Compliant hiring of employees abroad: Employer of Record

Hiring employees through an Employer of Record (EOR) has become a popular option for companies in need of flexible workforce abroad without the administrative burdens and risks of direct employment. Working with an EOR for hiring temporary employees abroad has its benefits, even if the organization already uses contract management services in their home country, for example through an MSP and/or Broker. It is advisable to use an EOR for hiring abroad, especially if the hiring organization does not have its own legal entity locally.

The benefits of an EOR:

Broader access to talent: By working with an EOR solution, the organization gains the ability to attract employees in countries where it does not have its own legal entity.

Reduction of administrative burdens: An EOR has a local legal entity (or partner) in the country where the temporary employee works, taking responsibility for performing accurate payroll administration, invoicing, tax filing, insurance, and other HR tasks for hired employees. Additionally, an EOR can also contract employees from a supplier. This allows companies to focus on their core activities without the additional administrative burdens.

Risk mitigation: EORs also take responsibility for complying with labor laws and regulations. This reduces risks for companies, such as lawsuits, fines, and potential reputational damage related to non-compliance with local laws and regulations in the country of hire.

Flexibility: EORs provide companies with the ability to quickly and easily contract temporary personnel when the hiring organization is not established in the country of hire. The knowledge and processes do not need to be built and set up by the hiring organization itself, but can be obtained as needed from the EOR.

Expertise: EORs have expertise in local laws and regulations in the country of hire for temporary employees. With this expertise, companies can ensure that their employees are paid correctly and comply with all applicable laws and regulations. However, it is important to choose an EOR provider that actually has presence and expertise in the countries of hire, as not all providers have the same geographic coverage.

Risks:

Less control over employees: Since EORs are responsible for HR tasks of employees, companies have less control over their hired personnel. An additional link in the chain that can lead to communication issues between the employee and the company, as the EOR is effectively the employer.

Higher costs: Working with an EOR can result in higher hiring costs. This is because EORs charge additional costs for the administrative tasks they perform and the risks they cover.

Potential delays: Since EORs are responsible for hiring employees and performing administrative tasks, this can lead to delays in hiring personnel.

Choosing EOR providers:

There are now a range of providers active in this market. Market analyst Everest conducted a survey in 2022 among 15 larger EOR service providers. Additionally, there are still a significant number of larger and smaller players active. When choosing an EOR solution, careful evaluation should be done to determine which provider is best equipped to offer the desired services in the countries where employees may be hired.