How EOR Can Save Your Company

An Employer of Record (EOR) is a third party local entity that takes responsibility for all formal employment tasks on behalf of another company. The EOR can be useful for companies that choose not to directly employ a worker on assignment, either in a different state or foreign country.


In this day age of globalization, the “why” of international expansion for many organizations is pretty clear-cut: to access a wider customer base or talent pool, further a mission, or acquire another company. Especially post Covid-19, traditional workplace settings being no longer the norm, and remote working is more widely embraced, organizations become more willing to consider employing offshore competencies. However, it is the “how” that is still a struggle. But it does not have to be difficult. Thanks to employer of record services. A quicker way to add workers in new global markets without having to take on the cost and risk of establishing an entity in a foreign country.



How does an employer of record work?


A global employer of record provider has already done the often costly and arduous work of setting up entities around the world while ensuring all banking, insurance, tax, HR, facilities, and contract requirements are met in order to employ and pay local workers. They, therefore, are able to help organizations the ability to employ abroad without having an entity and in-country expertise to do so compliantly.

When you use an EOR, you rely on the provider to hire workers on your behalf and take on the legal responsibility for complying with all the payroll and employment laws in the country. The employer of record: 

  • Onboards local employees with compliant contracts

  • Remits salaries, taxes, and benefits owed

  • Supports in-country employees’ HR needs

While the employer of record handles the HR and payroll for the in-country employees, you, as the client organization, are responsible for managing the employees’ day-to-day work. In effect, you get to benefit from in-country workers’ contributions without taking on risk to your organization.



When to use an employer of record?


There is a lot to consider when it comes to handling your organization’s global expansion plan. A lack of speed or local expertise could be among your organization’s top concerns, an employer of record may then be the best option for achieving your global growth objectives.



Here are some common situations:


1. A vehicle for exploring new markets. 

An EOR lets you evaluate the readiness of an international market by hiring workers for you in your targeted country. You can “test the waters” in the country by starting operations with your new workers, without having to commit the time and money required to establish an entity.


2. An entity stopgap. 

An EOR lets you evaluate the readiness of an international market by hiring workers for you in your targeted country. You can “test the waters” in the country by starting operations with your new workers, without having to commit the time and money required to establish an entity.


3. Facilitate an acquisition. 

If your organization has recently acquired a workforce in a new country but does not have a way to compliantly pay the new employees because the deal does not include the legal business entity. An EOR would be a great solution to pay the employees compliantly on your behalf indefinitely, or until you set up an in-country entity. 



What to look for in an EOR provider?


When it comes time to evaluate employer of record providers, there are some qualities to keep in mind to help protect your organization. The utmost importance is the extent of the provider’s knowledge in the countries you are targeting for expansion. One way to gauge this is by finding out how long the provider has been in the country and whether it has a direct entity and is not just relying on local partnerships. Besides, the EOR provider should have staff at the local level to fully manage clients’ HR and payroll services. Top providers will have at least a year of direct employment experience in the country, with multiple client examples to prove their expertise.


Conclusion


Overall, the final decision of contracting the services of EOR providers, relies exclusively, on the level of liability and stress that the client wants to handle. One has to consider the complexity of payment schedules, the number of jurisdictions, and insurance policies involved in your current staff. With that, you can weigh the sums that will be invested in the service provision offered versus the stress and money of doing so by yourself. Keep also in mind the costs, both in time and money, of setting up companies overseas. These sets of actions will extend the scope of liability, the jurisdictions where you can be sued, and will, most likely, exceed the difference in the price for an EOR service provision.


Worknetics is an EOR provider for companies looking to establish a workforce or enter in the Vietnam market. With a special focus in the tech industry, we have successfully helped many organizations established their very own dedicated offshore tech teams. Get in touch with us today to find out more how partnering with us in Vietnam is able to help you scale your business.


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