How Does an Employer of Record Operate?

The Employer of Record's operations are governed by their legal responsibilities within the respective country or jurisdiction.

While the client company maintains day-to-day oversight of its employees, the EOR, in collaboration with client companies, undertakes the following activities:

Tax Registration:
The EOR registers with tax authorities as the official employer of the staff.
This necessitates the withholding of specific taxes from employee salaries, including income tax and payroll tax contributions.
The EOR is also responsible for submitting these withheld amounts to the relevant authorities on a regular basis and adhering to any reporting obligations.

Payroll Processing:
The EOR manages the payroll for all employees in accordance with the legal requirements applicable in that jurisdiction.
This includes handling necessary deductions, garnishments, expense reimbursements, and leave entitlements.
Payment methods and cycles are determined based on legal obligations, local customs, and the preferences of the client company.

Benefits and Social Contributions:
The EOR enrolls in pension funds, health insurance plans, workers' compensation schemes, and other benefit providers for employees.
This registration may be required by law, depending on the jurisdiction, or it may be done to offer additional benefits beyond legal mandates.

Employment Contracts:
The EOR enters into jurisdiction-compliant employment contracts with the hired staff.
These contracts can take various forms, including indefinite, casual, or fixed-term employment agreements.

Termination or Re-hiring:
The EOR handles employee terminations based on guidance from client companies and in compliance with applicable laws.
Similarly, they can renew employment contracts upon expiration.