An Employer of Record (EOR) is a third-party organisation that hires and pays employees on behalf of another company. It allows organisations to seamlessly work with national and international employees without the need for legal entities in multiple countries. The EOR manages various employment-related tasks, including payroll, benefits administration, compliance with labor laws, and tax obligations. This allows businesses to focus on their core operations while ensuring that employment practices are legally compliant and employees receive the necessary benefits.

The responsibilities of an Employer of Record typically include:

Payroll Processing: Managing employee salaries, bonuses, and deductions.

Tax Compliance: Ensuring that all payroll taxes are withheld and submitted according to local regulations.

Employee Benefits: Administering employee benefits, such as health insurance, retirement plans, and leave policies.

HR Support: Providing HR services, including employee onboarding, training, and conflict resolution.

Legal Compliance: Keeping up-to-date with local labor laws and ensuring that all employment practices are compliant.

While both EORs and PEOs help companies manage their workforce, they differ in their approach • EOR: The EOR is the official employer of the workforce and is responsible for all employment-related liabilities. Companies can utilise EORs to hire employees without establishing a legal entity in the employee’s location. • PEO: A PEO co-employs workers alongside the client company. This means that both the PEO and the client share certain employer responsibilities, which can lead to a more integrated approach to HR functions. PEOs often provide additional services like HR consulting and risk management.

EORs ensure compliance with local labour laws by: Staying Informed: Regularly updating their knowledge of changing labour regulations in the regions where they operate. Tailored Contracts: Drafting employment contracts that adhere to local laws, including terms related to compensation, benefits, and termination. HR Best Practices: Implementing best practices in hiring, employee management, and termination processes to meet legal standards. Risk Assessment: Conducting audits and assessments to identify and mitigate compliance risks.

While an EOR can help navigate local employment laws, it’s essential to ensure they fully comply with regulations around pay, benefits, and working conditions to avoid any potential reputational risks. Companies should ensure the EOR is meeting all tax and social security obligations, especially if there are existing employees in the country, as differences in pay and benefits may raise concerns. It’s important to ask thorough questions about the EOR’s compliance checks to avoid future complications, especially with evolving global reporting standards like the EU’s Corporate Sustainability Reporting Directive. Partnering with a trusted service like Project Global can help you navigate these challenges with confidence, ensuring a compliant and seamless global expansion.

The cost of using an EOR service varies based on several factors, including:

Upfront Costs: The cost of EOR services depends on the provider, but initial expenses are usually minimal since no entity setup is needed. EOR platforms typically apply a per-employee service charge, which tends to be more consistent than entity management fees, which can differ based on the company’s structure and legal obligations.

Compliance Costs: Managing compliance for a legal entity often involves ongoing costs for legal advice and regulatory updates, which can be time-consuming and expensive. With an EOR, compliance is seamlessly handled by experts, ensuring your business stays up-to-date with local laws and regulations. This not only reduces the risk of fines or legal penalties but also saves you the significant costs typically associated with maintaining compliance on your own.

Administrative and Operational Costs: Supporting a new workforce typically requires investment in HR, finance, compliance, and legal teams. Setting up an entity on your own involves recruiting and training staff, which can be costly. Alternatively, outsourcing to local providers saves time but still requires careful management. By partnering with Project Global, you can reduce administrative burdens and scale your business efficiently without managing multiple HR and payroll systems. In addition to administrative and compliance expenses, businesses should consider other potential costs when managing a workforce, such as technology investments for payroll systems, training and development for staff, and potential legal fees for contract negotiations. These costs can add up quickly, making it essential to have a comprehensive strategy. By choosing Project Global as your EOR partner, you can mitigate many of these expenses and streamline operations, allowing you to focus on growth while minimizing unexpected financial burdens.