The complexity of recruitment goes beyond finding the ideal candidate. You still need to deal with all the implications, including legal compliance, tax obligations, administrative duties, and more. And this even adds up a level of complexity when you’re looking for global talent because you need to learn more about different country’s regulations. Here’s when EOR comes in handy.
An employer of record (EOR) acts as the legal employer for a client’s international employees. This entity assumes all legal obligations associated with employment (contracts, benefits, salaries, etc). By doing so, it enables clients to recruit global talent while ensuring strict adherence to the respective local employment regulations.
But how exactly can EOR services transform your recruitment strategy from standard to standout? Can EOR also include talent search and vetting processes? Let’s find out.
What is an Employer of Record (EOR)?
An employer of record (EOR) is a third-party organization that assumes the formal responsibilities of employing staff on behalf of another company.
For companies looking to expand their teams with international talent, global employer of record becomes a fundamental service as they handle all the legal and regulatory requirements relayed to employment, including:
- Managing and disbursing payroll
- Submitting and managing tax obligations
- Administering unemployment claims
- Overseeing workers’ compensation claims
- Distributing Forms W-2
- Drafting and managing employment agreements
- Employee onboarding Keeping up-to-date insurance certificates
- Organizing and securing Forms I-9
- Ensuring adherence to E-Verify requirements
- Conducting background investigations and drug tests
- Providing and managing employee benefits Executing employee terminations
Essentially, while the client company retains control over the day-to-day activities and duties of the employees, the EOR assumes the legal role of the employer for tax and compliance purposes.
Why Use EOR Services?
The best aspect of hiring remotely is the ability to expand your talent pool, enabling you to reach new markets. However, global hiring comes with different challenges that EOR is able to tackle right away.
EOR offers a range of strategic advantages for companies who are looking to expand their workforce quickly, navigate complex regulatory environments, or establish a presence in new geographical markets. These are its main advantages:
1. Rapid Global Expansion
One of the main benefits of EOR services is that it allows your company to hire employees from other countries without the need to set up a legal entity there. This reduces the time and cost of international expansion.
Let’s take the tech industry as an example. Being one of the most competitive industries, it makes it challenging for most companies to hire above-level talent without expending an exorbitant amount of money. With the use of EOR, you can hire remote tech talent, making sure your business aligns with all the regulations and laws needed.
At DistantJob, being an IT remote recruitment agency and EOR provider, many of our clients have benefited from sourcing talent from locations with lower salary expectations. Despite this cost advantage, they are able to offer compensation that is competitive, if not above the local average, while we handle all associated legal and administrative tasks.
“We have 3 employees from DistantJob right now. Phenomenal. For the dollar value that we are spending, we are far ahead of what we would find locally or offshore.”
– Matt Bricker, CTO at KnowFully
2. Compliance with Local Laws
When you hire global talent, there are many considerations that you might not be aware of. For example, employment standards are held differently, as well as local labor laws.
To mitigate legal risks and penalties, EORs make sure that your employment practices adhere to labor laws, tax regulations and employment standards of the countries you hire from.
This includes aspects such as minimum wage laws, overtime regulations, holidays, leave entitlements, and more.
3. Streamline and Tax Fillings
EOR services offer a unified system that manages payroll operations globally. This ensures that the payroll is processed efficiently in compliance with the varying tax withholding requirements and statutory deductions of each jurisdiction.
By handling payroll in local currencies and adhering to local tax laws, EORs ensure that companies meet their fiscal responsibilities accurately and on time. These services can be tailored to fit the specific needs of a company, considering the local legal landscape, payroll cycles, and other unique requirements.
When it comes to tax filings, EORs are instrumental in understanding the local and international tax laws. They are well aware of the latest legislative changes to make sure that your company remains compliant.
4. Efficient Recruitment and Onboarding
Essentially, EOR services are not involved in talent search and vetting process (more on this below). However, some may offer management of the recruitment processes, from sourcing to conducting background checks and drug screenings.
They also facilitate a smooth onboarding process to ensure that new hires can easily integrate into their roles, helping them navigate through the contracts, documentation, and more.
When looking for an EOR provider, make sure to understand what they offer, as not all of them offer the same. Some focus mostly on the legal aspects of hiring, while others offer the full spectrum of the hiring process.
5. Industry Expertise
By using EOR services, you can learn valuable insights about local and global market conditions, employment practices and cultural nuances that will help you enhance the effectiveness of recruitment and management strategies.
EOR services provide access to in-depth knowledge of different markets. For example, if you’re looking to hire software engineers, EOR can help your company identify where high-demand skills are most available and where they might find more favorable employment costs without compromising quality.
6. Cost Savings
When you hire remote employees, if you don’t have knowledge of the local market and its regulation laws, it’s highly probable that you’ll have to hire someone who does. This might not be only one person but several, taking into account all the different aspects that hiring involves.
