So, your organisation is doing well. You’re expanding, investigating new markets. You’ve heard some great things about a dynamic young manager based in Nairobi… She would be perfect for a role you need to fill.
But you don’t have any contacts in Kenya—never mind a legal entity. Now that’s where an Employer of Record could be the answer. Maybe Cinderella can go to the ball after all!
What is an employer of record (EOR)?
Let’s start with what an employer of record is—also known as an EOR, they become the legal employer of a worker in a certain country. It’s a company in its own right. The EOR legally employs the talent on your behalf. This then lets you hire, pay and insure employees in a place where you yourself don’t have an entity… that is, a legal, compliant presence.
There’s a 3-way contract between you (the company), the employee, and the Employer of Record. As the EOR is the legal employer it allows you to just handle the day-to-day management of the employee, without worrying about day-to-day compliance.
All the payroll, all the tax withholding, all the benefits administration, all taken care of by the EOR.
An EOR is effectively a middleman, making sure everything is legal, efficient, and swiftly executed!
How does an EOR work?
So how does an EOR work, exactly? You still need to spot the new talent – this is after all the most important part of the whole deal. And let’s face it, the fun part! You identify an incredible new hire, or several hires, with no geographical constraints.
You then contact the EOR and let them know who that talent is. The rest of the signing-on process is now delegated. The EOR holds all the necessary entities, understands all the local rules and regulations. They jump through all the hoops for you so you can carry on doing what you do best… running your company.
Payroll processing – tick.
Benefit administration – tick.
Tax withholding – tick.
All employment related HR functions – tick.
It really is a load off your mind. A safe, compliant, stress-free hire process.
And it doesn’t just stop there. It’s ongoing. You’re freed up to do the things that matter most, while the EOR keeps track of all thing’s employment for the entirety of the contract.
Do you need a legal entity in the country where you’re using an EOR?
In a word, no. This is the beauty of the whole system. In these days of global working, you’re free to expand into new markets and new territories—without the costs and administrative burden of setting up legal entities all over the place. Because, let’s be honest, it’s never as simple as a tax number, an annual tax return and a rubber stamp. All those individual peculiarities? Not your problem with an EOR!
If you do have a legal entity in the country you want to employ, then a PEO will be a better solution for you. Read more about the differences of an EOR and PEO!
When should you use an EOR?
Think of an Employer of Record as a litmus test. With an EOR…
- You can employ a far-flung super talent for a short period and see how it goes.
- You can get that super hire up and on the books really fast.
- You can cover a temporary assignment abroad without the cost and hassle of an entity.
- You can enjoy the freedom of employing just a small cohort of global employees. You don’t have to employ a whole department abroad just to make it financially viable.
- You don’t need to worry about compliance. Do you have the time, or the inclination, to mug up on all those overseas rules and regs? Don’t worry, your EOR does.
- You can improve diversity—a huge selling point for your organisation. Using an EOR makes this an easy, viable option.
What are the benefits of an EOR?
Let’s break this down so we can see the benefits of an employer of record clearly:
- Goodbye to all those hiring admin niggles: on-boarding, local tax anomalies, timesheets, recruitment logistics, contract termination—all out of the picture.
- Hello to all that saved time to do what you’re good at—growing your organisation back at home.
- Save some money. Applying for that entity, setting up a whole new satellite HR and payroll division in downtown Nairobi is an expensive business. And while you’re at it, avoid any fines! The EOR suddenly doesn’t look that expensive.
- By using an EOR, you can benefit from ‘group’ insurance policies when setting up benefits. Individual policies tend to be significantly more expensive whilst an EOR will have the advantage of multiple ‘employees’ that they can enrol into a benefit plans.
- You were sure you needed to look East. But now it looks as if West is best. An EOR allows you to keep those options open. Try things and see, before taking the plunge. Flexibility is a huge asset for a small business or start-up looking to the future.
- Stay safe. Compliance is key—we can’t all know the legal ins and out in Timbuctoo after all. But your EOR will. And if they don’t, they know a legal team who do.
- Keep your employees happy. An EOR will be on top of all the local employee perks…. health insurance, retirement plans, all those things they wouldn’t get if they were hired as independent contractors or self-employed individuals.
The easiest way to hire internationally
For fear of sounding a bit evangelical here, for the right sized organisation, the benefits of using an EOR are clearcut.
It’s a system that’s hugely attractive to your organisation as a money saving, stress eliminating, compliant option.
And it’s an extremely positive contract for your overseas workers who gain a separate employee to handle all the payroll and tax niggles in their own time zone, perhaps even their own native tongue and their own currency. A win-win, you could say!
We live for an easy win at Just Payroll Services. And making your life a little bit simpler. We live and breathe International, so why not get in touch today and we can chat about you and our EOR services?