The pandemic has brought dramatic changes in the work structure and has forced companies to adapt to different strategies of operation. While hiring and managing globally distributed teams have always been a difficult task for multinational organizations, it will become a bigger challenge in the post COVID world.
Cross-functional, diverse and globally distributed teams will be the new normal. It will become a resource-intensive task for human resource departments to conduct international and national hiring and manage employees who come from diverse geographical backgrounds, and are working remotely. Companies need to strategically align with partners who can help them achieve the same without too much resource investment. An EOR or an Employer of Record comes to the rescue here. An EOR can strategically boost a company in attaining efficiency and effectiveness in global employee management.
An EOR or Employer of Record operates as a third-party company that has been given the contract for employee management, which include administrative operations, payroll management, taxes, insurance and benefits, visa applications and others.
The EOR is preferred by companies today, as they directly help the latter in cost and time savings, in increased effectiveness of regulatory compliances for international and national scenarios, and also in reduction of risks. The EOR is responsible for the regulatory and legal requirements associated with employment, immigration, payroll but does not have any management role in respect to the position of the employee. Therefore for a business, hiring an EOR is strategically, financially and operationally profitable.
International expansion and operation are the prime challenges for most companies, and therefore, choosing the right strategic alternative becomes a make or break game for an organization. Opting for an EOR has proved to be effective in managing international hiring and global distributed teams. But the process of choosing the right EOR partner is critical and should be relevant to one’s organization. Researching about the choices available on certain criteria as mentioned below, will help one in streamlining the relevant EORs for one’s needs.
1) The infrastructure of the EOR in providing prompt and accurate support.
2) Degree of customization and experience offered by the EOR in your industry.
3) Ease of payment and the pricing model followed by the EOR.
4) The experience level of the EOR in the target country and host country.
In management literature, achieving the perfect fit between a need and its solution is touted as the strategy for success. Therefore, it is critical to identify and choose the EOR that will perfectly fit the company’s needs and its strategic vision. Once the company has streamlined several EORs based on the criterion as mentioned previously, it is then needed to answer certain questions.
As the regulatory framework for every country differs, it is critical that the chosen EOR needs to have a local presence in the country where the company intends to set up its international operations and does the hiring, or at least needs to have a strategic partner in that nation to handle all the compliances of employee management.
There are nations such as Germany that allow organizations to work through EORs for 18 months. Global EORs all operate on different time frames, and this time should be utilized by companies to set up their future strategies. While hiring the right EOR, the company should have complete knowledge of legal limits, and its future game plan.
Security and privacy are the two aspects that cannot be stressed enough in today’s business, and even before the regulations of GDPR, these have served as important strategic aspects for the business. The task of an EOR is dealing with sensitive employee information. If the former cannot ensure complete privacy and security of the information, then it can prove to be detrimental for the company. Therefore, it is of phenomenal importance to choose an EOR partner that has sufficient infrastructure.
The company must determine the profitable pricing model that they want to engage in. Global EORs opt for either fixed price per employee or the charge a proportion of the earning of the employee. It depends, therefore, on the country, employment rules, basic salaries of the employees to finally arrive at the suitable pricing model beneficial for the company. Therefore, prior to engagement with any EOR, it is pertinent to know about the model of pricing followed by them.
For the right fit between the company and its EOR, it is required that their policies must be aligned together. Situations may become complex if the two sets of policies are directed differently. It is required that prior to choosing, the company needs to strategize with the EOR into creating a host of standard policies that would work best rather than accepting what the EOR has to offer without flexibility.
Companies choose EORs with the promise of higher effectiveness and efficiency. But to determine whether the chosen EOR is, in reality, helping you or just merely acting as a middleman or an aggregator, is a task that companies need to examine periodically. Investigation on variables of GDPR practices, legal and HR compliance, protection of the business’s best interests, attrition rates of employees, employee satisfaction surveys and others must be conducted at periodic intervals to understand whether hiring the EOR is meeting the business’s objectives successfully.
Lastly, the ability of the EOR is prompt communication and solution of issues must also be considered as an important criterion for selection. Ideally, companies intending to hire an EOR must create their framework of suitable metrics and explore the available choices of the EORs based on those metrics periodically.
Choosing the right EOR partner is fundamental as the success of international expansion depends on that. Companies need to keep in mind that the EOR partner must enable them with the entire gamut of employee management practices, give timely and successful solutions and prove to be financially profitable for them in the long run. In choosing a true partner, it is critical that the company needs to choose an Employer of Records who can satisfy them rather than just meet with the basic requirements.
EOR services are there to help companies avoid the hassle of local and international operational hiring, and help them to focus their valuable resources in strategic tasks. If you are looking to expand in different nations, start searching for EOR services now. Make a checklist of your requirements, and analyze the available options to you. And conduct periodic reviews to assess the fit between your partner and you, and to take intervention strategies to arrive at the best fit.