTS LEVERAGE AN EOR?
Compliance with complex local labor laws can be a major hurdle for your clients' successful growth. But working with an EOR takes this burden off their shoulders, mitigating potential fines, penalties, and litigation risk. Companies often choose this model for three main purposes:
To test new global markets. Without setting up an entity, your clients can start hiring in minutes in multiple international jurisdictions and test new markets.
To access global talent. To be competitive at an international level, your clients need to hire the best talent. An EOR can help them hire skilled global talent compliantly.
To manage risk and administrative burden. Setting up an entity involves hiring legal and financial experts to help your clients navigate local laws, and any mistakes could significantly compromise your clients’ goals. When you work with an EOR, your clients are free to focus on their day-to-day operations while the EOR shoulders the administrative burden of setting up and running an entity in compliance with local laws and regulations.
There are two primary global models for employer of record services.
Consolidator Or Aggregator Model
In this approach, an umbrella company selects third-party entities in each country on behalf of its clients, serving as an intermediary between the client and the local in-country partner. Essentially, the aggregator company acts as an overarching organization that sub-contracts the employment of the client's team members to providers in different countries. These providers are typically small-scale local entities that possess the necessary in-country presence, which the aggregator employer of record did not establish themselves.
The second model is the fully built, in-house model, where a highly skilled legal, HR, and tax team establishes a global infrastructure that meets top-notch standards. This model assumes the responsibility and control for ensuring proper and lawful handling of affairs in each country, while also meeting the high standards necessary for companies backed by professional expertise, particularly during critical moments such as employee terminations.
HOW TO CHOOSE THE RIGHT EOR FOR YOUR INTERNATIONAL HIRE
When assessing an employer of record, it is essential to evaluate the following factors:
Contractual responsibility: Determine who holds the various contractual responsibility. You want to ensure that the EOR represents that it will comply with local laws. Identify the EOR's internal and external legal experts and their locations.
Accountability and risk mitigation: Evaluate whether the EOR can be legally held accountable or if they transfer the responsibility of protecting your company's risk and liability to third-party providers. Consider how you will hold these providers accountable if issues arise.
Emergency situations: Understand the communication process and contacts for urgent situations, such as employee injuries in another country.
Internal expertise: Inquire about the EOR's internal international tax, legal, HR, and data privacy teams to assess their qualifications.
GDPR compliance: Verify whether the EOR adheres to GDPR and related privacy laws concerning employment and personal data. Additionally, consider how the EOR ensures their in-country partners also comply with data privacy regulations.
In-country HR and legal support: Determine if you have access to a local, in-house HR and legal team in case issues arise. Assess whether they use a data-secure helpdesk or rely solely on email communication. Review their service level agreements for response times.
Financial standing and investor vetting: Evaluate the EOR's capitalization to ensure they have sufficient financial resources. Additionally, consider whether they have been vetted by reputable investors, indicating their credibility and stability.
By considering these factors, you can make an informed decision when evaluating an employer of record provider.
THE EVERYWHERE WORKFORCE HAS ARRIVED
The current business landscape offers a multitude of opportunities for companies to build global teams and expand their reach. The decision to partner with an EOR can be a strategic move for companies that wish to drastically reduce the time and resources invested in global expansion. Instead of setting up legal entities and establishing local infrastructure, which can be time-consuming and resource-intensive, the EOR allows companies to swiftly onboard new team members in minutes, not months.
Whether it's tapping into new markets, recruiting specialized talent, optimizing costs, or building your employer brand, now is the ideal time to embark on this transformative journey. Embrace the potential of the everywhere workforce and start building your global team with an EOR today.
NICOLE FORBESDeputy General CounselG-PBoston, MA
This article is designed to give general and timely information about the subjects covered. It is not intended as legal advice or assistance with individual problems. Readers should consult competent counsel of their own choosing about how the matters relate to their own affairs.