Global Employment: What Does an Employer of Record Do?

An employer of record can be your trusted partner for global employment. Explore everything EORs can do with their specialists and solid infrastructure.
what-does-an-employer-of-record-do
Wendy Ng
Wendy Ng
Content and Operations Strategy Manager, FlexOS
4+ experience with Employee Experience background in Human Resources industry, Wendy is dedicating to share invaluable strategies, empowering managers to boost team productivity and engagement.
May 14, 2024
10
min read

So, you're ready to take your business global and tap into the world's best talent. Exciting times ahead!

However, navigating the complexities of global expansion poses a unique set of challenges, especially when it comes to managing a workforce across international borders.

If you're here, it's likely that you need help with that.

The good news is that you've found the right solution: Employer of Record (EOR).

EORs can be your best companions in the journey of building and managing a global team, handling all the nitty-gritty of international employment - from compliance and payroll to benefits and beyond.

They take on the legal responsibility of employing your international workers, so you don't have to set up local entities in every country where you want to hire and bury yourselves in a pile of paperwork.

But what exactly does an EOR do? And how can they make your life easier as you navigate the complex world of international hiring?

In this article, we'll dive into the nitty-gritty of EOR services and explore how they can help you:

  • Onboard new hires in record time
  • Stay compliant with local employment laws
  • Manage payroll and taxes across multiple countries
  • Offer competitive benefits packages to your global team
  • Handle the ins and outs of international employment contracts
  • And much more.

Whether you're a startup venturing into new markets or a multinational corporation looking to streamline your global hiring process, understanding the full scope of EOR services is key to making informed decisions.

Let's dive in!

Defining Employer of Record

An Employer of Record (EOR) is a third-party organization that takes on the legal responsibilities of employing workers on behalf of another company. (For a deep-dive, check out my full guide on EOR meaning).

EORs are built on three key elements that enable them to support businesses in managing their workforce:

  • Legal presence: EORs have a legal presence in multiple countries, allowing them to employ workers on behalf of their clients (you) and ensure compliance with local regulations—a key factor distinguishing EOR from its similar global employment solution, PEO.
  • Expertise: EORs possess extensive expertise in international employment laws and best practices, enabling them to navigate complex legal landscapes and mitigate risks. This expertise is either developed in-house through years of experience and research or acquired through close partnerships with in-country experts with deep knowledge of local labor laws, tax regulations, and cultural nuances.
  • Technology: EORs leverage cutting-edge technology to streamline processes, automate tasks, and provide a seamless experience for both the client company and the employees. These tech-enabled solutions include user-friendly platforms for managing global teams, automated onboarding and offboarding processes, and real-time reporting and analytics to keep you informed and in control.

Core Services of the Employers of Record

So, with such infrastructure in place, how can EOR companies simplify the complexities of global employment for you? Here are the five standard steps that every EOR service provides to ensure your operations run smoothly in various international markets without the need for establishing a local entity and deciphering all local requirements on your own:

Drafting Compliant Employment Contracts

As mentioned earlier, EORs are experts at creating employment contracts that adhere strictly to local labor laws and regulations.

This critical service helps businesses avoid the pitfalls of worker misclassification and ensures compliance with diverse legal frameworks.

Forget the outdated routine of drafting something from scratch and passing on scattered information in long threads!

Efficiency and convenience are key in modern HR technology.

Innovative solutions like EORs allow you to complete employment contracts—including double-checking the correct employment status—in minutes, at your own pace, using standardized templates, guidance, and specialized tools.

Oyster EOR's virtual assistant for employment contracts
Create employment contracts with Pearl, Oyster EOR's virtual assistant.

Your employees can also start engaging with the EOR platform right from the beginning by submitting their information via a dedicated portal.

Moreover, EORs continuously monitor legislative changes globally, adapting contracts to align with new regulations, thus protecting both the employer and employee against potential legal issues.

Setting Up Payroll and Onboarding Employees

You need to pay your people properly, regardless of their employment nature.

EORs can manage a comprehensive onboarding process that covers everything from collecting essential documents to automatically setting up payroll systems.

HR leaders can easily set up preferred payment methods, adjust payment cycles, and make other modifications as needed.

It should be noted that some employees prefer to be paid in their local currencies, while others might opt for transactions in USD or even cryptocurrencies to mitigate the risks associated with their local currency inflation.

EOR companies are often built on robust global payroll services, so it is no surprise how quickly and flexibly they can support you in settling payroll operations with international employees.

Deel EOR Payroll
Deel EOR serves over 100 countries with its native payroll engines.

EOR services include properly registering your new hires with local authorities and processing their payroll accurately and punctually, reflecting the complexities of local tax systems and employment laws.

This not only helps in establishing a transparent and trusting relationship between employers and their international workforce but also provides a competitive advantage of speed when assembling new teams in new markets—one of the significant employer of record benefits.

