Employer of Record Services

Every business is established with a singular goal: to grow beyond borders.

Companies today are increasingly looking to expand their business operations globally, which sounds exciting in theory but is complicated to apply in the real world.

Every country has its own set of labor laws, tax regulations, and compliance requirements, it is challenging for companies to ensure they are sticking to local laws while managing their globally distributed teams.

Imagine a US-based company that wants to expand its operations into ASEAN markets owing to a skill-rich and diverse workforce. Where do they begin? - Do they set up a physical office, a local entity, or open a branch?

While it all sounds possible, setting up a local entity is a risky business.

A simpler, more effective, and safer alternative to global business expansion is opting for the employer of record services.

The need for an employer of record service as a solution arises from the complexity and cost associated with setting up legal entities in multiple countries, navigating diverse regulatory environments, and the administrative burden of international HR management. 

An employer of record facilitates these processes, providing an efficient and compliant way to manage a remote workforce, enabling businesses to expand their reach and operate globally with zero hassles.

What is an employer of record service?

An employer of record service, also known as Employer of Record (EOR), is a global employment solution that helps companies hire, onboard, pay, and manage their globally distributed workforce without setting up a local legal entity.

An EOR, like Skuad, hires employees on behalf of the company and takes on full-fledged remote workforce management responsibilities like onboarding, payroll, taxes & benefits administration, and HR compliance, and ensures adherence to local laws and legal regulations.

What do EOR services cover?

Employer of record services help companies deal with various global employment aspects from onboarding, and payroll to offboarding.

Here’s a closer look at what EOR services cover:

1) Legal employment

The employer of record, also called an international EOR, is officially listed as the employer on paper, which means they handle all legal responsibilities related to employment. This includes drafting and signing employment contracts in compliance with local labor laws.

2) Onboarding

Global employer of record services manages the onboarding process and ensures that all necessary documentation and formalities are completed per local laws and regulations. This smooth onboarding helps employees start their roles quickly and efficiently.

3) Payroll management

An employer of record service takes care of processing payroll, ensuring that employees are paid accurately and on time. This includes managing currency exchange rates, handling deductions, and adhering to regional tax laws.

4) HR support

Employer of record services provides comprehensive HR support, including employee record maintenance, performance management, and addressing any HR-related queries or issues that may arise.

5) Legal compliance

Staying compliant with local labor laws is critical. An EOR software ensures that all employment practices match the legal regulations of the country, reducing the risk of non-compliance fines and heavy penalties.

6) Tax administration

An employer of record handles all tax-related matters, including withholding the appropriate taxes from employee salaries, filing tax returns, and ensuring compliance with local tax regulations.

7) Benefits administration

The employer of record services manages employee benefits such as health insurance, pensions, and other benefits required by local laws. They can also offer localized and statutory benefits and additional perks to attract and retain top talent.

8) Visa and immigration

For employees who require visas or work permits, an employer of record facilitates the application process, ensuring all necessary documentation is in place and compliant with immigration laws.

9) Workforce management

Employer of record services assists with day-to-day remote workforce management tasks, such as tracking attendance, managing leave, and addressing workplace issues.

10) Offboarding

When an employee’s tenure ends, an employer of record service handles the offboarding process, ensuring all legal requirements are met, final payments are processed, and necessary documentation is completed.

When should you use an employer of record service?

The employer of record services can be useful in various global business expansion scenarios. When companies plan to expand worldwide, setting up a global workforce is one of the primary tasks in their plan of action. 

However, trying to grow global teams through direct hiring in different countries takes out a significant chunk of the company’s resources. So, many businesses naturally choose the best solution for hiring globally i.e. an employer of record service. 

Here are some situations where using an employer of record service is particularly beneficial:

1) Expanding into new markets

If your company is looking to enter a new country or region, setting up a legal entity can be time-consuming, costly, and complex. An employer of record, like Skuad, allows you to swiftly hire employees and establish a presence in new markets without the need for establishing a subsidiary.

2) Hiring remote employees globally

With the rise of hybrid work and distributed teams, many companies are pursuing to hire talent from around the world. An international EOR enables you to hire employees in multiple countries, ensuring compliance with local labor laws and managing payroll and benefits seamlessly.

3) Navigating complex compliance requirements

Different countries have different labor laws, tax regulations, and compliance requirements. An employer of record has the expertise to navigate these complexities, ensuring that your company adheres to all local regulations and avoids costly fines and legal issues.

4) Short-term projects

If your company has a short-term project in a foreign country, setting up a legal entity may not be practical. An EOR can provide a temporary solution, allowing you to hire local employees for the duration of the project without the long-term commitment of establishing a legal presence.

