What is a Global Employer of Record?
Want to take advantage of remote working on a global scale? Considering overseas expansion? An Employer of Record like Agility EOR can make it happen – safely, securely and in full compliance with local HR law.
The remote working revolution
In recent years remote working has become more and more common, often spreading beyond national boundaries. It’s here to stay. Research from Owl Labs found that remote employees were 22% happier than workers in an onsite office environment and stayed in their jobs longer. A McKinsey study found that across all geographies, employees are the most interested in having access to remote work, with nearly a third saying they would like to work remotely full time.
Source talent worldwide
In their quest to find talented employees, businesses now look further afield than ever before. That affects the structure of the labour force, increasing the number of countries in which individual workers are located. Employers who want to continue lawfully paying their globally dispersed workers have two options: either set up an entity and register as an employer in the country where their worker lives or hire an Employer of Record (EOR) to do so on their behalf.
What exactly is an EOR?
Employer of record, or EOR for short, describes the company that is legally responsible for paying employees. You’ll also encounter the term PEO, or Professional Employer Organisation (it’s in our name), but the services we offer are also known as EOR.
To put it simply, Agility EOR can handle all the legal and regulatory details involved in employing people from an overseas entity. HR, Payroll, Benefits, taxes, stock options, and compliance are all handled by us as an Employer of Record.
Daily tasks and duties of the employee are not managed by an EOR. Instead, these will continue to be managed by your company; the EOR worker will report, be managed and assessed in the same way as any directly employed member of your team.
Why do I need to use an Employer of Record?
International Employment Law is complex, varies from country to country, and the penalties for errors could inflict serious financial and reputational damage on your company. So (assuming you don’t have time to study for a master’s degree) an Employer of Record is the ideal way to ensure you’re 100% compliant in all the countries you employ people in.
Employer of Record services are unique, specialised and complex. It takes a significant amount of time to learn the rules and local employment norms, set up the necessary infrastructure, and identify trustworthy local partners. Multi-country payroll providers or generalist HR consultancies cannot match the expertise of an EOR such as Agility EOR.
What are the benefits of using an EOR?
When venturing into new territory, using a EOR can be a prudent choice. The EOR will handle your payroll, taxes, and visa requirements in the foreign country. A company that acts as EOR can aid salary benchmarking, benefits management, and the hiring of international workers.
There can be significant advantages of an EOR, especially for a small or medium sized employers, including:
- Companies can expand operations more quickly than by forming a foreign entity in the country and avoid the risks associated with doing so
- The use of a Global EOR is especially attractive to smaller businesses, or those without the necessary corporate infrastructure to handle local payroll, tax, and visa issues.
- Companies can save valuable management and admin time by outsourcing payroll and HR issues to an EOR or global employer of record.
- Companies can often save money by outsourcing payroll and human resources management to an EOR or global employer of record.
- Payment for the EOR service is via a simple monthly management fee.
When dealing with payroll processing and employment legal issues for employees across the world, having a EOR handle such details on your behalf can be extremely helpful. Without the EOR, you would have to keep up with ever-changing legislative requirements in other territories to ensure your compliance.
Why or when would a company use Employer of Record services?
When a firm wants to expand internationally but doesn’t want to establish a physical presence there, it will commonly employ an EOR to do business there.
Setting up an entity in a new jurisdiction can be time-consuming and costly. A new initiative or commercial venture may require you to act quickly. Sometimes a temporary workaround is all you need.
In cases like these, using a global Employer of Record as an alternative to employment in the country can be beneficial. Legal entities will be established in the EOR’s operating regions to handle payroll, human resources, and immigration. Your remote workers will see the EOR as their official employer in the host country.
Can’t I use a contractor model? We’ve done that for years…
This question comes up time and again when we discuss our clients’ wishes to grow their workforce or establish a new office. The issue is complex, as there are multiple factors to consider and each international jurisdiction has its own rules. But tax authorities around the world are taking an increasingly hard line on the contractor model, especially if the contractor in question is working exclusively for your business, represents your organisation or is being managed by someone in your team. Get it wrong, and the penalties can be punitive both for your company and the contractor.
To find out more about this topic, click here
Is employer of record (EOR) service legal?
Employing workers in foreign nations via EOR is permitted by law. However, not all EORs are created equal when it comes to compliance. An EOR like Agility EOR, with its own direct entities and a partner network chosen for quality rather than costs, will deliver the highest standards of compliance. Make sure the EOR you’re considering either has a local presence or works with reputable partners where required.
How do you end an employment contract via an Employer of Record?
Our clients have complete control over the day-to-day interactions with their employees, and they decide how their business strategies will affect their workforce. We frequently get questioned about the EOR model’s provisions for terminating employment, which is understandable given that this is one of the most contentious and unsettling aspects of any working relationship.
This is where an EOR comes in handy; they know the ins and outs of the country’s employment laws and can help your company comply with them. A professional EOR like Agility EOR will assist the client in terminating the employment contract in a way that is respectful to both parties. This includes providing guidance on the legal requirements in the relevant jurisdiction and ensuring that the employee is treated fairly throughout the process.
Employees in most countries now have the right to a transparent and fair process before their employment is terminated, even if “fire at will” practices are still accepted in some states.
That’s why it’s crucial for a business to have input from its EOR and their local representatives before terminating someone’s job. Many countries have employment tribunals, and if a business is found to have mis-handled the termination process they may be forced to pay punitive damages.
At Agility EOR, we are familiar with employment laws of the countries we operate in, and we have in-depth understanding of the necessary procedures. If you’re considering terminating someone’s employment, make sure you contact us first!
Scott Winter
HR Director
