Establishing an international team is an exciting step in any organisation’s journey. But the reality for most business leaders is that navigating employment laws across multiple countries can quickly turn international dreams into a compliance and administrative nightmare.

This is where an Employer of Record (EoR) steps in.

But, what exactly is an EoR, you ask. Simply put, an EoR is a service that enables organisations to compliantly employ people in countries where they don’t have a legal entity. The EoR becomes the official, legal employer of those international team members on paper, handling all the complex stuff – compliance, contracts, payroll, benefits etc. – while the international employee’s day-to-day activities remain squarely with the client organisation. 

When to Use an Employer of Record

But why would use an EoR? Well, there are quite a few compelling reasons:

• You want to expand into a new market but want to test run before committing to setting up a legal entity
• You’ve discovered an exceptional talent who happens to be based overseas
• Your top sales person wants to move their family abroad 
• You need to quickly expand your operational footprint across multiple countries
• You’ve landed a large, year-long, international project 

The beauty of an EoR is that it removes barriers to international growth. So whether your star salesperson wants to relocate to France, or your perfect hire lives in Poland, or you’re expanding operations into Ireland, suddenly they’re all within reach.

These reasons are common across organisations of all shapes and sizes, but at the same time, most business leaders also want to ensure they don’t spend time and expenditure on setting up entities and navigating foreign bureaucracy. They’d rather leave the compliance and admin to the experts whilst they focus on delivering their core objectives and growing their business. 

If a business is expanding into new markets or jurisdictions, they’re often faced with unfamiliar legal and administrative landscapes. By partnering with an EoR, they can navigate local employment laws, taxation requirements, and regulatory obligations with confidence, reducing compliance risks and ensuring smooth market entry. During periods of rapid growth or fluctuating workforce needs, Employers of Record offer scalability and flexibility. Businesses can quickly onboard new employees or adjust staffing levels.

Whether you’re expanding into new markets, hiring remote or international workers, experiencing rapid growth, facing compliance challenges, or seeking to streamline your HR processes, an EoR could help to ease the workload. 

Advantages of Using an EoR

Partnering with an Employer of Record offers numerous benefits for businesses seeking to streamline HR processes, reduce administrative burdens, and mitigate compliance risks.

There are numerous advantages to be had from working with an EoR:

• EoRs provide expertise in navigating complex employment laws and regulations. This reduces the risk of costly fines, penalties, or legal disputes, safeguarding the reputation and financial health of the organisation.
• EoRs offer scalability and flexibility, allowing businesses to quickly adapt to changing workforce needs without the hassle of hiring and managing additional HR staff. 
• By outsourcing functions such as compliance, payroll processing and benefits administration to EoRs, businesses can focus their resources on core operations, strategic initiatives, and growth. 

but What Does an Employer of Record actually Do?

EoRs handle various HR and administrative tasks for their clients, including compliance with international employment laws, onboarding, payroll processing, and handling employee benefits. 

Serving as the legal employer for another company’s workers, an EoR acts as a compliance and administrative bridge between the employer itself and its workforce. That allows the client to focus on its core business activities, without having to worry about the compliance and administration involved with managing an international workforces. They can then take advantage of having increased flexibility to scale their workforce quickly, expand into new markets, or hire remote workers without the burden of managing complex HR functions.

Compliance with Employment Laws

One of the primary responsibilities of an EoR is to ensure compliance local employment laws. EoRs must stay abreast of ever-evolving legal landscapes to avoid penalties, lawsuits, or reputational damage for their client companies. This includes staying up to date with regulations related to taxes, wages, workplace safety, and employee rights.

Regulations differ widely from one country to the next, across all manner of topics such as payroll, working hours & overtime, benefits, health & safety, employee classification and much, much more. EoRs must be experts on these matters, and have the ability to take all of these considerations out of their clients’ hands. 

In a nutshell, then, Employer of Record compliance considerations entail a comprehensive understanding of local employment laws and diligent adherence to regulatory requirements to safeguard both employees and client companies from legal risks and liabilities.