5) Testing new markets

Before making a significant investment in a new market, your company might want to test the local landscape. An EOR software allows you to hire employees on a trial basis to gauge the market’s potential without the upfront costs and risks associated with setting up a subsidiary.

6) Mergers and acquisitions

During mergers and acquisitions, companies may inherit employees in different countries. An EOR can manage these employees during the transition period, ensuring continuity and compliance until the new organizational structure is established.

7) Avoiding employee misclassification

Many companies are unaware of employee and contractor classification which can lead to serious complications. An EOR service saves you from heavy fines and penalties by rightly classifying employees and contractors.

8) Cost efficiency

Establishing a legal entity in a foreign country can be expensive. An employer of record service provides a cost-effective alternative, allowing you to hire employees and manage HR functions without the high costs of incorporation and ongoing administrative expenses.

9) Scaling operations quickly

When rapid growth demands quick scaling of operations in multiple countries, EOR services can facilitate quick and compliant hiring. This allows your company to scale efficiently without being bogged down by legal and administrative hurdles.

10) Specialized expertise

In regions where your company lacks local HR expertise, employer of record services can provide the necessary knowledge and support. This ensures that all employment practices meet local standards and best practices.

Top 5 advantages of using an EOR

Using employer of record services provides several key advantages for companies expanding globally or managing remote teams.

Here are some of the benefits of employer of record service.

1) Rapid market entry & cost savings

An employer of record allows companies to quickly establish a presence in new markets without the need to set up legal entities. This accelerates market entry and reduces the high costs associated with incorporation and ongoing administration.

2) Compliance & risk management

An employer of record ensures that companies comply with local labor laws, tax regulations, and employment standards, minimizing the risk of legal issues and fines. They keep up-to-date with changing regulations, providing peace of mind and reducing compliance burdens.

3) Streamlined HR, payroll & benefits administration

EOR services handle all aspects of HR management, including payroll processing, benefits administration, and tax deductions. This ensures accurate and timely payments, compliance with local regulations, and a consistent experience for employees.

4) Access to global talent with flexibility

EOR services enable companies to hire the best talent from around the world without worrying about local employment laws. They also offer scalability, allowing businesses to easily adjust their workforce size based on changing needs and business demands.

5) Enhanced focus on core business activities

By opting for the employer of record services for handling HR and administrative tasks, companies can concentrate on their strategic goals and core business activities. This allows for greater efficiency, productivity, and innovation, as internal resources are freed up from managing complex international employment issues.

Misconceptions about employer of record services

Many global businesses use the terms employer of record (EOR), professional employer organization (PEO), and staffing agency interchangeably. 

All these solutions help companies hire global talent, but there are significant differences that make each of these solutions unique. Now, let’s take a closer look at what makes them different.

PEO vs EOR

What is an employer of record?

An Employer of Record (EOR) is a service provider that enables companies to hire employees in foreign countries without setting up a legal entity. 

The EOR acts as the legal employer, managing employment contracts, payroll, taxes, benefits, and compliance with local labor laws. 

This allows companies to focus on their core business activities while the EOR handles all administrative and regulatory responsibilities, ensuring seamless and compliant international hiring.

What is a professional employer organization?

A Professional Employer Organization (PEO) is a service that provides comprehensive HR solutions for businesses. Through a co-employment arrangement, the PEO manages various employee-related functions such as payroll processing, benefits administration, tax filing, compliance with labor laws, and HR support. 

This allows businesses to outsource their HR tasks while maintaining control over day-to-day employee management, enhancing efficiency, and ensuring compliance with regulations.

What is the difference between an employer of record and PEO?

A key difference between a Professional Employer Organization (PEO) and an Employer of Record (EOR) lies in the legal structure and responsibilities. 

With a PEO, there is a co-employment arrangement where the PEO and the client company share HR responsibilities, and the client must establish a legal entity in the country.

In contrast, an EOR acts as the sole legal employer on paper, handling all employment-related functions without the client needing to set up a local legal entity. 

This makes EORs particularly advantageous for companies looking to quickly and compliantly hire international employees.

Employer of record vs staffing agency

What is a staffing agency?

A staffing agency is a service provider that helps businesses find and hire temporary or permanent employees. These agencies recruit, screen, and place workers in various roles according to the client's needs. 

Staffing agencies handle the recruitment process, including job postings, interviews, and background checks, and often manage payroll and other administrative tasks for temporary hires. 

This enables companies to fill positions fast and manage workforce fluctuations without the burden of extensive recruitment processes.

