What are the services of the Employer of record?
In the past couple of years, employment has taken on a significantly more global dimension. Individuals have relocated, and hiring managers have expanded their search for top talent beyond their immediate geographical areas. This shift has not only altered where people work and the prevalence of remote work but has also had an impact on the way employment relationships are structured. For companies seeking to employ their globally dispersed workforce in a fully compliant manner, there are two options available: one involves establishing a legal entity and registering as an employer in the specific jurisdiction where the employee resides, while the other entails utilizing the services of an Employer of Record (EOR). It's important to note that relying on independent contractors for extended periods is not advisable and should be avoided.
An Employer of Record primarily handles employment matters, not performance management. Often, we tend to group employment and the management of someone's performance into a single category. However, it's essential to recognize that they are distinct concepts—one relates to a legal arrangement, while the other pertains to a professional working relationship.
Assigning someone an inappropriate task, as opposed to incorrectly specifying their legal employment status, carries differing levels of consequences. Employment represents a legal status that entails legal responsibilities, ensuring that an individual enjoys all the employment rights as stipulated by local employment laws in a particular region. Conversely, performance management revolves around the nature and quality of the work itself within the professional context.
When both the employer and employees are situated within the same geographical area, it is typically the company's responsibility to handle both the legal obligations and performance management. However, when there is geographical distance involved, such as operating in a new jurisdiction, a distinct employer registration becomes necessary. To address this challenge, a company has two options: it can either undertake the demanding process of directly registering as an employer, which encompasses establishing international payroll operations, or it can opt to utilize the services of an Employer of Record (EOR).
