What services does an Employer of Record (EOR) offer?
An EOR takes on the responsibility of hiring employees for a company in a new location, ensuring the company complies with local employment laws and avoids the complexities and risks of establishing its own local presence. While the EOR becomes the formal employer "on paper," the company retains control over the day-to-day work of the employees.
In terms of the working relationship, the company maintains regular communication with its employees and typically follows a traditional line manager or hierarchy for work-related matters, similar to if the employees worked directly for the same organization.
However, when it comes to tasks related to payroll processing, taxation, contracts, or other employment law matters, employees would need to engage with the representative from the Employer of Record. Here are some of the key responsibilities an Employer of Record typically handles:
Payroll Management: The EOR manages payroll taxes, registers with local tax authorities, handles documentation, and ensures legal compliance. They also oversee the detailed aspects of payroll processing, including collecting necessary forms like W-2 or I-9, making deductions, providing payslips, filing tax returns, and managing other required documentation.
Contracts: Onboarding employees through an EOR simplifies the contract setup process. The EOR conducts background checks, identifies any regulatory requirements specific to the location, and creates employment contracts that fully comply with local laws. This includes understanding local regulations related to paid time off, sick leave, and other employment conditions.
Benefits: Employee benefit expectations can vary widely by location. EORs establish relationships with various benefit providers, including pension funds, health insurance companies, and sometimes training organizations. They ensure that employees under their responsibility receive all mandatory and optional benefits.
Working with Local Authorities: An EOR works closely with local authorities in each region where the company has employees. This requires a "boots on the ground" approach, involving tasks like obtaining local insurance, setting up bank accounts, registrations, and maintaining positive relationships with local authorities to ensure compliance.
Termination: The EOR may also support termination processes or help transition employees to new arrangements. This could involve scenarios such as employee relocation, promotions, resignations, or terminations. The goal is to manage these transitions efficiently without excessive fees or contract term constraints.
HR Advice: The EOR serves as an expert on local matters in the new region. Companies can turn to their EOR for advice on various local issues, including visa applications, equity arrangements, adherence to local holidays and customs, and addressing any other region-specific concerns. Local expertise in labor laws is particularly valuable in these situations.
