These days, expanding from one market to another is important for every growing organization. The appeal of deriving better profit margins, pioneering industry in a new country, less competition, and acquiring new talent drives organizations to place their footprints in a new market. But global expansion does not occur without several challenges that may affect an organization’s business activities. Hence every company needs to weigh the options before setting up shop in a new country.
One of the crucial decisions organizations must make before expanding into a new country is setting up a subsidiary or hiring a remote team in the new market. While setting up a subsidiary or a legal entity seems like a viable option, it is an expensive, time-consuming, and resource-intensive process. On the other hand, hiring a remote team requires an adept understanding of the country’s employment laws.
For growing organizations and emerging businesses, building a remote team is a feasible solution that enables them to expand into new markets. An efficient way to expand compliantly without incurring any loss is with an Employer of Record (EOR) or a global Professional Employer Organization (PEO). While there are differences between global PEO services and an EOR, both solutions enables organizations to expand efficiently into new markets.
What is an EOR or a global PEO?
An EOR or global PEO services help organizations build remote teams anywhere in the world without setting up a subsidiary or an entity while also handling the payroll and other HR administrative functions.
Global expansion involves several risks and challenges related to understanding and implementing global employment laws and country-specific regulations. However, with an EOR or a global PEO, organizations can place a laser focus on their core business activities. At the same time, the EOR handles the legal requirements of hiring, onboarding, managing payroll, and ensuring full compliance with the employment laws and tax regulations.
One major question every organization needs to answer is if their business needs an EOR or a PEO. Though these terms may be used interchangeably, a global PEO and EOR have important distinctions. The differences between an EOR and PEO are in their service offerings.
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EOR vs PEO - What is the difference?
An Employer of Record (EOR) primarily serves as the legal employer on behalf of an organization. They are mostly third-party organizations that assumes the legal responsibilities of their client organization. The EOR fully handles HR functions and is responsible for hiring and onboarding employees for its client organization. An Employer of Record enables organizations to carry out business operations in a new country without setting up a subsidiary or a business entity.
A global PEO on the other hand, functions as a co-employer of the organization and is deployed to handle the organization’s entire workforce. Unlike an EOR, global PEO services shares and partly handles the HR responsibilities and liabilities with the organization. Also, a PEO only works for organizations that have established entities in a new market.
Undoubtedly, an Employer of Record (EOR) or a global PEO can be the best option for any organization planning to build a team globally, regardless of the company’s size. However, what are the factors to consider before choosing an EOR or a global PEO?
Factors to consider before choosing an EOR/PEO
Before choosing an Employer of Record partner, the EOR needs to be able to provide solutions for your expansion and business needs. The following factors will enable you to make the right decision before partnering with an EOR or a global PEO platform.
Every EOR or global PEO offers unique services. While there may be many fascinating and incredible service offerings, the important factor to consider is if they are offering the services your business or organization requires to simplify your expansion plans. For example, some EOR partners offer basic services that cater to your daily HR administration tasks. However, it is best practice to go for an Employer of Record capable of handling the entire employment lifecycle of your business. This includes hiring, onboarding, payroll management, regular HR administration, and ensuring full compliance with employment laws.
While EORs generally provide global employment services, some may not cover the countries you are particularly interested in hiring and recruiting from. Without a network reach in the country you plan to hire from, your expansion plans may be futile. Therefore, it is important to find out about their global presence and a network reach in the countries of interest for your organization.
Partnering with an EOR or a global PEO requires granting access to sensitive information to a third-party organization. Coupled with the General Data Protection Regulation (GDPR), data protection and security are crucial. Therefore, it is imperative that your organization partners with an EOR that prioritizes data privacy and security.
Technology in use
Partnering with an EOR partner will require regular data exchanges. If the tech package the EOR platform uses does not align or work properly with your organization’s, it will impact the efficiency of utilizing an EOR. But if the system works properly with your own, you will find it seamless and easy to manage the exchange of data and everything required to work remotely.
Reputation and Experience
Before entering into a business relationship with a third-party organization, it is best to vet them and ensure they are right for you. Due to the sensitive nature of HR administration and navigating the compliance landscape in different countries, it is important to partner with a reputable and experienced EOR or global PEO organization. It is essential to know who handles your business information and how they operate in the country you plan to expand into.
Plans and pricing
Every EOR platform has a fixed system of offering charges for its services. While some offer a fixed fee for each employee, other EOR platforms place the charges on a flat percentage rate on the employee’s salary. Furthermore, you have to decide if the rate the EOR or global PEO service is charging is right for you at your current organization's growth stage. Having the right plans and pricing information will help you decide if the EOR partner is right for you.
If you are yet to figure out how to utilize an EOR service to build a remote team anywhere in the world, reach out to us at Skuad.
Skuad is a global HR platform that enables organizations to hire full-time employees and contractors in over 160 countries without setting up a subsidiary or a legal entity. Skuad’s global HR platform also helps organizations onboard talent, manage payroll, and ensure compliance with employment laws in any country of employment of your choosing. In addition, we handle your entire employment lifecycle so that you can scale your business operations compliantly, with reduced efforts and a top-notch HR administration.
To know more about Skuad, book a demo today.