The gains of an organization's expansion into new territories are numerous. Revenue generations, exposure to foreign investments, diversification of the organization's market, and the appeal of rendering services to different people globally are some of the attractive benefits of going international. Ideally, every organization strives to be a global market leader and exert its dominance in other regions, and this is a great thing. However, the significant gains are not easily attainable feats. There are drawbacks such as compliance with territorial laws and policies, tax laws, cultural familiarisation, differences in holidays, etc. Scaling through these hurdles is herculean, but armed with the correct information and linking up with third-party organizations will make it easier.
One of the drawbacks every expanding organization has to deal with in new territories is the recruitment and the complexities around it. However, the availability of different employment models eases getting new team members on board in an organization. Two of the employment models that expanding organizations have embraced are Employer of Record and the utilization of International Staffing Agencies. Here, we will try to figure out which one of them is better. But first,
What does the International Staffing Agency mean?
An International Staffing Agency is essentially an organization that handles search, recruiting, and termination on behalf of an organization. Being an agency, they are autonomous in their operations and take up the entire responsibility of managing staff for any organization that serves as a client. Their primary task involves identifying and matching prospective staff to an organization in their employ.
It is a common practice to find that many International Staffing agencies work on a unique-service basis. For instance, some agencies are solely for recruiting nurses and health professionals, whereas others work with a variety of professionals. They are also identified and called Temporary agencies, but this only applies when the agencies specialize in providing organizations with short-term workers or staff to fulfill a temporary task.
Why use an International Staffing Agency?
As earlier stated, an International Staffing Agency's primary task is to identify and match prospective staff to an organization that hires its services. The agency carries out its duties by specializing in searching for executives, placing personnel in firms that need them, and also offering temporary services to organizations that need staff on a short-term basis.
The modus operandi of International Staffing Agencies is that they take up every responsibility of management related to the staff. Organizations directly hire the International Staffing Agency, and in turn, the agency provides workers suited to the organization's demands. Therefore, the agency bears the entire grunt work of human resources and staff management as the agency is responsible for paying and accruing any benefits directly to the staff. Other responsibilities that the agency handles on behalf of the organization that hires its services include negotiating the staff salary, work schedules, and further employment details.
What does an Employer of Record (EOR) mean?
An Employer of Record (EOR) is an organization that hires professionals for companies and serves as the legal staff employer in territories where these companies do not have the legal rights to operate.
The EOR places itself as an intermediary between organizations seeking to expand beyond territorial borders and international employees. However, the EOR is not in charge of recruiting staff but provides the organization with all the tools needed to hire workers of their choice in the country they choose to operate. So, in essence, the organization itself identifies and vets the candidate using its internal recruitment team. The EOR's role is to serve as the legal employer and place the candidate under its payroll.
What enables the EOR to act as an intermediary between the company and its international employees is the infrastructure that allows it to operate in a fully legal compliant manner in the country that the incoming organization wishes to work.
Why use an Employer of Record?
Every organization seeking to enter new markets in foreign territories faces compliance issues with the country’s laws and policies. For an organization to conduct its business with ease, the Employer of Record is used to overcome the regulatory challenges and reduce the operational costs the organization may have incurred if it had to set up a physical presence in the said country.
It is also employed to bypass the regulations that govern the recruiting of staff from that country. Sometimes, setting up operations in a new country can take up to 12 months. However, many companies use EOR to accelerate their entry into a new market by hiring international candidates. They can carry out their business operations while they wait for accreditation to be completed.
As every country has its unique policies regarding work permits, taxation, and payroll requirements for countries that do not locally operate within the country’s borders, the Employer of Record serves as an ideal alternative. It manages the payroll and other compliance issues for every staff that the organization employs from that particular region.
Other reasons for the utilization of Employer of Record include providing employment contracts that protect the company's interests by ensuring that the contracts awarded for local employment are compliant with the country of operations' policies. Also, it offers the organization the opportunity to provide competitive benefits packages to ensure that the organization recruits the best talents.
What is the difference between the two employment models?
Even though the International Staffing Agencies and Employer of Record are two separate business entities and employment models, they have many similar benefits. However, there exist several differences in their modes of operations.
Mode of operation
An International Staffing Agency's mode of operation involves hiring employees and assigning them to different organizations that need their skill set. The agency takes up the full responsibility of managing the workers deployed to the various organizations and handling their payment, payroll, and other Human Resource activities on behalf of the organization.
Conversely, an Employer of Record is primarily tasked with the sole responsibility of being an intermediary between an organization and candidates for employment. Unlike the International Staffing Agency, the Employer of Record is not in charge of recruiting the organization’s staff but takes on the legal responsibilities of representing the organization in the country of operation by ensuring compliance with hiring policies.
Absorption of professionals
Many will be hesitant in dealing directly with an International Staffing Agency in recruiting executives and top professionals. The belief is that agencies for recruiting staff do not offer job security, stability, and compensation that they can get from working directly with the organization. With the Employer of Record, the organization sets the employment terms and deals with the professionals directly, and the Employer of Record provides a competitive employment package.
Employment duration options
In choosing between an International Staff Agency and an Employer of Record, sometimes, the choice depends on the job's duration. While it is possible to recruit on a short-term basis using the International staffing agency, it is not possible with the Employer of Record model. Many International Staffing agencies are set up to accommodate short-term and temporary labor for specific projects. However, if an organization is on the lookout for highly skilled and professional staff for long-term employment, using the Employer of Record employment model is the best.
Ease of expansion
One of the fantastic things about the Employer of Record companies is that they have their footprints in several countries. What this means to any organization seeking to recruit and make use of an EOR is that it can partner with a particular EOR, and it will render its service for any location that the organization wishes to recruit from. Therefore, partnering with one Employer of Record will aid a particular organization's growth globally. Conversely, recruiting with an International Staffing agency means that for every country from where the staff is drafted, there is a unique agency handling staff management for that country. Aside from having to sign multiple contracts with different agencies, it makes communication and management very difficult.
So, which is better?
Both Employers of Record and International Staffing Agencies have very similar benefits. The benefits include:
- Affording organizations the ability to recruit top talents worldwide without setting up physical structures.
- Assisting with compliance with territorial laws and policies.
- Dealing with international payroll.
However, with the plethora of benefits, they serve different purposes.
Applying either of the two employment models has to do with the organization's objectives regarding recruitment and operations. If an organization seeks short-term services or needs a couple of staff for a particular duty and would love to outsource its management, using an International Staffing Agency will be best utilized. However, if an organization intends to launch into a new international market or recruit professionals from a particular country or globally, an Employer of Record will be best suited for this. An Employer of Record will ensure that all the hassles of setting up an operational presence in the territory are taken care of.