Employer of Record (EOR) companies are among the most powerful tools in a company's arsenal, especially for businesses of small to medium size. They allow business owners to expand globally and accommodate their exponentially growing workforces without worrying about tax law, employment regulations, or intellectual property rights regulations that other countries have.
Let's take a closer look at what an EOR company is and how it helps business owners grow their empires on a global scale:
What Is an Employer of Record?
In a nutshell, an EOR is the best friend of any small- to medium-sized business wishing to expand its business globally. EORs are third parties that enable these businesses to obtain talent internationally and hire them compliantly.
An Employer of Record becomes the full legal employer of a company's international workforce. As an added benefit, the EOR is responsible for all human resource (HR) tasks, such as payroll, benefits and taxes, on behalf of the company that engages it.
How do they achieve this on a global scale? EORs will have established legal entities in territories where their services are available so their clients don't have to.
The Basics of Employer of Record Services
As your firm grows, an Employer of Record (EOR) can help hire and onboard remote workers by providing legally enforceable contracts and visas in almost every major market. Taking in all this information may be challenging, but if you arm yourself with the proper knowledge, we're confident you can make the best choice for your company's expansion plans.
Want to learn more? We've compiled comprehensive guides to take you through the ins and outs of EORs.
Explore our EOR guides here:
Part 1: What's the Difference Between a PEO and an EOR?
When looking at expanding your business into foreign markets, your research might pull up two similar terms — PEO and EOR. However, they're not the same thing. So, what is the difference between PEOs and EORs? Learn the answers to that question and more in our helpful article.
Part 2: Employer of Record vs Automated Payroll Platforms
You may have read that an EOR can also act as a payroll manager, so why shouldn't you use an automated payroll platform instead? The differences between the two services are vast. Find out what they are and which service is the best for your business in our article.
Part 3: Deel vs Emerald Technology: Which Is the Better EOR Solution?
Price should be one of many considerations when picking an EOR solution for your business. It's essential to go down to the nitty gritty details of the service before making the ultimate decision. This article discusses whether Deel or Emerald Technology is the better EOR solution for your business needs.
Part 4: Emerald Technology vs Papaya Global: Which Is Better?
Discover the best solution for your company's global expansion in this comprehensive comparison of Emerald and Papaya Global. Explore their strengths, potential shortcomings, customer service and pricing through our comprehensive comparison to make an informed decision for your business expansion plans.
Part 5: Which Is Better: Emerald Technology or Safeguard Global?
Explore the world of EORs with Emerald and Safeguard, two leading providers in the field. Our comprehensive comparison looks at the benefits, downsides, pricing and customer service experience of the two services to help you make a more informed decision for your upcoming business expansion plans.
Part 6: Emerald Technology or Remote.com: Which Is the Better EOR?
Exploring the competitive market of Employer Of Record services, this blog post dives into a detailed comparison of Emerald and Remote. Delve into their unique approaches, strengths, and weaknesses to discern which EOR service aligns best with your international business growth needs.
Part 7: How EORs Can Raise the ESG Score for Tech SaaS Businesses
Whether you want to sell your firm or raise capital, having an ESG certification will make you a more marketable candidate. An Employer of Record can improve your ESG score in several ways — learn how in our comprehensive guide.
Part 8: Meet Emerald Technology's EOR Team
At Emerald Technology, we believe that knowing the people you plan to collaborate with in business is vital to a successful partnership. This fun article introduces some of the team behind Emerald Technology, who work hard to ensure that your company maintains compliance anywhere in the world.
Benefits of Using an EOR Company
For small-to-medium-sized companies, there are many benefits that an EOR can offer. As you'll learn quite quickly in this article, an employer of record will be an HR outsourcing firm you engage with and your global partner who will help you achieve your globalisation goals.
With that in mind, these are the most significant benefits of partnering with an employer of record:
1. Eliminate the need for foreign entities
Typically, when a company seeks to expand into new markets, it needs to set up a local entity in order to conduct business and hire foreign talent. When you partner with an EOR, you won't have to worry about doing this.
