Running a global company is no easy task. It involves several complex responsibilities such as hiring remote staff, establishing payrolls, dealing with taxes, insurance, applications, benefits, visas, contracts, and understanding legal entities like country-specific tax laws. These scenarios alone may burden many companies unless they incorporate an employer of record (EOR) into their system.
What Is an Employer of Record?
An EOR is a third-party firm or organization that legally takes care of all formal employment tasks on behalf of another company. In a simpler context, EOR allows companies to engage with overseas workers without setting up any local entity in a new state or country.
When a company uses the employer of record model, they are most likely to enter into a co-employment contract signed and acknowledged by all parties involved.
What Is the Function of an Employer of Record?
Since it is a third-party local organization, they are responsible for performing all the legal and regulatory requirements of immigration, employment, and payroll. In a nutshell, an employer of record is the registered employer for the worker.
However, they do not perform any management role. It is still the original employer, not the EOR, who maintains work relationships and decision-making on compensation, duties, projects, and termination.
In essence, the employer of record is the lawful entity that performs these responsibilities:
- Arranges the visas, employee contracts, and work permits, ensuring no delays and refusals.
- Oversees that the host country’s laws regarding taxes, labor codes, worker protection, and contracts are followed.
- Informs the client of notice periods, severance pay, and termination rules.
- Acts as the host country’s connection between government authorities and employees.
What are the Benefits of Using an Employer of Record?
The EOR is beneficial when doing business in a foreign country since it cuts costs, complexity, and compliance risks of local employment. Other benefits of using employer of record include:
Makes Immigration Compliance Faster and Easier
Nowadays, establishing a business overseas has become a headache for some companies due to increased scrutiny by foreign policies of work permits, visas, and the type of business. With EOR, this complication is avoided since the processing of the requirements will be done by the local partner.
Does Not Need for Local Incorporation
Setting up a local entity via incorporation and registration is expensive and time-consuming. However, when you incorporate EOR into the process, this makes all aspects of payroll, employment, and immigration requirements in the host country less expensive and faster while ensuring full compliance with the host country’s laws and regulations.
Manages the Local Payroll in the Host Country
One country’s payroll system might be different from another. This process seems to be a stressful undertaking. However, using EOR, payroll is ensured to be accurate and compliant with the host country’s withholding and tax rules, ensuring that no issues with local authorities arise.
Are You Interested in Doing Business Abroad? Consider Using Employer of Record!
Avoid the stress of handling all these administrative functions, allowing you the time and energy to focus on business operations instead. Call us today to book a consultation.
Establishing a company in another country can be stressful and overwhelming. That is why we at ClearPath are dedicated to helping companies handle legal compliance matters, payroll management, and employee benefits as an Employer of Record.