Understanding GlobalEmployer of Record
You're part of an organization that wants to expand internationally. You want access to a larger customer base, expand your company mission, acquire an international entity, or you want to tap into the ever-expanding global talent pool. But how?
Luckily, the answer to that question is simple: Employer of Record (“EOR”) Services.
What is EOR, and How Does it Work?
Usually, expanding internationally means ensuring that all your tax, insurance, banking, entity formation, and other local infrastructure is in place. That costs a lot of time and money, not to mention the steep learning curve to get up to speed with in-country expertise and compliance. Luckily, the right EOR services company that has already done all that hard work so that you don't have to.
As the legally recognized Employer of Record, the EOR company will allow you to expand into new global markets and employ talented people without having to set up an entity, or become mired in complex regulatory quicksand. The EOR company guides you every step of the way, from contracts to onboarding, to local benefits, payroll and employment laws, to termination. Your EOR partner takes on all of the legal liabilities for complying with local employment and payroll laws while you get to enjoy awesome employees all over the world.
How does that work, you ask? Simply, the EOR serves as an intermediary between you and the employee. The EOR hires the employee on their in-country entity and manages all employment-related compliance, while your company manages the employee's day-to-day activity. An EOR can do even more, too, such as:
- Arrange visas and work permits for the employee;
- Provide a registered entity to run compliant, local payroll in-country;
- Advise clients about local employment laws, including worker protections, termination rules, notice periods and severance pay;
- Interface between the employee and local government authorities;
Why Use an EOR?
There are many benefits you can take advantage of by using an EOR services company, especially when you're considering doing business in foreign countries where the cost, complexity, and compliance risk might be prohibitive.
- Avoid Local Incorporation. Usually, the first step for a company expanding into a new country is to set up a local, legal entity via incorporation and registration. Unfortunately, that's often expensive, and wading through the local regulatory landscape surrounding incorporation and registration while acting as a compliant employer in-country can be daunting. An EOR provides a better alternative for your company explore new international markets.
The EOR company already has a legal entity in place that can handle all of your payroll, employment, tax and immigration requirements in-country. Eventually, once you've established a local workforce and your company is comfortable with everything that doing business entails in-country, the right EOR partner can assist your company in establishing your own entity while continuing to provide payroll, benefits and compliance support in the background.
- Guard Against Permanent Establishment and Independent Contractor Non-compliance. Are you relying on international independent contractors as part of your workforce and international growth plan? Governments all over the world are currently tightening regulations around such relationships. It's very possible that the work they're doing would be considered too similar to what local governments define as employment related. Those independent contractors could be putting your business at risk of employment and tax non-compliance, leading to fines and other consequences.
An EOR can onboard and manage your contractors on your behalf (if allowed in-country) and maintain all compliance with local regulations and remove compliance risk away from your company.
- Expand into Global Markets While Reducing Risk, Saving Time and Money. Operating in a foreign market while trying to stay on top of the nuances of local labor, payroll and tax regulations may lead to your company unintentionally violating multiple laws. The last place you want to find your company is in international hot water. Payroll, HR, benefits and compliance takes a lot of time, money and expertise. Using an EOR mitigates your company's risk, because your company is not the on-record employer – the EOR is. So, any employment, payroll and tax liability lies with the EOR, not your company. An EOR is a time and cost-effective way to outsource essential employer functions while still maintaining control over the employees' work.
The EOR company will allow you to expand into new global markets and employ talented people without having to set up an entity, or become mired in complex regulatory quicksand.
Thinking of expanding your business internationally and want more information about EOR? One of Listo Global's experienced Global Business Advisors will happily serve as your guide to global expansion. Reach out to ready@listoglobal.com.