If your team is spread internationally and you want to keep recruiting the best international talent, working with an Employer of Record (EOR) is a simple way to do it. There are lots of benefits to working with an EOR, and one of the most important is the mitigation of risk. In this post, we’ll explore how using an EOR can mitigate a company’s exposure to risk.
What is an Employee of Record?
There’s a problem with recruiting internationally. You need a presence on the ground in the countries in which you hire, to meet local laws. Or you treat every employee as an independent contractor. Both create obvious problems of cost and impracticality (in the first case) and legal risk (in the second, explored more below). An EOR is a way of avoiding both issues by working with a third-party service provider who effectively employs the people you recruit on your behalf, in a fully compliant way.
What are the benefits of working with an Employer of Record?
There are several, the most obvious being that you avoid the issues outlined above. In addition, the EOR will manage payroll, onboarding, commissions and local tax arrangements, so you don’t have to. They will handle employee data, keeping everything up to date on your behalf. And when you choose an EOR who also happens to be a payroll processor, you combine the benefits of an EOR with the benefits of outsourcing payroll. Those advantages include speed, accuracy and time-saving simplicity for your organisation.
Yet perhaps the most important advantage of working with an Employer of Record is the extent – and variety of ways – you reduce risk within your organisation.
How an EOR reduces risk
1. No legal entity required
You want to recruit an international team, working remotely from their home turf. Naturally, you want to do it compliantly and legally. Even if you wanted to establish a legal entity in each of the countries in which your people operate, however, the practicalities of that – and the risk of getting something wrong – would be overwhelming for most organisations, especially if you’re new to international operations.
With an Employer of Record, you don’t need to be an expert in employing a global workforce, because the EOR is.
2. Test markets without long term commitment
You may not have a presence in all the countries in which you operate yet, but you’re planning for that to change. The trouble is you don’t yet know which markets will take off. Working with an EOR temporarily is a great way of enabling your international plans to take shape without having to commit to (and make a major investment in) a specific country or countries at this stage.
3. Avoid tax and employment law non-compliance
When you work with an Employer of Record, the EOR is responsible for legal compliance with local tax and employment law. That not only removes the obligation on your part to understand, apply and stay up to speed with international law; it also removes the risk of getting something wrong (because the EOR carries the can) and the reputational risk that may flow from it – because the EOR takes the PR ‘hit’, not you.
4. Avoid misclassification-of-contractor penalties
If you’ve used contractors in the UK over the past few years, you’ll know all about IR35, the off-payroll rules designed to ensure companies weren’t using contractors when, effectively, they were employees.
You may not know that IR35 – or, at least, legislation similar to it – is in place in countless countries around the world. That presents a challenge for any company that decides to take the contractor route to international recruitment.
The simple fact is that a measure designed to cut complexity could cost you dearly if local authorities decide your arrangement is one of de facto employment.
When there’s a simple alternative in using an EOR, it seems pointless to take the risk.
5. Reduce employee churn
Recruiting isn’t easy. Nor is it quick, simple or cheap. The more people you can retain, the easier life will be. Another problem for any organisation taking a contractor route to international recruitment is that your hires never feel part of your organisation. That increases the risk they’ll simply head off in search of a better offer.
With an EOR, you can recruit, onboard and manage your people as your people (even though the EOR is the organisation doing the day-to-day admin), which helps reduce attrition.
Hire the best global talent – and pay them – easily. Make Just Payroll Services your Employer of Record. To find out more, talk to us.