Payroll

Employers of Record are responsible for processing payroll for all employees, which means calculating wages, deducting taxes and other withholdings, and ensuring timely payment. They must factor in hours worked, overtime, and any applicable bonuses or deductions, which means it can be quite a time-consuming process.

EoRs are also responsible for keeping themselves up to date with tax laws and rates to ensure accurate withholding and timely remittance to tax authorities. They facilitate the distribution of paychecks or direct deposits to employees on designated paydays, ensuring that they receive their wages promptly and reliably. This contributes to employee satisfaction and morale.

An Employer of Record also manages payroll-related reporting and compliance tasks, such as generating pay stubs, filing tax forms, and providing year-end statements. This relieves client companies of administrative burdens and reduces the risk of non-compliance penalties.

All in all, the payroll administration work of a company can be significantly alleviated by the right Employer of Record. 

Onboarding

Employers of Record can help streamline the onboarding process for client companies by efficiently managing various administrative tasks, including collecting necessary documentation, setting up payroll and benefits enrolment, and providing mandatory orientation and training materials. This eliminates the burden on the client company’s HR team and ensures compliance with legal requirements.

By efficiently managing these onboarding tasks, EoRs enable client companies to focus on core business activities while ensuring that new hires receive a positive and organised introduction to their roles.

Compensation, Benefits, and Termination

Finally, but by no means of least importance, Employers of Record (EoRs) are instrumental in managing compensation, benefits, and termination processes for client companies. They are responsible, in this way, for ensuring fairness, compliance, and efficiency throughout the employee lifecycle.

In terms of compensation, Employers of Record facilitate the calculation and distribution of employee wages, including regular pay, overtime, bonuses, and other forms of compensation. They ensure that wages are accurately calculated and disbursed in accordance with employment contracts and applicable laws, ensuring trust and transparency between employers and employees.

When it comes to termination, EoRs manage the process in a compliant and respectful manner, handling tasks such as final paychecks, severance agreements, and exit interviews. They ensure that terminations are conducted in accordance with legal requirements and company policies, minimising the risk of disputes or litigation.

How to Choose an Employer of Record

Selecting the right Employer of Record is essential for any business looking to outsource HR functions and ensure compliance with employment laws. Several key factors should be considered when making this decision:

• Is there good value alignment? Your chosen EoR is effectively an extension of your organisation, and should therefore align with and represent your company values and employee value proposition. 
• Consider the level of customer support and responsiveness provided. Choose a provider that offers personalised support and is readily available to address any questions or concerns that may arise. Don’t settle for chat-bots and call centres – make sure you have the direct contact number of a dedicated account team. 
• Review the pricing structure and transparency. Ensure that your EoR is being upfront about ALL the associated costs and fees. Understand how fees are calculated, whether they are based on a per-employee basis or a flat monthly rate, and whether there are any additional costs for specific services.
• Assess the EoR’s reputation and client references. Look for testimonials or case studies from satisfied clients, and consider reaching out to existing clients to get feedback on their experience.
• Evaluate the EoR’s geographic coverage. Ensure that they operate in all the locations where you plan to hire employees, especially if you are expanding into new markets or hiring remote workers.
• Consider the range of services offered. Look for providers that offer comprehensive HR solutions, including payroll processing, benefits administration, compliance management, and employee relations support.

By carefully evaluating these factors, businesses can be confident they’re selecting an Employer of Record that meets their needs. Choosing an EoR is tough, as it’s so important to get the decision right. But choose wisely, and you set yourself up for a successful partnership for – hopefully – many years to come.

How Much Does an EoR Cost?

The cost of using an employer of record will, of course, vary. Whenever reviewing costs of EoR, it’s always a good idea to remember the old adage, “you get what you pay for”. A good EoR will be a reliable, experienced and value-aligned extension of your own organisation. They should be accessible, responsive and proactive. EoRs that can promise this may be priced slightly higher, but it’s most often worth the marginally higher investment. 

Here at Peak PEO, we’re not aiming to be the cheapest, but we are confident we provide the best value.

Please do get in touch to discuss your requirements in more detail, and to receive a fully detailed, transparent pricing proposal.