Varieties of EOR Models
Employer of Record (EOR) services are available in two primary models. The first model, known as the aggregator model, involves an EOR provider collaborating with local independent in-country partners (ICPs). In this setup, the client works alongside the EOR provider and its network of ICPs in foreign countries.
The second EOR model is a wholly owned infrastructure. In this arrangement, the global EOR provider either establishes its own local offices or acquires existing ones in various countries. This approach integrates the different branches into a global company, with central offices typically situated at the company's headquarters.
Both models have their respective advantages and drawbacks. The aggregator model offers flexibility and the potential for customized plans, thanks to its ability to tap into various providers. In contrast, the wholly owned model can provide a more stable, uniform process to oversee all foreign subsidiaries, with fewer anticipated changes.
Alternatives to Employer of Record
There are several alternatives to the Employer of Record (EOR) model. One term you may come across is Global Employment Organization (GEO), which is sometimes used interchangeably with EOR. However, GEO often refers to a single company that owns EOR providers in various countries worldwide. This differs from an EOR, which typically aggregates local partnerships in the required regions.
GEO can be a more limited solution because the local partners of a GEO are usually not replaceable. This can result in lower service levels and potential conflicts of interest concerning data integrity and compliance. Choosing an EOR service provider that offers services through external third-party partnerships typically provides greater flexibility and control.
Another comparison you might make is between EOR providers and staffing agencies. A staffing agency specializes in recruiting candidates and assisting with the hiring process. For instance, if you need to onboard a team of developers in a new region, a staffing agency can help identify suitable candidates and manage the interview and enrollment process.
However, staffing agencies do not handle employment management in a compliant manner, including tasks such as withholding taxes or social security contributions, managing employee benefits, ensuring data security, or addressing ongoing employment matters. Once they find the employee, their role is usually completed.
