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As demand for highly skilled talent intensifies across various industries, businesses are expanding their search internationally to find and hire top-tier workers to fill critical roles—essential for pushing innovation, managing business processes, developing new products and services, and achieving growth.
However, hiring in different jurisdictions isn’t straightforward. It involves various compliance obligations that you need to consider, such as understanding and adhering to local employment laws, managing payroll, and dealing with tax regulations.
To navigate these complexities, many modern and agile companies are turning to employer of record (EoR) service as a solution to bypass these challenges. An EoR enables companies to hire, pay, and manage workers anywhere in the world without the need to establish a local presence. This means you can streamline the entire hiring process and ensure compliance with local laws and regulations while reducing administrative burden.
Using an EoR solution brings significant advantages for your business. It lets you focus on your core business while the EoR takes care of all the critical HR functions, such as employee management, onboarding, payroll administration, benefits, and other administrative tasks. This helps your business operate efficiently and expand into new markets quickly and compliantly.
In this detailed blog post, we’ll cover everything you need to know about using an EoR service, including compliance and HR frameworks, selecting the right EoR provider, and strategies to utilise the employer of record for your global expansion efforts.
What is an employer of record (EoR)?
The employer of record, or EOR, is a workforce solution provided by a third-party that serves as the legal employer of your employees in countries or regions where you do not have a legal entity or local presence.
An EoR is responsible for handling all HR and administrative tasks associated with hiring international workers, including:
- Employment contracts and terms of the agreement.
- Onboarding full-time or part-time employees.
- Filing taxes in respective countries.
- Processing of payroll.
- Remittance of salaries and reimbursements.
- Providing health benefits and insurance.
- Offboarding employees when the contract ends.
- Ensure that the company adheres to the country’s local laws and regulations.
To put it simply, it’s like having an extension of your team, a trusted expert you can rely on.
Here’s how you can use an EoR solution to benefit your organisation and gain a competitive edge:
Attracting top international talent
If you are looking to hire the best talent with the right set of skills from other countries where you do not have a legal entity, an EoR provider can be your strategic partner in recruitment and hiring. With their expertise, you can secure top talent quickly and compliantly.
Exploring new markets
Setting up a local entity typically takes six to twelve months. However, with an EoR solution, you can test new markets without the need to set up a legal entity. By partnering with a reliable EoR provider like CXC, you can recruit talent, reach new customers, and generate new revenue streams before your competitors.
Facilitating an acquisition
When your company’s in-country entity is still being established, the EoR provider can work on your behalf to pay your employees and adhere to local labour laws and regulations.
Avoiding non-compliant independent contractors
Hiring independent contractors is an alternative and cost-effective option for your short-term needs. However, misclassifying them can put your company at risk. With an EoR solution, you can hire and process independent contractors in compliance with local requirements.
Leveraging EOR services for global expansion
Expanding into new markets can be complex and costly, but that’s not the case when you use an employer of record. An EoR simplifies the process, allowing you to hire the best talent for your international expansion without the need to setup a separate legal entity in the new market. What would traditionally take months to fulfil can now be accomplished in just a few days.
Take GitLab, a global tech company headquartered in San Francisco, U.S., as an example. GitLab is struggling to attract and hire talent in markets where they do not have an entity, which has resulted in missed opportunities and a stagnant growth trajectory.
After learning about their unique requirements, CXC partnered with GitLab to provide expertise and guidance in sourcing top-tier talent and ensuring compliant workforce engagement. By leveraging CXC’s comprehensive EOR services, GitLab managed to hire contractors seamlessly and compliantly in key markets, including Poland, Portugal, Romania, and more.
Many companies, like GitLab, are using the employer of record as their strategic approach for their global expansion efforts. Here are some compelling reasons:
Local expertise in HR compliance and risk management
Expanding into new markets requires a thorough understanding of in-country specific laws and regulations. Non-compliance can put your company at risk. An EoR solution provides guidance and expertise on local labour laws, regulations, and tax requirements. They ensure that your company remains compliant with all local employment laws, reducing the risk of fines, legal issues, or operational disruptions due to non-compliance.
Reduced administrative burden
EOR providers handle payroll processing, benefits administration, tax withholding, and other administrative tasks associated with hiring international workers. This reduces the administrative burden on the hiring company, allowing them to focus on their core business activities.
Speed-to-market
Setting up a legal entity in a new country can be time-consuming and overwhelming. EoR services provide a quicker route to establishing a presence in new or multiple markets. Instead of waiting for months for entity setup, you can quickly secure the talent you need and accelerate your entry into new jurisdictions through an EoR solution.
Cost efficiency
Compared to setting up a full legal entity (subsidiary) overseas, which involves significant upfront costs and ongoing operational expenses (such as compliance, legal fees, and administrative costs), using an EOR can be more cost-effective. EOR services typically operate on a fee-for-service basis, which may be more predictable and manageable for budgeting purposes.
Scalability and flexibility
EOR services provide scalability, allowing companies to hire a workforce quickly and flexibly adjust the size of their workforce as needed. This is particularly beneficial in uncertain economic climates or when testing new markets where demand is unpredictable.
Focus on core business
Managing international payroll, benefits, and compliance can be distracting from your core business activities. EOR services handle these administrative tasks, allowing your company to focus more on strategic objectives, market expansion, and customer relationships.
How an EoR service ensure HR and legal compliance
While expanding into new markets can bring tremendous benefits to your business, it also comes with legal and financial risks that could disrupt your operations.