Managing Tax Deductions and Filings

EORs also take charge of post-payroll tasks including tax deductions, record keeping, and year-end fillings—a critical aspect of global employment.

They are responsible for accurately calculating and withholding taxes from employees' paychecks and ensuring that all necessary tax filings are completed with local authorities.

Also, EOR teams will support employee-specific tax issues for your international employees as part of their services.

This can be a significant relief for teams that might not have the expertise or resources to manage their tax obligations, allowing you to avoid costly penalties and fines for non-compliance.

Providing Statutory Benefits

Granting appropriate employee benefits is crucial to attracting and retaining the best talents, as 40% of companies said they lose their talents for those with better benefits.

While flexibility at work and other remote-related job perks are more and more appealing in modern work environments, studies show that a strong core set of standard benefits remains the top priority for most employees.

These can include health insurance, retirement savings plans, paid leave, and other entitlements designed to ensure a minimum standard of welfare and protection.

Most important employee benefits (Source: SHRM)

EORs are well-versed in the specific legalities of each jurisdiction and take responsibility for the administration and compliance of these statutory benefits.

This means they handle everything from registering employees with the appropriate health insurance plans to ensuring that pension contributions are correctly calculated and remitted.

Depending on your strategies, EORs can provide different benefits packages to help you stay competitive.

Handling Contract Terminations and Offboarding

Deel EOR Offboarding

When an employment relationship comes to an end, EORs manage the offboarding process with the same level of professionalism and compliance as onboarding.

This includes calculating final payments, issuing termination documents, and advising on best practices for compliance with local laws regarding severance and notice periods.

Their involvement ensures that the termination process is handled smoothly and respectfully, safeguarding the company's reputation and reducing the risk of legal complications.

Additional Support for Global Employment

In addition to the core services, Employer of Record companies often provide extra support to help businesses navigate the challenges of global employment.

Some helpful services I observed after analyzing most EOR services on the market include:

HRIS Platform for Global Employees

As a pivotal component in managing global employees, EOR technologies often integrate with or supplement HRIS systems.

With a centralized platform for global employment, HR leaders can manage all employee information, administer payroll and benefits, handle PTO management, and access comprehensive reports and analytics—like your existing HRIS software.

Of course, these platforms also allow you to connect with your existing HR tech stack to perform advanced employee management functions.

I realized that BambooHR stands out as one of the most popular integration options available for EORs, facilitating seamless employee data transfers. However, almost all of the leading EOR vendors, like Oyster, Multiplier, and Velocity Global, are continuously working to expand their integration capabilities.

Your employees also have a designated point of contact and a dedicated team to address their specific concerns.

This approach underscores the necessity of properly introducing employment relationships with your employees, ensuring that expectations are clearly set.

This centralization is crucial for maintaining uniformity in employee management despite the differing local regulations you may face. As Q Hamirani, Chief People Officer at EdTech Unicorn Paper, shared in our interview:

"We're fragmenting the employee experience, and employees don't know where to go. And if they go somewhere, they can't find it. Unifying communication mediums and service delivery is in the best interest of people leaders to push and fight for. At the end of the day, that is how the culture will be built, with how people feel, how people can get information, and how they can interact with each other." - Q Hamirani, Chief People Officer at Paper
Rippling HRIS

Notably, Deel and Rippling, both our top picks for the Best Employer of Record Services, develop their own HRIS platform to manage the entire mixed workforce effectively.

Sponsoring Work Permits and Visas

As your company grows globally, some of your employees might need to relocate to manage new operations or join international teams, necessitating work permits to ensure they can legally work in these new locations. Or sometimes, the foreign talent you want to recruit may need help with work visas to legally join your team.

EORs can assist with obtaining the necessary documentation, guiding clients through the application process, and ensuring that all requirements are met.

This way, you can be less worry about the complicated and time-consuming process of visa application yet still ensure that your team members are supported with the paperwork they need to work legally.

This, once again, underscores the mission of EORs:

"“Based on who you are, what you can do, you should have the best opportunities. Not being born in the right country should not be the reason why you don’t get to work for the best companies in the world and have the best potential life and career. So for that, we could solve that. And eventually, that led to creating Deel and what it is today.” - Alex Bouaziz, CEO of Deel EOR

Providing Remote Work Benefits

EOR Fringe Benefits
Work-from-home equipment for remote teams.

As remote work becomes increasingly common, EORs help businesses support their distributed teams by offering benefits such as home office stipends, coworking space memberships, and even ergonomic equipment.

These benefits not only help to attract and retain top talent but also ensure that remote employees have the resources they need to be productive and engaged.

Offering Top-Up Benefits for High-Performers

Oyster's equity grant process.
Oyster's equity grant process.

Equity compensation, such as stock options and restricted stock units, along with performance-based bonuses and commissions, can be powerful tools for rewarding and motivating top talent. Jim Birch, Vice President of Global Payroll and Product Strategy at Velocity Global, captured it well:

“When you give talent access to equity, you are conveying a key message that everyone is deserving of the same opportunities and investments regardless of where they land on the map.” - Jim Birch, Vice President at Velocity Global

While EORs ensure compliance with statutory benefits, they also provide the flexibility to go above and beyond for your best employees.

