What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third-party organization that legally employs workers on behalf of another company. The EOR assumes full responsibility for various aspects of employment, including compliance, payroll, taxes, and employee benefits.

EORs can operate within the same country as the business they support or in a different country with distinct employment regulations.

What Does an EOR Do?

The responsibilities of an EOR can vary depending on the service provider and location. Here are some common tasks handled by an EOR:

1. Ensuring Compliance with Local Employment Laws

An EOR ensures that employees are hired in accordance with local laws, providing legally compliant employment contracts. This allows businesses to focus on their operations while the EOR handles legal complexities.

2. Onboarding New Employees

Once a business selects a new hire, the EOR manages the onboarding process, including employment agreements and setting up all necessary systems for the new employee to begin their role.

3. Managing International Payroll

The EOR oversees payroll and handles local taxes for both employees and employers. Employees receive their salaries and payslips directly from the EOR.

4. Administering Compensation and Benefits

EORs often provide a range of benefits, which may include health insurance, parental leave, and time-off policies. The specific offerings depend on the EOR service provider.

5. Handling Contract Terminations

If an employee’s contract ends, the EOR takes care of all necessary termination procedures, ensuring compliance with local labor laws.

What’s an Example of an EOR?

Imagine a U.S.-based company wanting to hire employees in Spain. An EOR located in Spain can employ these workers locally on behalf of the U.S. company. While the employees perform their roles in Spain for the U.S. company, the EOR assumes all legal employment responsibilities, including compliance with Spanish labor laws.

How Does an EOR Differ from a PEO?

Key Difference: Co-Employment

With an EOR, employees are fully employed by the EOR, not “co-employed” as they are with a Professional Employer Organization (PEO).

A PEO typically handles HR tasks like payroll, taxes, and benefits under a co-employment agreement. The National Association of Professional Employer Organizations defines co-employment as a shared responsibility where:

“Both the PEO and the client company will be responsible for certain obligations of employment, while both parties might share responsibility for other obligations and be ‘an’ employer, but neither party is ‘the’ employer for all purposes.”

This arrangement means the company and PEO contractually share employer responsibilities.

The Disadvantage of Co-Employment

Splitting employee risks between the client company and the PEO can create legal challenges. For example, in the case of Stephanie Perez vs. Dermatology Group, PC, vs. ADP, the employee sued both the company and its PEO for discrimination. Such complexities in the co-employment model led to the development of EOR services as a more streamlined alternative.

The Advantage of EORs Over PEOs

EORs go beyond general HR outsourcing by assuming full responsibility for hiring employees internationally. This allows the client company to focus on daily operations without the risks and complexities of employment compliance.

How Does an EOR Differ from a Staffing Agency?

A staffing agency primarily helps companies find and hire suitable candidates for open roles. Their services often include:

Advertising job openings.
Conducting background checks.
Screening and shortlisting applicants.
Handling initial paperwork.

In contrast, an EOR comes into play after a candidate has been hired. EORs do not assist in recruitment or vetting but instead take over the legal and administrative aspects of employment once the hiring process is complete.

Is It Easier to Open an Entity in Another Country or Use an EOR?

The answer depends on your company’s goals and circumstances.

Opening a Legal Entity
Companies that establish their own legal entity in another country typically plan to hire a significant number of employees there. This approach requires the company to manage its entire presence in the country, including:

Hiring legal and accounting professionals.
Complying with local employment laws.
Running payroll and administering benefits.
Handling other country-specific regulatory tasks.

This can be a complex, time-intensive, and costly process.

Using an EOR
If your expansion plans are uncertain or limited in scope, partnering with an EOR can be a simpler, more cost-effective option. EORs handle all legal and administrative employment tasks, allowing you to focus on operations without the burden of setting up a legal entity.

What Are the Advantages of Using an EOR?

1. Streamlined People Operations

EORs save time and money by managing hiring processes, including paperwork, payroll, and onboarding. Since services vary by provider, businesses should ensure the chosen EOR meets their specific needs.

2. Compliance with Local Laws

EORs ensure compliance with local employment regulations, leveraging local expertise to handle all legal and administrative requirements.

3. Staffing Flexibility

EORs offer flexibility for hiring, enabling businesses to engage international contractors for temporary or project-based work. This is particularly valuable for startups or companies testing new markets.

4. Cost Savings

Using an EOR is far less expensive than setting up a legal entity in a new country. Global EOR services, such as Oyster, allow businesses to hire across multiple countries without the high costs of establishing entities in each location.

Additionally, hiring in countries with lower salary expectations can further reduce labor costs.

5. Faster Expansion

EORs simplify onboarding and tap into global talent pools, enabling businesses to expand teams quickly and efficiently.

6. Access to a Diverse Talent Pool

Building a global team naturally increases workforce diversity, enriching your company with varied perspectives and cultural insights.

In Summary
Partnering with an EOR offers numerous advantages, including compliance, flexibility, cost efficiency, and faster access to global talent. Carefully evaluate your business needs to determine if an EOR is the right choice.

Where Are EORs Present?

EORs operate in most countries worldwide. Explore our country-specific guides for more details:

EOR in Ukraine
EOR in Kazakhstan
EOR in Turkey
EOR in Serbia
EOR in Italy
EOR in UK
EOR in Estonia
EOR in France
EOR in Germany
EOR in Poland

How to Choose the Right Employer of Record (EOR)

With numerous EOR solutions available, finding the right one can feel overwhelming. Here are key factors to consider:

1. Are They Present in the Right Countries?

If your prospective team members are located in one or two countries, ensure the EOR operates in those locations and meets your standards. If hiring across multiple countries, managing several EORs can become administratively burdensome.

A global employment platform like Braine Source International simplifies this by owning or partnering with local entities in over 180 countries. Braine Source also manages essential employment functions, such as benefits, onboarding, and offboarding, through an intuitive platform.

2. What Level of Support Do They Offer?

Cross-border employment can be complex. Look for an EOR that provides robust support tailored to your needs.

Review their support materials, self-service options, and availability for consultations. Starting with a conversation with Oyster’s team can help you explore solutions that fit your business.

3. Does the EOR Offer a Platform?

Evaluate whether the EOR has a software platform and what features it includes. Many EORs lack a platform, but Braine Source International offers a user-friendly solution you can demo before committing.

How Much Does an EOR Typically Cost?

EOR costs vary depending on factors such as location, services, and employee count. Many EORs charge on a per-employee basis. Visit Oyster’s pricing page to learn more about global hiring costs.

Can You Onboard Contractors Through an EOR?

Yes! Most EORs, including Oyster, can assist in onboarding contractors in various countries. Learn more about working with international contractors through Oyster.

What Are the Alternatives to an EOR?

1. Opening a Foreign Entity

Businesses can establish their own legal entity in the target country to manage employment directly. While this approach offers control, it’s costly and complex, making it suitable primarily for larger companies planning significant local hiring.

2. Sponsoring International Employees with Visas

Employers can sponsor employees to work legally through country-specific visa programs. However, these programs are often time-limited and administratively demanding for each employee.

Is Braine Source International an EOR?

Braine Source International provides global workforce management services through its comprehensive employment platform.

In countries where BSI has direct entities, it acts as the legal employer for its customers’ team members.
In locations without direct entities, Braine Source partners with trusted EOR vendors to manage employment.

Get in Touch
Contact Braine Source International today to discuss your specific needs with one of our expert advisors and explore how we can support your global hiring goals.