When it comes to navigating international regulations while expanding your business, one of your biggest concerns might be hiring employees. You know rules abroad are probably different regarding minimum wage, required benefits, and taxation, but you aren’t sure on specifics. You may think you’re in for countless hours of sifting through information and paying an army of international HR specialists. And after that’s complete, you’ll need to keep up with regular filing requirements and tax submissions.
Sure, you could go through that hassle on your own if you’re established in the country (more on that later). The better option, however, may be to hire a reputable employer of record (EOR). That’s it. Full stop. Breathe a sigh of relief.
What’s an EOR, you might ask? Let’s get into what they do and how to use one to your business’s advantage when you’re looking to expand globally.
How Does an EOR Work?
An EOR is an entity that has set up an official presence in the country where you would like to hire employees. The EOR will hire employees on your behalf and take care of all administrative filing and payroll processing.
This is similar, but not identical, to a professional employer organization (PEO). The main difference between an EOR and a PEO is who technically employs your workers. When it comes to your responsibilities, this is a very important distinction.
With an EOR, the employees are not legally employed by you. The EOR is the official employer and therefore takes on all risks regarding international employer requirements. The EOR is responsible for making sure that all mandatory benefits are being offered and employer taxes are in compliance. This removes a major compliance burden from your shoulders.
With a PEO, a great deal of the administrative burden is relieved, but not the risk to you. You are still the employer and remain responsible for any administrative errors, even if those tasks are outsourced to a PEO.
When Should I Use an EOR?
Your business needs to retain an EOR if you don’t have a legal presence in the country you’re hiring from. The only other option is to establish a business location in the country of hire. When deciding which direction you would like to go, it’s best to weigh the pros and cons.
Establishing a presence in another country is very time-consuming and requires a great deal of administrative maneuvering. It can also prove to be very expensive. If you are only going to hire a small number of employees, you may not save money by managing them in-house. If you are hiring a significant number of employees for a long period of time, it might be a more appealing option.
Apart from the cost consideration, you will want to determine the value of offloading technical requirements to a third-party expert. Your current HR staff are probably not experienced in international employment law. Therefore, handling global employees internally might require additional personnel. Additionally, any errors in administration could result in expensive penalties to you rather than the EOR.
Another perk of using an EOR when first expanding globally is having the option of later transitioning to in-house or PEO management. A good time to make such a transition might be once you are more firmly established in the area.
What Else Can EORs Do?
EORs looking to separate themselves from other providers offer more than just basic employer support. Some EORs have developed country regulation databases that can help you select which countries would be advantageous to hire from. They might also have options or partners to provide legal or visa-related services.
Benefits administration is a big area where you can run into trouble with international labor laws. An EOR takes care of this whole process for you. First and foremost, they will make sure obligatory benefits are provided. This is extremely helpful since every country has different rules on what benefits employers must offer. If you want to attract in-demand workers, you can choose to offer benefits in addition to the base requirements.
Not only can EORs assist with employees, but they can also hire contractors for you. Contract hires typically don’t require the same benefits as employees, but there can still be country-specific regulations to consider. EORs can help you draft worker contracts that keep you in compliance with independent contractor laws.
Having an EOR manage your contractors is another way you can reduce liability on your business. Improper contracts or contractor misclassification can carry penalties ranging from fines to having your ability to hire contractors revoked, depending on the country. By having an EOR handle contractor administration, you can be more confident legal processes are being followed correctly.
With an EOR, you also don’t have to be on the lookout for upcoming regulatory changes. Reputable EORs will have their teams stay current on changing labor rules and pass along pertinent updates to you. This way, you can be aware of upcoming changes and be better prepared to adapt to them.
Work Smarter, Not Harder
Whether you’re just looking into hiring a few remote workers or expanding your location overseas, an EOR can be a great asset. Not only can you get the guidance you need from an expert in global hiring, your risk is greatly reduced. So before you start down an international research rabbit hole, save yourself the headache and hire an EOR.
