What is an Employer of Record? (EOR Meaning)

If you’re looking to swiftly engage workers but find the associated costs, risks, and responsibilities of direct employment overwhelming, understanding the ‘Employer of Record (EOR)’ meaning and how it works could be worthwhile. When time is limited to navigate complex employment compliance when hiring in new markets, considering an EOR solution to engage your staff could be a strategic choice for your business.

What is an EOR?

An Employer of Record is a third-party organisation that employs workers on behalf of a company. Once a worker has been selected, the EOR becomes the legal employer by taking on the responsibilities of back-office employment tasks. An EOR manages the legal obligations surrounding payroll, tax withholding regulations, paid leave laws, and employee benefits, depending on the country and area where you are employing staff.

For more information on how employment regulations differ per country, visit our country-specific EOR meaning guides.

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How Does an Employer of Record Work?

The Employer of Record handles the following processes on behalf of the company using their service in accordance with local labour laws:

• Creates and issues employment contracts
• Onboard new workers quickly
• Conducts background checks
• Manages payroll
• Provides benefits and insurance plans for workers, including healthcare plans if applicable in the country they are operating in
• Manages and keeps on top of changes in employment laws in the country you’re operating in
• Deducts payroll taxes
• Gathers and stores workers’ timesheets
• Processes and deposits payments to workers
• Responsible for employment compliance

Why Should you use an Employer of Record?

Are you considering exploring new markets and placing workers globally? An EOR solution makes sure your employees are classified correctly, taxed, paid on time, receive the correct benefits, and any employment issues are addressed and resolved in compliance with local labour laws.

If you don’t have the time to manage all these HR processes by yourself or lack the funds to hire an internal team to take control, utilising an EOR takes this responsibility off your shoulders. Using an EOR’s employment expertise ensures you remain compliant when engaging workers and means you don’t have to worry about keeping up to date with ever-changing law updates.

What are the Benefits of an EOR?

Understanding ‘What is an Employer of Record’ and grasping ‘EOR meaning’ is invaluable for businesses due to the benefits utilising EOR services entail, especially when building a global business.

1. Reclaim Operational Time Spent on Backoffice HR

Using an Employer of Record is extremely beneficial for businesses as it enables them to directly focus on daily operations and business expansion. This approach saves time typically consumed by grappling with and managing complex HR tasks when employing workers in an unfamiliar area.

2. Streamline Employment Compliance Management

The EOR takes the responsibility of complying with payroll tax laws and processing your employees’ payroll and benefits, sparing you from the intricacies of calculations. An EOR lessens the legal and compliance employment issues that may arise when employing workers in different areas. Nevertheless, the business that hires the worker remains responsible for their day-to-day operations, schedules, and ensuring workplace safety.

3. Efficient Workforce Expansion

If you’re considering expanding your business globally, you’ll need to hire employees in new markets to help build your company’s international presence and offering. You could choose to set up your own legal entity, but you’ll have the responsibility of figuring out the taxes, legal obligations and liabilities to do so.

On top of this, you would need to keep on top of the employment laws where your worker is based, have compliant HR policies and be equipped to answer their questions, and have robust payroll and tax deduction processes. Using an Employer of Record eliminates these steps. Your business won’t need to have its own entity or local presence in each place you want to hire in.

An EOR also takes care of ever-changing employment laws, which differ per country and frequently change. For example, Workwell Global compiles quarterly employment law updates to keep our clients up to date with laws changing in popular countries for recruitment. With the increased popularity of remote work, your business can access skills beyond your home country and hire talent wherever in the world with an Employer of Record.

4. Leverage Cutting-Edge HR Platforms with an Employer of Record

If you use EOR services, a big benefit is that you can utilise their HR tech platforms that help speed up HR processes. As Employer of Records have experts in the fields of payroll, benefits management, HR, and more, you can lean on them for support.

For example, clients of Workwell Global who use our Employer of Record services will have access to our Workforce Management Platform to view their global workforce at a glance. Utilising our platform simplifies onboarding, offboarding, and employment compliance per country which is a main feature of an EOR.

How Does an Employer of Record Work in Different Countries?

Utilising an EOR service is a great option for businesses expanding internationally, who are unaware of different employment laws in other markets. Companies using an EOR don’t have to set up an entity if they wish to hire within that market. As the EOR is the legal employer, they don’t have to register in each market before employing workers, meaning the EOR takes care of the complex paperwork, allowing you to onboard workers quickly and hit the ground running.