As companies expand, especially with remote and international teams, many turn to Employer of Record (EOR) services to manage the complexities of payroll, compliance, and HR. An EOR becomes the legal employer for tax and legal purposes, while your company directs the work. Picking the right EOR is essential, as they handle crucial compliance responsibilities that impact your business.

Here’s a guide to choosing the right EOR partner.

1. The Rate of Services Included

It’s tempting to choose an EOR based on price, but a low rate can sometimes mask hidden fees and limitations:

• Hidden Fees: Some EORs may have low initial fees but add costs over time. Ask for transparency about any potential add-ons.
• Value Comparison: Check what’s included in the price. Scrutinize what is included in each vendor you are considering to draw true cost comparisons vs. only upfront pricing.

Tip: Request a full breakdown of services and costs from EORs to see where you may face future expenses.

2. Compliance: An EOR’s Core Competency

A key reason to hire an EOR is to handle compliance, ensuring your business avoids penalties and stays up-to-date with labor laws. Here’s what a reputable EOR should proactively manage:

• Worker Verification: Ensures legal right to work through documentation like I-9 in the U.S.
• Payroll Taxes: Withholds and submits payroll taxes correctly and on time.
• Overtime & Wage Laws: Manages varied state and country requirements for overtime, double time, etc.
• Employee Classification: Properly categorizes employees as exempt or non-exempt.
• Mandatory Training: Some states require mandatory training, particularly around sexual harassment on specific schedules. Ensure your EOR is prepared to keep your workers compliant.
• Mandatory Sick Leave: sick leave accrual and usage, as required by law.

Your EOR is the worker’s legal employer, so confirm their compliance expertise and check their track record.

3. Benefits: The Basics and Beyond

Some benefits are required by law and vary by location, so it’s crucial the EOR covers these. Additional, optional quality benefits help you retain talent, and a great EOR will offer a strong package, including:

• ACA Compliance: Ensures health benefits align with Affordable Care Act standards for U.S. employees.
• Optional Perks: Good EORs go beyond basic benefits, offering options like dental, vision, and voluntary plans like Aflac. Flexible Spending Plans (FSA) including commuter benefits may be required in some states / cities.
• Retirement Plans: Having retirement options, such as a 401(k), can attract employees and keep you compliant in jurisdictions where these plans are required.

An EOR with a competitive benefits package helps you attract top talent while staying compliant with local laws.

4. Adaptability: Not All Businesses Are the Same

Some EORs take a “one-size-fits-all” approach, but a flexible workforce partner will tailor their services to your unique needs:

• Flexibility: Does the EOR allow you to adjust services as you grow or specific to your industry.
• Custom Solutions: Ask if they can handle special requirements, like client software application integration and procedures or custom reporting.

A flexible EOR partnership adapts to your business needs, rather than making you fit into a preset structure.

5. Contract Terms: Avoid Traps

A close review of contract terms can save headaches later.  Be on the lookout for:

• Setup Fees: Be vigilant for upfront setup fees, which can be significant.
• Automatic Increases: One tricky contract requirement would allow the EOR to increase their rate and fees automatically at set intervals.
• Termination Clauses: Avoid long contracts, non-competes and penalties that limit your options if you’re dissatisfied. A notice period is understandable but you should not be stuck with an underperforming EOR.
• PEO vs. EOR Distinction: Confirm your EOR takes full legal responsibility for employees, unlike a Professional Employer Organization (PEO), which shares responsibilities.

Careful review of contract terms is not only essential to avoid costly surprises, it will also give you insight into the partnership ideals of your EOR.

6. Experience: Reputation Matters

When it comes to compliance an EOR offers, experience often equals reliability and stability. Look for:

• Industry Knowledge: Experienced EORs are more likely to handle industry-specific needs effectively.
• Reputation: Check reviews and references to gauge the quality of service and satisfaction of current clients.

An experienced EOR will be better prepared to address challenges that might arise in managing compliance or handling sensitive situations.

7. Employee Relations: Handling Sensitive Issues

Employee relations matter, especially for handling sensitive matters like harassment claims. Look for:

• Clear Policies: A good EOR has established procedures for handling employee complaints. Ask for examples of the policies and pathways they provide the workers.
• Communication: How does the EOR communicate with employees and client company about these issues?

A strong employee relations process supports a positive and professional work environment for everyone. It can also keep your company out of hot water and costly mistakes.

8. Customer Service: Your Frontline Support

Customer service is crucial to a smooth EOR partnership. Consider:

• Availability: Make sure their hours align with your needs.
• Knowledgeable Staff: Look for teams trained in HR and compliance.
• Responsiveness: Quick problem resolution is vital.

A responsive and knowledgeable customer support team can prevent minor issues from becoming larger problems.

9. Technology Platform: Efficiency Counts

An EOR’s platform should support HR and payroll management efficiently:

• User-Friendly: The system should be easy to navigate for both administrators and employees.
• Payroll & Compliance Tracking: Ensure it handles payroll, tax filings, and compliance smoothly.
• Data Security: Protecting employee information is essential, so verify the platform’s security.

A reliable tech platform helps reduce administrative burdens, so your team can focus on core business tasks.

Final Thoughts

Choosing an EOR impacts your compliance, employee satisfaction, and overall business health. A good EOR will be transparent, adaptable, and committed to meeting your company’s needs, helping you grow your business confidently.

Request your Ultimate Guide to Choosing an Employer of Record  to find the right workforce partner who will support your operational goals while keeping your business compliant and efficient, so you can focus on what you do best – growing your business.

Contact us today for a workforce consultation to discuss your specific situation and explore options to for managing your team.

ClearPath is a leading Strategic Workforce Partner company focusing on the contingent labor market. We’re committed to helping business owners stay compliant and minimize the risks associated with their contingent labor requirements.

No Legal Advice Intended. This article includes general information about legal issues and developments in the law. Such materials are for informational purposes only and may not reflect the most current legal developments. These informational materials are not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal issues.