In this article, we will delve into the concept of Employer of Record (EOR), its responsibilities, benefits, and the services it offers.
The global EOR market is projected to reach USD 8.04B by 2031, growing at a CAGR of 6.8%.
The demand for Employer of Record services goes back to COVID-19 and the increased preponderance of remote work. Which has led to a significant rise in global talent acquisition.
To help organizations manage their workforce during the pandemic, big market players started wondering “How do we manage our workforce in the new remote era?”.
And since the concept of an EOR provided all the solutions for this shift. Eventually, Tech companies, startups, remote-first businesses, nonprofits, and healthcare organizations started partnering with these companies.
Why? These companies can easily hire internationally and have expertise in local labor laws. These perks are greatly valuable for the mentioned companies.
What is an Employer of Record?
An Employer of Record (EOR) assumes the legal responsibilities of employing workers on behalf of the client company.
They handle all employment-related tasks such as payroll, taxes, benefits, and compliance with local labor laws. Essentially, the Employer of Record becomes the legal employer, while the client company manages the day-to-day tasks and supervision of the employees.
Responsibilities of an EOR
According to industry studies, companies can realize savings of up to 30% on administrative costs by outsourcing employment responsibilities to an Employer of Record. So what does an EOR do?
1. EORs handle payroll processing. Not only that but they are dedicated to ensuring accurate and timely payment of wages and managing tax compliance. So, they will calculate all the payroll taxes and make sure they are paid properly.
2. They provide access to health insurance plans and oversee additional benefits such as paid time off and wellness programs. They also manage retirement benefits like 401(k) plans.
3. EORs ensure employment contracts adhere to local labor laws. They stay updated on changes in labor regulations, ensuring ongoing compliance. Employers of Record also manage workplace safety standards, complying with OSHA regulations to maintain a safe working environment
4. EORs also manage the complete recruitment processes. This includes elements such as onboarding, background checks, and training. They also manage employee relations issues, such as dispute resolution and disciplinary measures.
5. By acting as the legal employer, Employers of Record assume many employment liabilities, protecting the client company. They provide workers’ compensation insurance and manage claims, ensuring employees are protected in case of work-related injuries
6. EORs ensure compliance with local employment laws and tax regulations for companies expanding internationally. They provide expertise in local labor markets, helping navigate the complexities of hiring and managing employees in different countries
Benefits of an EOR
Businesses using Employer of Record services report a 25% faster time-to-hire for international roles compared to setting up local entities themselves. Here are some of the benefits partnering with an EOR can provide you.
1. Assures compliance with complex local labor laws & Reduced legal risks.
2. Eliminates the need for setting up a local entity, saving time and money.
3. Allows companies to quickly scale their workforce up or down based on project needs.
4. Frees up resources for strategic business activities.
Types of employer of record service providers
Employer of Record service providers can be classified into two categories. Comprehending these types is critical for businesses to pick wisely, considering your functional scale and unique needs.
Type 1- Aggregator models
Firstly, there’s the Aggregator model, in this model EORs partner with local Employer of Record providers in different countries to offer a wide range of services across multiple jurisdictions.
Specifically, these providers act as intermediaries, managing a network of local EORs.
Type 2 –Wholly owned infrastructure models
In the Wholly owned infrastructure model, EORs have their own established entities in the countries they operate in.
They do not rely on third-party providers and manage all Employer of Record services in-house.
How do they compare?
Aggregator models are often more flexible and cost-effective for businesses expanding into multiple countries. On the other hand, Wholly owned models might offer better compliance control and tailored services but at a higher cost.
What’s the difference between a PEO and an EOR?
While both EORs and PEOs offer HR outsourcing services, they differ fundamentally in scope and structure:
Employer of Record acts as the legal employer for compliance purposes but allows the client company to manage day-to-day work and supervision. A PEO however, co-employs the workers, sharing responsibilities with the client company, including HR management and benefits.
For businesses looking to expand globally without establishing a local entity, EORs are typically more suitable due to their focus on compliance and legal responsibilities in multiple jurisdictions.
C o n c l u s i o n
The global EOR market is growing fast, technologies such as robotic process automation and AI are enhancing EOR services.
At Gini Talent, we offer complete EOR services. So, whether you are looking to expand internationally or manage a remote workforce. Contact us today for a free consultation.