They have the expertise to structure and administer equity plans, like stock options and RSUs, in compliance with local tax laws and reporting requirements.

Moreover, EORs allow you to tailor benefits packages to each country's norms, enabling you to provide competitive perks that truly motivate and retain your high-performers.

Protecting Intellectual Property

Intellectual property (IP) laws vary widely across countries, making it challenging for businesses to ensure that their IP is adequately protected when hiring internationally.

EORs help ensure that your IP rights are properly secured and enforced across different jurisdictions, mitigating the risks of IP leakage or disputes.

They can advise you on the IP laws and regulations of the countries where they service. They can assist in drafting employment contracts and agreements that include robust IP protection clauses, such as non-disclosure agreements (NDAs), invention assignment agreements, and non-compete clauses. These legal safeguards help ensure that your company retains ownership of any IP created by your employees spanning across the globe.

Remote EOR pioneers in this aspect with its Remote's IP Guard, which offers a unique two-step IP protection process. This means the IP rights are first assigned from the employee to Remote and then from Remote directly to your company, creating an additional layer of security.

Remote's IP Guard approach.
Remote's IP Guard approach.

EOR Services to Consider

With the growing demand for EOR services, numerous providers are now available, each with its own strengths and pricing models.

Here are some great options to consider:

Remofirst

Remofirst EOR
Remofirst EOR

Remofirst is an excellent EOR service option for small to medium-sized enterprises that need straightforward EOR solutions without the complexity and high costs associated with larger platforms.

With coverage in 180 countries and transparent pricing tiers starting at just $199 per employee, Remofirst offers a comprehensive range of services, including same-day onboarding, local employee contract compliance, global payroll, tax filings, and pensions, along with 24/7 support.

>> Check out our detailed review of Remofirst EOR

Multiplier

Multiplier EOR
Multiplier EOR

Multiplier is an affordable yet feature-rich EOR service, ideal for medium to large enterprises that require a robust solution for managing international employees with a focus on compliance and payroll automation.

With coverage in over 150 countries and support for payments in over 120 currencies, Multiplier simplifies the management of international employees while ensuring compliance with local employment laws and streamlining payroll processes.

Pricing starts at $400 per employee per month for EOR services and $40 per contractor per month.

>> Check out our detailed review of Multiplier EOR

Papaya Global

Papaya Global EOR
Papaya Global EOR

Papaya Global is a formidable player in the global EOR and payroll market, ideal for businesses seeking a comprehensive solution for international workforce management in over 160 countries.

Papaya Global's robust platform, coupled with advanced analytics and a proprietary payment system, offers significant advantages in managing complex global operations.

The EOR company has deep expertise in local compliance issues and provides dedicated customer support.

Papaya Global's EOR services start at $599 per employee per month, while contractor management starts at $30 per contractor per month in a standard plan.

>> Check out our detailed review of Papaya Global EOR

Deel

Deel EOR
Deel EOR

Deel is a fast-growing EOR service provider with robust specialized capabilities, offering a comprehensive range of services to help businesses compliantly hire and manage talent in over 100 countries.

Deel excels in managing local tax obligations, statutory benefits, visa immigrant support, and other regulatory requirements while also providing detailed compliance reports.

The platform automates payroll calculations, tax deductions, and benefits administration, performing well through its proprietary HR system. (For more details, explore Deel as the best HRIS software.)

Pricing starts at $599 per employee per month for EOR services and $49 per contractor per month.

>> Check out our detailed review of Deel EOR

Remote

Remote EOR
Remote EOR

Remote is a key player in the EOR market with impressive wholly-owned country coverage and a distinguished client-centric approach.

Remote simplifies the process of hiring and managing international employees in full compliance without the need for companies to establish local entities in over 180 countries.

Remote's platform is praised for its ease of use and sleek UX design, with step-by-step instructions and many automation tools.

The EOR company offers a transparent pricing model, starting at $599 per employee per month for EOR services and $29 per contractor per month.

>> Check out our detailed review of Remote EOR

For more options, see my comprehensive reviews on the Best Employer of Record in 2024

Wrapping it Up

We all love remote work and try to leverage these flexible working models more. But let's be real, building and managing a global team is not without its challenges.

The logistics of international hiring can be overwhelming, from navigating complex employment laws to ensuring seamless payroll and benefits administration across borders.

As your trusted partner in global employment, EORs take on the legal responsibilities of employing your international workers, freeing you up to focus on what matters most—growing your business and building a kick-ass team.

As you have a clear picture of what an EOR can do, take the time to evaluate your options. Consider your budget, specific requirements, and priorities. There's always a solution that meets your needs.

With the right EOR by your side, the world is your oyster. Happy recruiting!

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