What Is an Employer of Record? A Complete Guide for US and Global Employers

Expanding your business globally is a strategic move that can lead to substantial growth. Hiring international talent allows companies to tap into new markets, and a global employer of record (EOR) can facilitate this process. This guide explains the role of an EOR, how to utilize their services, and the benefits of partnering with a global EOR to achieve your global expansion goals.

Table of Contents

1. Introduction
2. What is an Employer of Record (EOR)?
3. Services Provided by a Global EOR
4. Benefits of Partnering with a Global EOR
5. Exploring New Markets
6. Attracting and Retaining Top Talent
7. Hiring During Entity Setup
8. Avoiding Misclassification of Contractors
9. Important Considerations When Selecting an EOR Partner
10. Difference Between EOR, PEO, and Staffing Agencies
11. Need Help?

Introduction

Taking your business global is a smart and exciting adventure for any company looking to grow. By hiring national or international talent, you can break into new markets and reach new customers.

An employer of record (EOR) - also often referred to as payrolling services too,  is like your trusty guide on this journey, helping you navigate the complexities and make the most of national and global opportunities. This guide not only explains the role of an employer of record but also emphasizes how easy and convenient it is to utilize an EOR and the benefits of partnering with a global EOR, like TCWGlobal, to achieve your global expansion goals.

What is an Employer of Record (EOR)?

An employer of record (EOR) is a third-party company that legally employs your workers and takes care of all the responsibilities that come with being an employer. This means the EOR handles tasks like hiring, paying, and managing your employees, while you stay focused on running your business.

For example, imagine you want to hire someone in a different state or country. Instead of figuring out all the local laws and setting up a branch there, you can use a global EOR. They will manage everything from employment contracts to payroll, ensuring you comply with local laws without the hassle of establishing a local entity.

In essence, a global EOR acts as your state-by-state and international HR team, understanding the specific labor laws and payroll regulations in each country where your employees are based. This allows your company to hire and manage talent worldwide efficiently and legally, without worrying about violating local employment laws.

Services Provided by a Global EOR

A global EOR handles all the legal and regulatory tasks related to immigration, employment, payroll, and benefits for your international team.

Think of it like this: imagine you want to hire a worker in another country. The EOR becomes the official employer, dealing with all the paperwork and legalities. Meanwhile, you still get to manage the day-to-day aspects like setting their salary, assigning tasks, and overseeing their projects and performance.

For example, if you're a tech company in the US and you want to hire a developer in Germany, the EOR will handle all the legal employment requirements in Germany. You, on the other hand, will continue to decide what the developer works on, how much they get paid, and how to manage their performance. This way, you get the best of both worlds—expert legal support and full control over your team’s daily activities.

Some of the services that a global EOR provides include:

• Drafting and maintaining locally compliant employment contracts
• Managing all payroll and tax withholdings
• Paying supported employees on time
• Offering comprehensive and statutory benefits
• Ensuring compliance with terminations and offboarding
• Providing ongoing support on local labor laws and regulations

Benefits of Partnering with a Global EOR

A global EOR partner offers numerous advantages for companies looking to expand nationally and internationally. Many businesses lack the resources or in-depth knowledge needed to hire compliantly in different states or foreign markets. A global EOR allows you to hire top talent from around the world while ensuring their needs are met according to local regulations.

Here are some key benefits:

• Quick Talent Onboarding: Speed up the hiring process and get your new employees on board rapidly.
• Cost Savings: Avoid the high costs associated with setting up a new entity in each country.
• Talent Retention: Offer comprehensive benefits packages to keep your employees satisfied and engaged.
• Compliance Assurance: Stay in line with local employment contracts and evolving labor laws.
• Ongoing HR Support: Receive continuous assistance with all HR-related matters.

An EOR is invaluable for managing a distributed workforce and navigating the complexities of global markets. Here’s how a global EOR can benefit your business:

Exploring New Markets

Planning to expand into a new market but not ready to establish a local entity? An EOR lets you test the waters in a new country without the commitment of setting up a permanent entity. This allows you to quickly hire a team, generate new revenue streams, and reach new customers.

Attracting and Retaining Top Talent

The flexibility to work from anywhere is highly attractive in today’s job market. By removing geographic limitations, you can access a broader talent pool and find candidates with the perfect skill sets. Additionally, a global EOR helps you retain employees who wish to relocate without the need to establish a local entity.

Hiring During Entity Setup

Setting up a local entity takes time, money, and expertise in local laws. An EOR can act as an interim solution, providing hiring support and insights into entity establishment while you complete the necessary setup.

Avoiding Misclassification of Contractors

Many companies hire contractors as a cost-effective way to access remote talent. However, as your company grows, the risk of worker misclassification increases, which could lead to hefty fines and penalties. A global EOR helps you transition contractors to employees, mitigating compliance risks.

For more insights, check out our complete guide to employee and contractor misclassification.

Important Considerations When Selecting an EOR Partner

• Transparent Pricing: Choose an EOR with clear pricing to avoid unexpected charges and stay within your budget.
  
  
• Accurate Employer Burden Calculations: Ensure your provider accurately calculates all employer burden costs, including health insurance, social security, and paid time off.
  
  
• Worldwide Coverage: Verify that your partner has extensive expertise in the markets where you need to hire. Inexperienced partners can lead to non-compliance and unnecessary expenses.
  
  
• Responsiveness and Support: Select a partner who is responsive to your needs and provides dedicated support, including an assigned client account manager.
  
  
• Independent Third-Party Validation: Look for a partner recognized by credible third-party sources as an industry leader. Independent reports can help you identify the best EOR for your needs.

Difference Between EOR, PEO, and Staffing Agencies

The main difference between an EOR and a professional employer organization (PEO) is that an EOR is the legal employer of your distributed workforce, while a PEO acts as a co-employer. An EOR handles all HR tasks, including onboarding, payroll compliance, taxes, and benefits, while a PEO partners with small and medium-sized businesses to provide HR services. Finally, and most importantly, an EOR will provide strong legal protections, while a PEO often provides very limited protection. 

A staffing agency, on the other hand, recruits candidates to meet temporary workforce needs, matching workers to businesses to cover absences, skills gaps, or special projects. TCWGlobal, is both an EOR (payrolling agency) that can handle your staffing as well!

Need Help?

Whether you need expertise in Employer of Record (EOR) services, Managed Service Provider (MSP) solutions, or Vendor Management Systems (VMS), our team is equipped to support your business needs. We specialize in addressing worker misclassification, offering comprehensive payroll solutions, and managing global payroll intricacies.

From remote workforce management to workforce compliance, and from international hiring to employee benefits administration, TCWGlobal has the experience and resources to streamline your HR functions. Our services also include HR outsourcing, talent acquisition, freelancer management, and contractor compliance, ensuring seamless cross-border employment and adherence to labor laws.

We help you navigate employment contracts, tax compliance, workforce flexibility, and risk mitigation, all tailored to your unique business requirements. Contact us today at tcwglobal.com or email us at hello@tcwglobal.com to discover how we can help your organization thrive in today's dynamic work environment. Let TCWGlobal assist with all your payrolling needs!