By using EOR services, you can significantly reduce the administrative burden of HR, payroll and legal compliance, all under a single umbrella. This not only leads to considerable cost savings but also allows your business to reallocate resources and focus more on your core operational activities.
7. Simplify HR Operations
As your business expands globally, so do your HR responsibilities. This expansion requires a thorough understanding of tax and labor laws, employee benefits, termination procedures, and more across different jurisdictions.
Employer of Record (EOR) services offer a streamlined approach to managing these challenges. This comprehensive support allows your business to focus on growth while minimizing the administrative burden associated with talent expansion.
EOR vs. Staffing Agencies
EOR services are often mistaken for staffing agencies; however, they have different purposes.
As we mentioned, an EOR is a third-party organization that legally employs individuals on behalf of another company. They handle all legal, HR and compliance responsibilities associated with employment.
On the other hand, staffing agencies are recruitment firms that help companies find temporary or permanent employees. Once the candidate is placed, the hiring company usually assumes all responsibilities related to employment.
These are the core aspects that differentiate EOR from staffing agencies:
| EOR | Staffing Agencies |
| EOR acts as the legal employer of the staff. | Recruitment focused, specializing in sourcing, vetting and placing candidates in suitable job positions. |
| They manage all aspects of employment compliance, payroll, taxes and benefits. | Offer solutions for both short-term needs and permanent positions. |
| Ideal for companies looking to hire employees in new markets without establishing a local entity. | Limited legal responsibility – the staffing agency’s legal responsibilities are limited to the recruitment process. |
In short, EOR services are used for global workforce expansion and employment compliance, while staffing agencies are primarily used to fill job vacancies.
However, some staffing agencies, like DistantJob, also offer EOR services, providing an all-in-one recruitment solution.
“DJ is phenomenal. They find amazing candidates that make hiring extraordinary devs easy. Think of it as having a top recruiter, HR, and payroll departments in dozens of countries.”
– Éric St-Jean, VP Engineering, Monetate
Checklist: Does Your Company Need EOR Services?
- Is your company looking to hire employees in countries where you do not have a registered business entity?
- Do you need assistance ensuring compliance with employment laws in different jurisdictions?
- Are you concerned about keeping up with changes in local labor laws, tax obligations, and employment regulations?
- Would your company benefit from outsourcing payroll and tax management for international employees?
- Do you need help managing different currencies and tax systems for employees in various countries?
- Are you looking to reduce the administrative workload associated with HR, payroll, and legal compliance for a global workforce?
- Do you want to streamline the process of onboarding and managing international employees?
- Is minimizing legal and financial risks associated with international employment a priority for your company?
- Are you concerned about the penalties for non-compliance with local employment laws?
If you answered “yes” to most of these questions, then it’s time you start looking for reliable EOR services.
How to Choose the Right EOR Partner?
Not all EOR services offer the same benefits. The best way to ensure you’re selecting the right partner is to first understand what you need and what you’re looking for and then see if they match those requirements.
Generally, these are some of the relevant aspects to look for in EOR providers:
1. The Cost – Look for an Employer of Record (EOR) that offers transparency in their pricing structure. While some EORs may not list their prices directly on their website, this presents an opportunity for you to reach out directly. During your communication, ensure that they provide a clear breakdown of their fees to avoid any unexpected charges in the future.
2. Consider the Locations – Does the EOR provider operate in the countries where you intend to hire? It’s crucial to verify that the EOR has a presence in the specific regions you’re targeting for your recruitment efforts. If not, you might find yourself needing to engage with multiple EOR providers, which can be both costly and inefficient.
3. Customer Support – Partner with organizations that prioritize attentive responses to both your team’s and your employee’s needs. Your EOR partner plays a fundamental role in engaging with your current employees and integrating new hires on your behalf. To evaluate this, make sure to check out the company’s case studies, reviews and what others have to say about their services.
4. Precision in Employer Burden Costs – Look for a provider that offers precise calculations of employer burden costs. Accurate payroll computation extends beyond basic salaries to include various social contributions like health insurance, social security, and paid time off. These costs vary significantly across different markets, and it’s the responsibility of your EOR partner to present you with precise estimations of these expenses.
Partner with DistantJob: Your All-in-One Recruitment Solution
We understand the complexity of hiring talented software developers. It goes beyond headhunting, sourcing and evaluating. It’s also taking care of all the legal and administrative aspects. This is why we offer an all-in-one recruitment and EOR solution for those companies looking to expand their team with the best technical talent across the world.
What’s in it for you?
From defining job requirements to finalizing paperwork, we take care of everything. We charge no initial fees—you only pay when you hire. Plus, we handle contract management and payments, allowing you to focus on your core business.
Interested? Let’s talk.
