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.

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.

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. 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. Customized Recruitment 

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. 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. 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 

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. 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. 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.

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.

• Explore 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.

• Hire and retain 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.

• Ensure compliance when working 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.

• Substitute while establishing entities 

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.

• Compliance with immigration 

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. 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. 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. Pricing

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. 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. 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.

If you’re looking for an EOR 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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