What is An Employer of Record?

The modern business world isn’t comprised of four-walled cubicles any longer. A contemporary company will often look beyond its office – beyond its own national borders – to find the right skilled labor for a position. 

However, with this new approach to business come new challenges and hurdles. How can a business tap into international talent while still remaining compliant and operationally efficient? How can a business expand globally, fill in gaps during peak seasons, or retain its “nomadic” workforce while simultaneously dodging unnecessary risks. 

That’s where an Employer of Record (EOR) comes into play. In this article, explore a few common questions surrounding EORs, like what they are, what they do, and when to use their services. By learning more about EORS, you can strategize how to hire foreign employees the right way.  

Defining EORs

An Employer of Record (EOR) is a critical entity in managing a company’s international workforce. It takes on the legal responsibilities of being the employer, handling tasks like compliance with local labor laws, payroll processing, tax filings, benefits administration, and contract management. 

Using an EOR platform helps companies deal with the complexities of international employment regulations. By outsourcing these tasks to a specialized entity, businesses can focus on core operations and reduce risks associated with managing a diverse workforce. The best EOR services, like Borderless AI, leverage artificial intelligence to streamline these processes, strengthen contracts, deliver unparalleled support, and ensure unmatched accuracy in compliance. Basically, they take risk out of the equation. 

What They Do (and Don’t Do)

As mentioned, an EOR assumes the following legal responsibilities on behalf of a business/employer: 

• Offer Letters and Employment Contracts: They draft formal documents outlining job offers and terms of employment, ensuring clarity and legal compliance for employers and employees.
• Payroll and Administration: They manage employee salaries, benefits, tax withholdings, deductions, etc. 
• Compliance: They ensure that the company acts in accordance with local labor laws, regulations and even industry standards, which mitigates risk for companies. 
• Work Authorization: An EOR assists with visa and work permit processing for international employees who work in the host country. 
• HR Support: They assume HR responsibilities, which include everything from initial onboarding to offboarding and termination. 

Those are a few key responsibilities an EOR assumes. Please note, however, that an EOR does not: 

• Recruit and Acquire Talent: An EOR’s pivotal role kicks in after a company chooses their candidate; up to this point, they remain on the sideline, ready with an offer letter and formal contract. 
• Get in a Business’ Way: When you partner with an EOR, you still retain day-to-day supervisory control. You still dictate their daily tasks and responsibilities, leaving HR tasks to the EOR. 

When You May Need One

There are several scenarios where partnering with quality services is advantageous. For illustrative purposes, here are a few common times when an Employer of Record is beneficial: 

• During Global Expansion Efforts: If your business is setting up an arm abroad and hiring a local workforce, an EOR service will handle the employment responsibilities. This leaves your business to focus on its core operations without worrying about the risks surrounding international compliance. 
• Leveraging Skilled Remote Talent: Let’s say your business wants to hire a cost-effective back-end developer from Bulgaria, or a customer service rep from India. In these cases, you can partner with EOR services to ensure the employment is legally compliant and efficiently managed. By doing so, you can save money, diversify the skillsets in your organization, and keep your operations running round-the-clock. 
• Temporary Staffing: If your business needs international help to fill in the gaps during a peak season or special project, EOR services act as a quick, turnkey solution for remaining compliant and efficient. You can hire temporary help overseas, ensuring that the contracts and temporary employee management are “on the up and up.” 
• Employee Relocation: Globetrotting and digital nomadism are a common feature of modern business. Let’s say that one of your ace marketing members decides to relocate to Spain, or your back-end developer moves to Canada. In these cases, their employee rights/obligations fall under a new set of regulations and labor laws. To retain this talent and remain compliant, you need an EOR’s help. 

These are just a few examples of when you might need an EOR. If in doubt, speak to an industry-leading EOR service like Borderless AI to see if their services fit your unique situation. 

Hopefully, this article has demystified what an EOR is, what they do, and how they can help your business flourish.