As companies expand globally, managing a workforce across different countries becomes increasingly complex. Global Employment of Record (EoR) has emerged as a solution for businesses looking to simplify international hiring and compliance.
EoR helps companies employ individuals in foreign markets without having to set up a legal entity in those countries. This service is essential for businesses seeking to tap into global talent, manage local compliance issues, and streamline operations in foreign markets.
Table of Contents
Understanding the Concept of Employment of Record (EoR)
“Employment of Record” is an agreement where a third-party supplier takes on the official duty of hiring people on behalf of another business. This implies that even if the employee works for the client firm, the third-party supplier becomes their legal employer.
The client firm manages daily work activities, performance, and job responsibilities. However, the supplier is in charge of duties like payroll management, tax compliance, benefits administration, and other legal requirements related to employment.
This can be extremely useful in fulfilling the global talent shortage, especially in the technology sector. As stated in a Forbes article, around 81% of talent acquisition professionals say that hiring the right talent is challenging. They are not able to fulfill roles easily, which is where EoR can be helpful by enabling companies to hire global talent.
What distinguishes a Professional Employer Organization (PEO) from an EoR?
Since an EoR is legally considered the employer, it can conduct business in other countries without the customer setting up a local corporation. In contrast, a PEO usually works under co-employment agreements and demands that the client business already has a valid legal presence in the nation.
How Does Employment of Record Work?
When a company uses this service, the EoR provider effectively serves as the workers’ official employer when they are employed abroad. These providers can manage the legalities of recruiting, such as registering staff with local tax authorities and making sure labor regulations are followed. They do this with the help of their local offices or partner networks in several countries.
The usual procedure starts When a business decides to hire someone in a foreign market. The business can collaborate with an EoR provider with the infrastructure to handle legal compliance, payroll, and benefits in the target nation. This saves them the money and time that would have been required to establish a full-fledged subsidiary or branch.
According to the World Economic Forum, this model of hiring can benefit both employers and employees. Employers benefit by accessing global talent, which gives small firms an equal playing field to compete against larger companies.
On the other hand, employees can get better salaries, especially if they are hired by a company from a developed nation. Therefore, employees in countries like India, Brazil, Italy, and the Philippines are seeing salary increases because of their high demands.
The Role of an EoR in International Business Expansion
Businesses may find it difficult to expand internationally, especially when it comes to employing personnel from different nations. Effectively managing a worldwide workforce is challenging due to local labor laws, tax implications, and various employment standards.
Every country has different employment laws, and a company expanding to global markets needs to follow these local laws. For example, a Deloitte report of 62 countries shows that medical examination is mandatory in 22 of them. Moreover, criminal background checks are allowed in 11 countries.
Similarly, a maximum of 24 months of probation is allowed only in one country. However, three countries have no probation period, eight have two months, and 27 have three months. In some countries, the laws change based on the employee’s position. For instance, a standard employee has to serve a maximum of two months of probation. However, the maximum probation period for executives is extended to four months, as finding their replacement can be challenging.
How EoR Helps Comply With Different Regulations
Adherence to local employment regulations is significant for companies expanding internationally. Every nation has its unique laws regarding taxes, work licenses, employee perks, hiring procedures, and termination procedures. Businesses may swiftly enter new markets by utilizing a global EoR, which eliminates the need to comprehend the nuances of each jurisdiction’s employment regulations.
By ensuring these regulations are followed, the EoR provider lowers the possibility of penalties, legal action, or harm to the brand’s reputation. As stated by HSP Group, global EoR services are essential for this compliance across different countries with varying rules and regulations. They can also help simplify the nuances of transnational business operations and help companies meet their legal and ethical commitments.
Can an EoR make it easier to comply with data protection regulations?
Many EoR providers ensure that local data protection laws—like the General Data Protection Regulation (GDPR) in Europe—are followed. They adhere to each jurisdiction’s legal obligations while securely handling sensitive employee data. Thus, the client firm does not have to worry about learning about the regulations of the local economy and complying with them.
Advantages of Using an EoR in Global Operations
One of the main benefits of an EoR is that it allows businesses to avoid the hassles of establishing a local corporation. Establishing a new legal company and negotiating local legislation may be unaffordable for startups or smaller companies exploring foreign markets. By using an EoR, businesses can avoid these expenses and concentrate on recruiting and managing personnel.
Another major advantage of using an EoR is the decrease in administrative overhead. The EoR manages all legal and regulatory documentation from contracts to payroll administration, allowing the client firm to concentrate on its primary business operations. This keeps the company moving forward without becoming bogged down and lessens the need for internal personnel to handle foreign compliance.
Additionally, an EoR gives companies access to a worldwide talent pool. When hiring in overseas markets, businesses can use local knowledge and particular skill sets that might not be easily accessible in their native nation.
Due to all these benefits, the global EoR market is estimated to reach a whopping $6,795 billion by 2028. The market was valued at $4,236 billion in 2021 and is expected to grow at a CAGR of 6.9%. This shows a possible uptick in the adoption of this new hiring model, which can be beneficial for employers and employees alike.
How does an EoR manage perks and rewards in nations with particular needs?
EoRs are knowledgeable about national benefits such as required healthcare plans, holiday entitlements, and pension payments. They guarantee that these are supplied in accordance with local legislation, which aids companies in luring and keeping top workers in international marketplaces.
Businesses aiming to grow globally while negotiating foreign countries’ sophisticated legal and regulatory environments find the Global Employment of Record (EoR) model essential. By contracting with a third-party service to handle the legal employer function, businesses may swiftly, effectively, and with less risk enter new markets.
The use of an EoR should be carefully evaluated, though, since it entails possible control issues and expenses. Thus, you should do meticulous due diligence when selecting a supplier.
 has emerged as a solution for businesses looking to simplify international hiring and compliance){kind=link}