Difference between an employer of record and a staffing agency

The difference between an Employer of Record (EOR) and a staffing agency lies in their roles and responsibilities. 

An EOR acts as the legal employer for a company's international employees, handling all employment-related tasks such as payroll, taxes, benefits, and compliance with local labor laws. 

This allows companies to hire employees globally without setting up legal entities in each country. 

In contrast, a staffing agency focuses on recruiting and placing temporary or permanent employees for businesses. While they manage the hiring process, they do not take on the legal employer role or handle ongoing compliance and HR responsibilities.

How to select an employer of record service

Choosing the right Employer of Record (EOR) service is crucial for ensuring smooth and compliant international hiring. Here are key factors to consider when selecting an EOR provider:

1. Global reach & expertise

• Ensure the EOR software has a comprehensive geographical presence and expertise in the countries where you plan to hire. An EOR services provider with extensive knowledge of local labor laws and regulations will help ensure compliance and mitigate risks.

2. Compliance & legal expertise

• Verify that the employer of record has a strong track record of compliance and legal expertise. They should be well-versed in local employment laws, tax regulations, and statutory benefits, keeping your company compliant with all legal requirements.

3. Comprehensive services

• Look for EOR services that offer a full suite of services, including payroll management, benefits administration, tax handling, onboarding, offboarding, and HR support. A comprehensive service offering ensures that all aspects of employment are managed efficiently.

4. Technology & integration

• Evaluate the technology of the EOR services platform for managing HR tasks. The platform should integrate seamlessly with your existing systems, providing real-time data, employee self-service options, and easy access to payroll and compliance information.

5. Customization & flexibility

• Choose an employer of record platform that can tailor its services to meet your specific needs. The ability to customize solutions and offer flexible arrangements will help you manage a diverse and dynamic workforce effectively.

6. Reputation and references

• Research the reputation of the employer of record services in the industry. Look for customer testimonials, case studies, and references from other companies that have used their services. A provider with a strong reputation and positive feedback from clients is more likely to deliver reliable and high-quality service.

7. Cost transparency

• Ensure the EOR provides clear and transparent pricing. Understand the cost structure and be aware of any additional fees. A transparent pricing model helps you budget accurately and avoid unexpected expenses.

8. Customer support

• Assess the quality of customer support offered by the EOR service provider. Responsive and knowledgeable support teams are essential for addressing any issues or questions that arise, ensuring a smooth and efficient experience for both you and your employees.

9. Scalability

• Consider the ability employer of record platform to scale its services as your business grows. A provider that can support your expansion into new markets and handle increasing employee numbers will be a valuable long-term partner.

10. Data security and privacy

• Ensure the EOR has robust data security measures in place to protect sensitive employee information. Compliance with data protection regulations, such as GDPR, is crucial for maintaining confidentiality and trust.

By carefully evaluating these factors, you can select EOR services that align with your company’s needs, support your global expansion efforts, and ensure compliant and efficient management of your international workforce.

Why Skuad is the top Employer of Record service provider

Skuad stands out as a leading Employer of Record (EOR) service provider due to its comprehensive and innovative solutions that cater to the diverse needs of global businesses. 

By providing unparalleled access to global talent, allowing companies to hire employees in multiple locations without the complexities of setting up legal entities. 

Our legal experts ensure full compliance with local labor laws, tax regulations, and statutory benefits in every country of operation, minimizing risks and helping companies navigate the complexities of international employment.

Offering a full suite of EOR services, we manage payroll, benefits administration, tax handling, onboarding, offboarding, and HR support efficiently and effectively. 

Our technology platform is advanced and integrates seamlessly with existing systems, providing real-time data, employee self-service options, and easy access to payroll and compliance information, enhancing efficiency and transparency in HR management. 

Moreover, Skuad is scalable, supporting expansion into new markets and handling increasing employee numbers, making it a valuable long-term partner for global businesses. 

By making Skuad your EOR partner, businesses can confidently expand their global operations, knowing they have a reliable and expert partner managing their international workforce.

FAQs

1) What is the best employer of record?

Various factors come into play like scalability, technology, affordability, customer support, legal expertise, and global coverage when trying to find the best employer of record. Skuad is one of the best employer of record platforms that covers all the best qualities of an EOR service provider.

2) How much does it cost to use the employer of record?

Generally, any EOR service provider charges from 10-20% of the employee's salary. However, Skuad’s employer of record platform starts at just $199 per employee. For more information, explore Skuad’s pricing or try Skuad’s cost calculator tool.

3) Should I use an employer of record?

Yes. Using an employer of record for hiring, paying, and managing your global employees is highly cost-effective. It is a risk-free process for building and managing globally distributed teams.