What is an Employer of Record (EOR) ?
An Employer of Record is an entity (and not a subsidiary of your business) that will legally employ workers on behalf of your company. The Employer of Record will be a third party partner and will take care of all administrative activities and legal compliance in the country of employment.
Setting up companies internationally can be costly and a lengthy process, therefore businesses use EOR partners to hire globally at speed and risk and hassle free.
How does it work?
The Company will run a recruitment process or look for geographical mobility of its own workforce. Having no entity in the country where the worker is or will be based, the Company will partner with an Employer of Record in the desired location, so the EOR partner employs directly this worker against a monthly fee (either fixed or based on a percentage of the annual compensation costs).
The worker will have a contract with the EOR partner and will the OR Partner a Service agreement with the Company. The Employer of Record (EOR) will manage all aspects of contracts and amendments, labor authority registration, payroll and Taxes. The company remains responsible for all costs related to Dismissals or Redundancies.
Some EOR provides, like NOMAD GLOBAL HIRE, will also offer HR Advisory to manage employee issues or contract amendments that may arise in the future. This is hugely important as local labor laws can be very different from one country to another.
Who uses an Employer of Record (EOR)?
EOR’s handle employee management and administrative activities, including contracts, tax, local compliance regarding the dismissal and hiring legal framework, Benefits, HR and even Equipment needs.
Large Corporations
Although hose companies can have entities in several countries, there is a growing need to hire local talent when entering a new market. Those firms manot have an entity set up in the country and will use an EOR to help them hire faster and risk free. Some US companies for example build outsourced European Digital and Social teams in a couple of months thanks to the collaboration with the EOR partners. If they were to try to do this by themselves, they would face a lengthy process to set up companies with local finance and HR teams. Using an EOR can save months or even years to businesses.
Startups, Small and Medium companies
Covid has only accelerated a work transformation that already existed. Startups, especially in Tech or Services, are very much open to Remote work. Therefor there is few needs to have the employees in one office and Startup founders and HR Operations teams are usually interested in having access to Global talent for Quality and Cost reasons.
The new Ways of Working mean a UK Company could have 100 employees and only 5 of them located in the country. The rest would be based all across Europe or Africa. This is only possible through either opening entities in each market, which would not make sense because the costs associated with opening in Bulgaria a new entity for an IT Manager would be astronomical, or through partnership with an EOR provider or an EOR platform. Using an Employer of Record, this Startup could hire a Bulgaria based IT Manager in a few days.
Why are the Benefits of Partnering with an Employer of Record (EOR)?
Time and cost efficiency
The cost related to manage a local entity, hire employees and manage payroll are very high. A large number of tasks related to salaries, contracts, expenses and Benefits can be extremely time consuming (just ask your HR team!). Unless a Company plans to hire dozens of people in the same location, it simply doesn’t make sense. Using a EOR avoids that is particularly cost effective for the hire of individuals or small teams in a specific country. Doing the right thing with tax authorities is essential to avoid financial penalties, an EOR is a firmly settled local entity with years of experience to help you best navigate and manage this for you.
An extension of your HR and Finance teams
Partnering with Nomad or any similar EOR Platform will allow Companies to count with extra resources with strong local HR and legal expertise. For Heads of People with employees spread across several locations globally, this help is extremely valuable and it gives them access to resources they could not have internally.