This is where an employer of record becomes your strategic ally. An EoR can help mitigate these risks by providing expert guidance and ensuring compliance with local labour laws and regulations. Here’s a closer look at the compliance areas that an EoR can manage for you:
Employment contracts and documentation:
An EoR provider handles the preparation and management of employment contracts. They draft tailored, compliant employment contracts. A trusted EoR provider like CXC, for example, can help in drafting legally compliant contracts in more than 100 countries worldwide.
Payroll and benefits administration
Managing payroll can be overwhelming, especially when doing this in multiple countries. Leveraging an EOR service for your global expansion endeavours can help manage payroll processing, tax withholding, and benefits administration in accordance with local regulations. They ensure that your workers receive proper compensation on time and benefits as required by law.
Tax compliance
An EoR service also handles tax compliance matters, including filing and remitting payroll taxes and other statutory contributions to local authorities. They keep abreast of changes in tax laws and regulations, ensuring that companies remain compliant and avoid penalties or fines.
HR policies and practices
Understanding local norms and customers is essential when hiring talent in different jurisdictions. An EOR solution often establishes and enforces HR policies and practices that align with local norms and legal requirements. This includes handling issues such as employee terminations, disciplinary actions, and workplace safety regulations.
Compliance monitoring and updates
Local labour laws and regulations are constantly evolving. With EoR as your partner, you stay updated on changes to employment laws and regulations in the countries where they operate. They monitor compliance requirements and update their processes and practices accordingly.
Risk management and audit support
EORs assist in managing risks related to employment law compliance by conducting audits, providing documentation, and supporting legal inquiries or investigations if they arise.
Local partnerships and networks
Many EOR providers have established relationships with legal advisors, tax consultants, and other professionals in various jurisdictions. This network helps them stay informed about local legal developments and seek expert advice when necessary.
Best practices to mitigate EoR risks for your organisation
Choosing a reliable EoR provider is essential for ensuring smooth and compliant international expansion. A reliable EoR partner minimises operational risks and enhances the efficiency of global workforce management. With the right EoR provider, you can ensure that your international teams are support and have the best worker experience.
Below, we’ve outlined some practical steps to effectively mitigate risks associated with EoR services:
Do your due diligence
Make sure you choose a reputable, experienced workforce solutions company that offers the specific services you require. Engage with their representatives and ask plenty of questions. Ask to speak with a couple of their current EOR clients too. Are they satisfied with the services they are receiving? Has the partnership resulted in cost savings and streamlined operations? Did they deliver on all their promises?
Examine data security
Do they have data security certifications? These certifications indicate that a company has met specific standards for protecting sensitive information. With this, you can have peace of mind knowing that your workforce data is secured and protected from unauthorised access and breaches.
Consult with a legal expert
Considering the complexities of local employment laws and tax regulations, consulting with in-country legal experts can provide guidance when evaluating your EOR options. Staying proactive and keeping your organisation updated on evolving employment laws and regulations will enable you to align your practices accordingly.
Conduct regular audits
Carry out periodic checks to ensure your chosen EOR provider lives up to their promises. Do their practices align with the latest regulations and requirements? It is essential to review all aspects of your employment practices to address any potential compliance issues that may arise.
Key considerations when choosing an employer of record (EOR) provider
Selecting the best employer of record provider that will suit your needs and requirements is crucial to propel your global growth initiatives When evaluating potential EoR partners, it is important to consider several key factors to make the most informed and strategic decision:
Global coverage
A reliable EoR provider offers extensive global reach, with operations in all countries where your business intends to establish a presence. This ensures seamless integration of your workforce, regardless of location. Look for providers with a proven track record of supporting companies similar in structure and industry to yours, which demonstrates their ability to understand and meet your specific requirements.
Contract alignment
Your company and the EoR provider should meticulously craft the contract to safeguard your business interests, incorporating stringent IP and confidentiality provisions to secure your proprietary information and trade secrets.
Understanding of requirements
Your EoR provider should clearly understand your requirements and provide the type of service you are looking for. The provider should have a portfolio of services customised to suit your company’s specific demands, backed by experience catering to clients with parallel operational scopes and challenges.
Expertise
Choose an EoR provider that have in-depth knowledge and experience dealing with multinational corporations over multiple locations. They should also have a team of experts who can support and guide your company in ensuring compliance and mitigating risks.
Transparent and structured fee
Financial clarity is non-negotiable. Investigate the EoR’s fee structure thoroughly to understand the core service fee and any potential additional costs. A credible EoR provider will present a transparent pricing model and clearly explain any potential charges. It is also wise to inquire about their invoicing and payment schedules to align with your company’s financial planning and cash flow management.
Streamline your global expansion with CXC
In today’s borderless business landscape, the opportunities for international growth have never been more promising. With global expansion, you can unlock a multitude of benefits, including new revenue potential, access to a wider customer base, and the ability to tap into a more diverse talent pool.
However, we understand that global expansion can seem like a complex and daunting venture. The thought of setting up operations in a foreign country may appear time-consuming and costly, particularly for smaller companies. A do-it-yourself approach can bring risks, increased costs, and overwhelming time factors, especially if your intention is to start small and gradually grow your business in the new market.
That’s where CXC comes in. Our expertise and comprehensive solutions ensure that you can successfully navigate the complexities of global expansion with confidence. Speak to our team today.
