For a professional company, hiring a new employee comes with many costs, tasks, and liabilities when taking them on board. An employer of record (EOR) is a third-party organization that allows companies to delegate this work to them. Employer of record services focus on traditional employee management and tasks.
An employer of record will overtake tasks such as:
- Handling employee salary, benefits, or insurance
- Processing payroll and timesheets
- In charge of hiring new employees
- Handling unemployment or employee termination
- Depositing or filing a company’s taxes
- Creating employment contracts
- Conducting background checks or drug screenings.
Why Use an Employer of Record?
As your company begins to grow, it is integral to take the necessary steps to expand it internationally. An essential component in making your expansion successful is hiring the right professionals to do the job. An employer of record will save your time and energy so that you can concentrate on core responsibilities. These are the main reasons why you should opt to use an Employer of Record.
1. EOR Will Oversee All HR Operations
The tasks that are accomplished by an employer of record encompass those of an HR department. Employer of record relationships make up a majority of the tasks they execute. They overtake any duties relating to employee management, such as recruiting or terminating professionals, filing the paperwork for taxes and payroll, or designing insurance policies and benefits programs.
2. EOR Improves Business Efficiency and Time Management
Expanding your business internationally can be a daunting and time-consuming task. Easy mistakes can be made when attempting to manage employees along with your business operations. An EOR will make your company run more smoothly and efficiently by overseeing all employee management and delivering more effective HR services. It will make communications between your employees and business more seamless as they are proficient in employment regulations. The employer of record services that are offered are enough to boost your company’s productivity and organization. It saves you a lot of time in the long run since they oversee all of employee management.
3. EOR Improves Cash Flow
Operating a business isn’t easy, so hiring an employer of record can be beneficial when looking to get some help in business management. They are even able to restructure the company’s cost allocations to increase profit margins by reorganizing the cost dynamics of different sectors such as payroll, employee benefits, or overall compensation. By restructuring the cost allocations, money can also be saved in the marginal expenses of the company. The result is increased savings for your company and improved cash flow over time.
4. EOR Improves Compliance
When hiring employees in other countries, your company has to comply with the country’s regulations, policies, and laws. Many people opt to use a Payroll Only Registration (POR) for their company. However, a POR’s only function is to register your business for payroll in a country. It is essential to choose EOR to help navigate through more than just payroll. An EOR will also overtake tax regulations, benefits, or on-site work compliance concerns for employee relationships. They also become the legal employer for a company since they manage employee liabilities and responsibilities and help with employee compliance.
What Is the Meaning of an Employment Record?
An Employer of Record acts as a third-party contractor that takes on the responsibility of all formal employment tasks that pertain to any employee that is located overseas. They also take on many responsibilities that are associated with immigration, local employment, or payroll and tax details. Hiring an Employer of Record mitigates the stress that comes with employing a professional outside your home country and allows you to hire anyone in the world. EORs are partnered with companies all over the world — US, UK, Asia, Europe, and Australia, allowing you to readily have access to professionals from any corner of the world. An Employer of Record is beneficial in the way that they manage costs, are fully compliant with local laws, minimize the need for incorporation, and allow you to quickly hire new employees.
An Employment Record (ROE) is an official document that depicts basic information about an employee such as their contact information, employment history, certifications, and how much they have earned with that employer. An ROE will also contain important personal information that is required by federal or local laws. That would include citizenship status, social security number, payroll tax eligibility, etc. An employee needs to have an ROE if they are filing for employment insurance, and employers need to possess employees’ ROE documents for tax and legal purposes.
How Much Does an Employer of Record Cost?
The cost of an EOR ranges widely, depending on the size of your company and its location. According to Elements Global Services, the average base cost of an employer of record ranges from $15,000 to $20,000. However, the cost of an EOR can be as high as $80,000 per year. It can also increase by several thousands of dollars if you require your EOR to perform additional jobs, such as bank capital management, tax compliance, tax registrations, or statutory registrations.
What Does a Professional Employer Organization Do?
A Professional Employer Organization (PEO) is a human resources outsourcing company that allows you to hire professionals from anywhere in the world but minimizes the expenses or logistics needed to set up an entity. A PEO will help you expand your business by employing revenue-generating roles and scaling your company to employ a larger number of professionals. Entering new markets is also a very daunting task. A PEO will take on the duty of knowing all the local laws, regulations, and culture of your market so that they can give you access to full-time employees while taking on the risk and exposure. A PEO will act as a co-employer to your company, support your experience when hiring outside your home country, and will ensure that all new skilled employees are appropriately assisted and supported.
