What does an employer of record do?
by Preston on 2020-07-28
A couple of weeks ago, we examined the differences between an EOR and a 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 (EOR) operates, this is the post for you.
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.
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 EOR in the industry. For a flat rate of $599 per month per employee, you can hire any worker, from a CEO to a software developer, in any of our covered regions. No hidden fees, no percentages tied to salaries.
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.
How to get started with an EOR
Ready to hire an employee in a new region? Remote can help you onboard your workers in just a few days.
Click “Get started today” below and answer a few quick questions about your business. Whether you have a thriving international team or you’re looking to hire your first worker outside your hometown, we would love to help you grow.