EOR 101: The Ultimate Guide to Employer of Record

eor101, the ultimate guide to employer of record

Expanding your business and global presence is the best way to access a broad range of customers and international talent. But, by expanding, you’re also increasing your workforce and responsibilities, including tasks, costs, and liabilities associated with hiring new employees. 

With an offshore Employer of Record (EOR) company, you can allocate those hiring and HR solutions to lighten your business responsibilities.

But what is an EOR, and how exactly do you decide on a reliable global EOR partner? This guide will help you with everything you need to learn about Employer of Record companies, their general services, and what you can expect from them.

CORE Infographics for EOR Ultimate Guide

What Is an Employer of Record (EOR)?

An EOR is a third-party company that is legally the employer of your workforce and takes on the responsibilities that come with it. They take over HR tasks on your behalf, such as onboarding, salaries, and employee management.

Hiring an Employer of Record in the Philippines will ensure that you can smoothly expand into the country. The EOR will handle labor law and tax concerns and stay up-to-date with local government units (LGUs) and national procedures to ensure compliance.

Rates will vary depending on the EOR, but they are generally more cost-effective than setting up legal entities in the country.

Learn more about sourcing Philippine labor: Labor Laws to Consider When Sourcing from the Philippines

How Does an Employer of Record Work?

The EOR functions like an international HR team for your company. Some of its services are as follows:

1. Mastering Employment Contracts and Staffing Solutions

The EOR handles employee contracts, hiring, and onboarding. They ensure that contracts comply with the law and that the candidates fit the skills set and level of expertise you require. 

2. Tailored Recruitment Strategies 

Your partner will handle every step of the recruitment funnel. They will interact with the applicants, conduct interviews, and ensure that the process is organized and efficient. By giving candidates a positive experience through EOR, your company is more likely to attract top talent and referrals.

3. Strategic Sourcing Solutions

Having an expert in local recruitment means they are familiar with the different hiring avenues. These channels could be online job boards, social media groups, and events. The software the EOR uses could also help filter candidates that match your needs. 

4. Streamlined Payroll Processing

The EOR is responsible for setting up the payroll software and enrolling all employees. They’ll also do timekeeping and attendance to ensure all salaries are accurate.

5. Tax Registration Made Simple

As the official legal entity within the country, the EOR ensures that they file and remit taxes on time and comply with all reporting requirements.

6. Efficient Benefits and Social Contributions Management 

Since the EOR functions as an entire HR team, it’s up to them to look for and negotiate with different companies for the optimal benefits package. They’ll then administer the various benefits, such as insurance, day-offs, and leaves.

7. Embracing Flexible Office Solutions 

Depending on your needs and industry, an EOR can come up with the best solution for your workforce. They can look for an office or communicate with your employees to set them up for remote work.

EOR vs. BPO: How is an EOR Different from BPO?

On the surface, a Business Process Outsourcing (BPO) company and an EOR provide you with employees through outsourcing. However, there are several key differences.

While a BPO allows you to hire an entire workforce, your company does not control any behind-the-scenes processes. You won’t be able to handpick candidates, participate in interviews, or even interact with them. The BPO ultimately manages the entire recruitment funnel, which means that your workforce may not have the skill set you need. 

The benefit of having an EOR is that you still have control over the different management processes, such as day-to-day operations, projects, and schedules. You can assign tasks to your various teams and observe their progress.

BPOs are known for having high turnover rates and thus use easy-to-understand and learn training methods. However, having such a generalist training method could lead to varying experiences and quality, which may negatively impact your company’s goals. An EOR allows you to customize the training processes for your workforce.

Finally, you’ll be able to oversee the working conditions and well-being of the employees with an EOR. You can specify the type of work setting you want, unlike a BPO with no transparency on working conditions.

Learn more about the advantages of partnering with an EOR: The Benefits of Acquiring an Employer of Record Service

When to Use an Employer of Record?

Deciding between the different types of outsourcing is a lengthy process with many factors to consider. Here are some reasons to help you see when to use an Employer of Record company.

• Exploring New Global Markets

If you want to expand into a new market without spending a lot of time or money following laws in establishing a local entity, an EOR can help. Their services can help you explore how your company products or services will be received, giving you data on demand and the feasibility of expanding.

• Attracting and Retaining Top Talent

Since an EOR is like a global HR team, you open up hiring in several countries. That’s a broader job market and more skill sets you can consider. Depending on your company’s reputation in a particular country, you’ll be able to hire top talent that would have been otherwise more difficult to reach without establishing a local entity.

• Ensuring Compliance with Contractors

Some companies prefer working with independent contractors. However, few countries have specific provisions when classifying contractors, which could land your company into some trouble if you’re unfamiliar with their labor laws. An EOR ensures that you comply with union and labor laws where applicable.