As the perfect global partner, the EOR you engage with will allow you to gain access to international talent without spending precious resources on establishing a local entity. This is because EORs have established their own entities around the world – staffed with experts who will support you throughout your company's global expansion exercise.
2. Manage international payroll and tax
Since your company would be outsourcing most, if not all, HR tasks to their partner EOR, the employer of record will handle everything related to HR, including payroll administration and tax management. Managing payroll at the local level can be challenging, but coupled with an international workforce, payroll management can quickly become overwhelming.
An employer of record would be armed with the knowledge and technology necessary to ensure your workforce is paid appropriately and on time. It will also be able to handle the essential tasks needed to pay the relevant taxes around the world without you having to worry about it.
3. Maintain compliance
When expanding globally, there are three things that a company needs to make compliant with 100% certainty – employment or service contracts, payroll and tax. And since different countries carry differing laws and regulations regarding labour and tax, it is extremely easy to miss a step and become at risk of being non-compliant.
Those who work at your partner EOR company are experts in compliance. They will ensure that hiring and paying talent will always remain compliant, regardless of where in the world your staff may be from. This is because EORs always have their finger on the pulse of changing legislation worldwide and know how important it is to keep documents and procedures updated and aligned with local laws.
4. First-class HR support
When it comes to outsourcing HR services, the support you'll get from a highly-experienced employer of record is bar none. The best EORs understand the need to be present should you have any concerns and will be quick to answer any of your needs.
Your global EOR partner will also handle their tasks expertly and precisely. Have peace of mind knowing that they will manage your workforce responsibly and always ensure timely payment. In addition, your partner EOR will manage all relevant taxes and maintain up-to-date records for your company.
5. Save costs
Not only does it get costly when you need to establish a legal entity in every country where you wish to expand your business, but you will also need to hire competent teams within those markets to handle the global workforce you wish to obtain efficiently and effectively. Engaging with an employer of record as your global partner completely removes the need for both.
Partnering with the right EOR can be extremely cost-effective for small- to medium-sized businesses looking to explore and hire from new markets. Best of all? The mitigation of non-compliance risk also means that you won't have to worry about facing hefty fines!
6. Hire top talent globally more quickly
Since you won't have to worry about establishing entities everywhere you wish your company to operate, working with an employer of record allows your company to hire top international talent quickly. Some first-class EOR companies will even help you look for the right talent to fit your company's needs.
The ability provided by engaging with an EOR to hire top talent quickly allows your company to expand into new markets much faster. It also allows you to focus on the core of your business rather than worry about any legal issues that can arise when you don't engage with an employer of record.
Issues That Could Arise From Not Using an EOR
Now, if you decide to expand your business globally, you should be aware of the problems and issues you might face. When you partner with a reputable employer of record, all these problems will be solved, with a near-zero need to worry (unless you want to!).
Here are four significant problems that could arise from not engaging with an EOR:
1. Risk of non-compliance
The landscape of labour and tax legislation worldwide is ever-changing, and not keeping up to date with their subtleties is a surefire way to face non-compliance issues. As we've mentioned before, all contracts, payroll and tax payments need to remain compliant according to the laws governing the people you plan to hire, according to their country of residence.
Not engaging with an EOR when expanding your company worldwide means that you'll have to hire an in-house team that may or may not be able to maintain compliance as efficiently as those who work with your partner EOR. Compliance calls for efficiency and awareness so that this inability can place your company at significant legal risk.
2. Increased expenses during expansion efforts
Without using an EOR during your company's global expansion efforts, your company will have to establish a new local entity for each country that you wish to expand into and hire from. As it turns out, establishing local entities can be a rather costly exercise. Plus, those costs will be unavoidable.
Firstly, the fees required to create local entities can get quite expensive. You may need to hire local lawyers and sometimes even translators to ensure that establishing that local entity goes smoothly and that you understand what is happening every step of the way. Then, you'll have to hire multiple teams to manage the workforce of their respective markets, one for each country of operation.
