Is an Employer of Record the Right Choice for Your Organization?

Leveraging an Employer of Record (EOR) can serve as a valuable gateway to building a distributed workforce and ensuring compliance across different jurisdictions. To determine if your organization should collaborate with an EOR, ponder over questions such as:

• Are you planning to expand into new markets?
• What strategies will you employ to attract and retain talent across your various operational areas?
• How do you intend to handle the classification of contractors?
• Does your organization possess in-house resources for international employment law compliance?
• To what extent are you comfortable relinquishing control over your employees and various administrative processes?
• Are there other multi-country providers capable of handling compliance challenges?
• In which markets do you require coverage (i.e., where do you need to hire employees)?

Addressing these questions can assist your organization in assessing whether an Employer of Record is the most suitable option or if alternative choices like a Professional Employer Organization (PEO) should be considered.

What Sets Apart an Employer of Record from a PEO?
A Professional Employer Organization (PEO) is another category of third-party employee management service.

Although Employers of Record (EORs) and PEOs share similarities, they offer distinct services. Notable differences include:

1. Responsibilities – Companies engaging with a PEO enter into a "co-employment relationship," implying shared responsibilities. In contrast, an EOR serves as the complete legal employer.

2. Contracts – Due to this co-employment relationship, employment contracts are formed directly between the company and its employees, while the PEO establishes a separate client service agreement.

3. Registration – When working with a PEO, the business client still needs to establish a presence in each location where it employs individuals. Conversely, with an EOR, the company can have workers wherever the EOR operates, as it bears full responsibility for employment.

4. Insurance – Companies typically require coverage under the PEO's insurance policy, which may necessitate additional or supplementary employment insurance. EORs maintain their own insurance policies (covering unemployment, disability, workers' compensation, etc.), ensuring employee coverage.

To utilize a PEO, companies must establish their own branch in the chosen country, rendering them employees and responsible for local labor law compliance. In the PEO model, liability and risks are shared.

Furthermore, PEOs often stipulate a minimum number of employees, whereas an Employer of Record can cater to organizations of any size.