• Establishing Entities with Ease 

If you’re in the process of establishing a local entity but already want to set up operations, an EOR can be your substitute. They can handle all employees while you finish your requirements and eventually help with transitioning.

• Navigating Immigration Compliance 

If you need to send your staff to another country to help run operations, they may run into the hassle of filling out different forms and securing work permits and visas. An EOR can process these, ensuring that all legalese and paperwork comply with government standards and that visas and work permits are in order.

How to Choose the Best Employer of Record Partner

Due to increasing demand and global expansions, experts project that the EOR market may value at $6604.4 million by 2028. Here’s how to choose the best one for your needs.

1. Evaluating Reputation and Experience

Knowing how the EOR operates locally and handles compliance is essential. Read reviews and see how they work with other companies. Also, look for an EOR that is familiar with your industry so that they can deliver quality service.

2. Ensuring Data Security

Partnering with a third-party organization means having to share sensitive data. When looking for the right EOR, ask how they manage data security and the systems they have to protect client and employee information.

3. Transparent Pricing Models

Different EOR companies have different ways of charging for their services, usually by percentage or per employee hired. Consider your budget and if it’s sustainable in the long run. You may also negotiate with the EOR as your company scales.

4. Assessing Systems Used 

The software and systems the EOR use need to be compatible with your company to enable smooth transitions and data exchanges. These don’t have to be very advanced as long as there are no hiccups when passing on or receiving information.

For instance, if your company uses cloud integrations and the EOR tends to record everything manually, there may be data loss and confusion.

It would also help to ask about the software they use for recruitment. Around 80% of companies use an Applicant Tracking Software (ATS) tool to make hiring more manageable, so check if they use one and if you can have it integrated with your systems to keep track of applicants.

5. Comprehensive Support 

The EOR should be very open to communication and respond to your and your employees’ concerns. Whether it’s about benefits or salary, they should be ready to jump on the line and resolve these issues.

Share the Load, Focus on Success

Partnering with an Employer of Record is advantageous when expanding to other countries. It can be a worthwhile investment to allocate some of your employment and payroll responsibilities to a team of professionals. Doing so can improve the efficiency of your business as well as establish your global reach. 

While a BPO can give you an on-demand workforce, an EOR provides more flexibility and transparency. Remember that in choosing the best one to work with, consider their reputation, pricing, existing software, and level of support.

Frequently Asked Questions (FAQs)

Q1: What is an Employer of Record (EOR) and how does it function?

An Employer of Record (EOR) is a third-party company legally responsible for employing your workforce. They take over HR tasks, including onboarding, salaries, and employee management, ensuring compliance with labor laws and tax requirements in the target country. The EOR acts as an international HR team, providing services such as employment contracts, customized recruitment, sourcing solutions, payroll processing, tax registration, benefits management, and flexible office solutions.

Q2: How does offshoring with an EOR differ from using a Business Process Outsourcing (BPO) company?

While both EOR and BPO offer outsourcing solutions, they differ in the level of control and involvement. With an EOR, you retain control over various management processes, allowing customization of training and overseeing working conditions. In contrast, a BPO manages the entire recruitment funnel without direct client involvement, potentially leading to a mismatch in skill sets and experiences. EORs provide more transparency and flexibility, enabling businesses to tailor their operations.

Q3: When should a company consider using an Employer of Record (EOR) service?

Consider using an EOR when you want to explore new global markets without setting up a legal entity, hire and retain top talent across multiple countries, ensure compliance with labor laws while working with contractors, establish operations as a substitute while setting up a local entity, and comply with immigration requirements when sending staff to other countries. EORs offer a practical solution to expand globally without the extensive responsibilities and costs of establishing legal entities.

Q4: What factors should be considered when choosing an Employer of Record (EOR) partner?

Key factors to consider when selecting an EOR partner include evaluating their reputation and experience, assessing their data security measures, understanding their pricing structure and negotiating within your budget, ensuring compatibility of software and systems used, and evaluating their level of support and responsiveness. Additionally, consider their familiarity with your industry to ensure they can deliver quality service tailored to your needs.

Q5: Why is an EOR a beneficial solution for global expansion?

Employing an EOR for global expansion is advantageous as it allows businesses to focus on their core operations while delegating HR and employment responsibilities to a specialized team. EORs facilitate a smoother expansion process, provide access to a broader job market and diverse skill sets, ensure compliance with local labor laws and tax regulations, and offer cost-effective solutions compared to setting up legal entities in multiple countries. It’s a strategic approach to expanding and managing a global workforce efficiently.

If you’re looking for an EOR in the Philippines as a partner, consider One CoreDev IT. Contact us today to schedule a consultation with an expert. You can also check out the FAQs on our site.

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