Employer of Record & PEO — 6 min

What does an employer of record do?

Written by Preston Wickersham

July 28, 2020

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In another guide, we examine the differences between an employer of record (EOR) and a professional employer organization (PEO). If you already know a little about the two, that information can help you decide which type of partner is best for your business. However, if you have more questions about how an employer of record operates, this is the post for you.

Jump straight to a key chapter

What do EORs do for businesses?
Why should a company use an EOR?
How much does an EOR cost?
Do your employees work for you or for the EOR?
How to get started with an EOR

What do EORs do for businesses?

An EOR allows a business to employ legal, full-time workers in a different country, state, or province. The EOR takes on the burden of local legal requirements to ensure the client company can employ workers in the area. Remote operates as an EOR in all our covered countries, states, and provinces.

Without an EOR, businesses cannot employ workers outside the region where they are headquartered, with a few exceptions. Larger enterprises, for example, may choose to open their own local legal entities to employ workers in different places. This process can be both expensive and time consuming, though, especially when dealing with multiple countries. Historically, barriers of cost have locked out all but the most well-funded businesses from hiring global workforces.

Employers of record provide access to global talent to companies of all sizes, not just enterprise clients. If you want to hire someone in a place where you do not own a legal entity (and you don’t want to go through the enormous hassle of creating an entity yourself) you need an EOR.

Why should a company use an EOR?

Imagine finding the perfect engineer for your business. Sadly, that engineer lives in France, and you’re based in Silicon Valley.

You want to make it work, so you look into your options. You could onboard the person as a contractor, but your ideal hire may not want to work without the security and benefits of full-time employment. So, you look into opening a legal entity to hire your first French employee, thinking you may hire a few more later.

Without a dedicated international expansion team and significant resources, you quickly run into trouble. French regulators have questions. You have to fly to France, not once but several times, to complete all the documentation. At Remote, it took us several months, several thousand dollars, and multiple flights with our CEO on board to open our French entity this year.

International employment law is beyond complicated, especially when you start to account for multiple countries. Remote helps employers hire workers in a variety of U.S. states, Canadian provinces, and countries around the world, and we own the legal infrastructure to do so in every location where we operate.

For companies with concerns beyond international employment law (like their own customers, products, and visions), EORs make global employment possible.

link to When should you use an employer of record, and which one should you choose?

Employer of Record & PEO —

13 min

When should you use an employer of record, and which one should you choose?

If your company wants to hire workers in another country, you probably need an employer of record. But how do you choose the right one? And what does an employer of record actually do? This guide provides all the answers you need.

How much does an EOR cost?

EOR pricing models come in two flavors: flat fee structures and percentage structures. When you decide to work with an EOR, skip any potential partner that charges a percentage instead of a flat fee.

Percentage-based EORs disincentivize their client companies from offering fair compensation to workers. When you pay a percentage rate, you have to fork over more money to a third party to give an employee a raise or a promotion. Though percentage-based EORs used to be the industry standard, that dynamic has begun to change.

Flat fees allow you to hire the best global talent and pay them what they deserve, no questions asked. Remote offers the best pricing of any employer of record in the industry. For one low flat rate with no hidden fees, you can hire any worker, from a CEO to a software developer, in any of our covered regions. There are no transaction fees, and no percentages tied to salaries — just straightforward and honest pricing.

Read about Remote's Fair Price Guarantee and how we make it easy for companies to hire and pay global teams.

Do your employees work for you or for the EOR?

On paper, your employees work for your EOR in their local region. In every meaningful sense, they work for you.

Your EOR provides outsourced HR services for employees outside your home region. Instead of hiring your own lawyers, accountants, payroll providers, and other professionals, you depend on your EOR to handle the details on your behalf. Your international and out-of-state employees receive their paychecks from the EOR, but they work within your company the same as your domestic employees do.

When selecting an EOR, don’t limit your considerations to payroll and benefits management, although those factors are important. Consider the experience of your employees as well. The right EOR will ensure that your distributed team members do not feel like second-class citizens but like valued members of your cohesive team.

Remember to ask about the protection of your IP and invention rights, too. EORs without sufficiently robust partner networks in their covered regions may not have the legal expertise to protect the intellectual property created by your employees. Remote strongly protects the IP and invention rights of our clients by owning proprietary relationships with providers in all our covered areas.

Learn more about how Remote protects your intellectual property abroad with Remote IP Guard