As you can imagine, the dollar figure will only continue to rise as your business continues to expand. With maintaining and continuing your expansion efforts, there is only one easy way to mitigate these costs – partner with an employer or record.
3. Contractor misclassification
Did you know that, in certain countries, there is no distinction between an employee and a contractor? There are also certain countries that do have a legal distinction but still require companies to have established a local entity even if they perform no other form of business within those territories. So, even if you wish to hire in certain countries without establishing an entity, for example, by contracting your workforce, you might still end up in legal trouble.
This is why it's extremely important to become fluent in the local labour laws, which, again, can take up valuable resources your company could spend on the business instead. We cannot overstate the complexity of international labour laws or the importance of maintaining compliance in all areas. The slightest misstep can lead to severe consequences.
4. Heavy fines
All the above points lead to this final one. If your company doesn't maintain compliance, if it doesn't have an established local entity, or if it accidentally misclassifies its workers within the eyes of labour laws, then your company will face some severe penalties and fines. A hefty fine is the last thing a small- to medium-sized company must burden as they seek to expand their business globally.
The lack of proper strategic workforce planning also puts your company at risk of legal issues. It might be stressful enough to worry about being slapped with a hefty fine; it's another to worry about going to court. Companies that don't emphasise compliance may face the displeasure of local law enforcement and lawsuits from their global workforce – leading to even higher costs to burden.
What a Great EOR Service Should Include
By now, you should understand the great benefits of partnering with an employer of record and the significant risks you and your company face without engaging with one. With that, you might be wondering what you should look for in the right EOR.
You'll know that you'll be partnering with a top-notch EOR when it has these characteristics:
The worst thing to happen when partnering with any third-party company is finding out about hidden fees and surprise charges at the last moment. An employer of record that provides complete price transparency is definitely one that your company should partner with when seeking to expand globally.
When engaging with an EOR, you need to ensure that they can provide worldwide coverage to whichever country you wish to expand your company into at present and those in the future. If they only have limited reach, engaging with multiple EORs with different prices, packages, and rates might not be cost-effective.
The most important aspect of a trustworthy EOR is one that has a knowledgeable staff. There should be no guesswork when it comes to compliance, regardless of whether related to hiring, payroll or taxes. Although it might seem commendable to say "I don't know", it can be rather detrimental to say so in this regard.
Great track record
An excellent track record is a proven track record. The right EOR for you should have proof of their successes and should be able to showcase that they have had experience in engaging with companies like yours. Don't be afraid to ask lots of questions when you meet your potential global EOR partner — it's incredibly important to make sure that they're the right fit!
Great response rate and support
Responsiveness and helpful support are two highly-ranked characteristics of a great EOR company. You need to be able to rely on them to be there throughout your journey towards global expansion, and they need to respond to you and your needs in a timely manner. Hiring a reliable employer of record will ensure that your globalisation efforts run smoothly and that you have the greatest chance of success in achieving your goals.
Work with a reliable EOR partner — like Emerald Technology
Expanding your business into foreign markets can seem daunting, but it doesn't have to be. With the support of a reliable Employer of Record (EOR) partner, you can confidently tap into foreign markets. By managing crucial aspects such as compliance, HR tasks, and international payroll, an EOR takes the burden off your shoulders, enabling you to focus on growing your business.
While the decision to partner with an EOR is significant, the benefits clearly outweigh the risks and potential complications of expanding internationally without one. From cost savings to compliance assurance and access to global talent, an EOR is an invaluable partner in your company's global journey. Just be sure you choose the right one according to the points we've listed.
Thankfully, you've come to the right place. With Emerald, you can ensure that your tech company successfully expands across the global market compliantly.
Ready to start your global expansion journey with the proper support? Reach out to us today for a detailed consultation on how an EOR can facilitate your international growth. Let's take your business to the next level, together!