What is an Employer of Record? Understanding and Choosing the Right EOR

Expanding into a new market can be both terrifying and exciting for your business – it likely means you're leveling up. Many businesses choose to partner with an employer of record (EOR) to make the global expansion seamless. Are you wondering what and how an employer of record can help your business? Below we’ll explore what an EOR does and how to choose the right one.

What does an employer of record do? 

EORs allow businesses, particularly those expanding into the global marketplace, to hire employees without establishing a legal entity in those locations. The EOR manages the day-to-day employee relationship, while the client company (EOR) retains control over the administrative and HR functions. This service is particularly beneficial for businesses looking to expand globally, work with remote teams, or streamline their HR processes.

What are the benefits of partnering with an EOR? 

As businesses begin to test out new markets, they may wonder, how can an EOR benefit their expansion? Here’s some of the most important benefits of partnering with an employer of record. 

Global Expansion

For those looking to expand internationally, an EOR can facilitate entry into new markets by managing local employment laws, regulations, and compliance requirements. This allows businesses to establish a presence in a new country without the need to set up a legal entity.

Compliance Management

Employment laws and regulations vary from country to country, and staying compliant with these laws often becomes complex. For example, compared to the US, hiring a software developer in Spain means contributing a high amount to social security due to their comprehensive healthcare system. EORs specialize in compliance management, ensuring that all employment-related tasks are carried out in accordance with local laws and regulations, reducing the risk of legal issues.

Time and Cost Savings

Partnering with an EOR also saves time and resources that would otherwise be spent on establishing legal entities, managing payroll, and navigating complex regulatory frameworks in different jurisdictions. An employer of record allows businesses to focus on building their core business. 

Quick and Flexible Workforce Scaling

EORs can help small businesses quickly scale their workforce in response to changing business needs. This is particularly useful for projects with fluctuating demand or for those entering new markets where rapid workforce development in the hiring and expansion process is necessary.

Risk Mitigation

EORs assume a significant portion of the legal and compliance risks associated with employing workers. This includes staying up-to-date with labor laws, tax regulations, and other employment-related matters, reducing the burden on the employer. 

Access to Benefits and HR Support

EORs often provide comprehensive benefits packages, including health insurance, retirement plans, and other perks. They may also offer human resources support, helping with employee onboarding, training, and performance management.

Flexibility in Employment Arrangements

Most EORs can support various employment arrangements, including temporary or short-term contracts, part-time employment, or full-time positions. This flexibility allows businesses to adapt to different business needs and market conditions.

How to choose the right EOR 

Now that we’ve explored how EORs help global expansion, let’s consider how to choose the right EOR for your business needs: 

1. Global Presence and Expertise:

   • Ensure that the EOR has a strong presence and expertise in the specific countries or regions where you plan to hire employees. 

   • Check if they have experience navigating local employment laws, regulations, and cultural nuances.

2. Compliance and Legal Expertise:

   • Verify the EOR's track record in maintaining compliance with local employment laws and regulations.

   • Assess their understanding of complex legal issues, tax regulations, and other compliance requirements.

3. Industry Experience:

   • Consider whether the EOR has experience working with businesses in your industry. Industry-specific knowledge can be beneficial in addressing unique employment challenges and requirements.

4. Range of Services:

   • Evaluate the comprehensive services offered by the EOR. This includes payroll processing, benefits administration, tax compliance, and other HR-related functions.

   • Determine if they can support your specific workforce needs, such as contractors or full-time employees, and if they offer flexibility in employment arrangements.

5. Technology and Integration:

   • Assess the EOR's technology infrastructure and whether it integrates seamlessly with your existing systems. This is crucial for efficient communication, data sharing, and overall collaboration.

   • Consider the availability of user-friendly platforms for managing payroll, employee data, and other HR processes.

6. Scalability:

   • Determine if the EOR can accommodate your businesses growth and evolving needs. This is important for those planning to scale their workforce or expand into new markets.

7. Customer Support:

   • Evaluate the quality of customer support provided by the EOR. Responsive and knowledgeable support is essential for addressing issues, answering questions, and ensuring a smooth partnership.

8. Data Security and Privacy Compliance:

   • Assess the EOR's data security measures and their compliance with privacy regulations. This is particularly important when hiring employees in the EU because of the strict General Data Protection Regulation (GDPR) that outlines how employee data must be handled. 

9. Cost Structure and Transparency:

   • Understand the EOR's fee structure and ensure there is transparency in pricing. Hidden fees or unclear cost structures can lead to unexpected expenses.

   • Request a detailed breakdown of costs and understand how billing is handled.

How Justworks Can Help 

Justworks’ global EOR is the solution for small businesses looking to easily hire talent in countries where they don’t already have a legal presence. 

Justworks has direct entities in 11 countries, with the ability to hire in 100+ additional countries upon request through our trusted local partners. You can fearlessly handle HR essentials like payroll, benefits, local compliance, and more. 

Learn more about our EOR services, and get started today!