If you haven’t heard – building a remote team is becoming quite the norm these days, but here’s the catch – not everyone can succeed. The various, ever-changing international laws and taxation structures can be a headache to keep up with and let’s face it – you probably don’t have the time because, well… you have a business to run!
International expansion is great, but we would be lying if we told you that setting up shop overseas was a walk in the park. To hire foreign employees on a full-time basis, you need to ensure that your business complies with all the legal and social norms.
But, how do you do that?
An Employer of Record Partner is the simplest solution. With an Employer of Record on your side, everything expansion-related while you just sit back, relax and work on strengthening your business.
The best part? An EOR absorbs complete responsibility for the legal complexities of expanding and running your international entity.
Sounds too good to be true
We’re no fans of delayed April fool’s jokes. But we are fans of busting the barriers and red tape that slow down and frustrate expansion into new countries.
If you’re new to the expansion game and overwhelmed by everything, we’ve got your back. So grab a cuppa coffee, adjust that office chair and let us school you on everything you need to know about an Employer of Record partner.
First Things First, What Is an Employer of Record Service?
Simply put, an employer of record is a third-party company that acts as an employer for the sake of tax and legal purposes.
EORs are most commonly used by companies looking to expand internationally or non-recruiting small businesses. This is due to the fact that there are oh-so-many benefits to using an Employer of Record if you are looking to sow some seeds across the global pond.
In addition, small and large businesses can benefit from employer of record services as a more affordable, easier way to ensure that they have all their corporate ducks in a row in setting up a foreign entity, payroll and H.R.
Hold Up, What Exactly Does an Employer of Record Service Do?
OK. Now you know what an Employer of Record is. It’s less complicated than it sounded. What an Employer of Record actually does, under the hood, is actually pretty sophisticated, though all you’ll see at the surface is all of the benefits and advantages.
An Employer of Record is legally liable for:
- Issuing payments to employees
- Ensuring overall business compliance
- Looking after the taxman
- Taking care of Employee Insurance
- Employee Benefits
- Sponsorship applications
- Visa Applications
An Employer of Record can be especially helpful when dealing with financial processing and HR laws for talent in various countries. It is up to us to stay updated on the ever-changing country-specific laws so you don’t have to worry about learning and complying with laws in many places.
The Benefits of Employer of Record Services
There are several benefits to having an Employer of Record partner when trying to expand internationally. We hate to be a buzz-kill, but opting to do it on your own can be costly, time-consuming and opens you up to getting your fingers burnt legally if you happen to skirt any international employment compliance laws (ouch!).
The saying, time is money has never been truer than when it applies to overseas expansion, and who wants to waste money? Human resources activities, from hiring new employees to processing payroll, require constant attention to every detail, including individual payments, taxes, commissions, reimbursements, and other general employee benefits.
With an EOR, you can authorise someone you trust to handle everything on your behalf. This way, you save a lot of time which you can, in turn, invest in effective business development.
You can benefit from greater accuracy when you outsource your company’s employee management, payroll processing, and other H.R. activities to a registered employer. In fact, all of these are essential responsibilities of an Employer of Record. On the other hand, your internal team can focus on other business-related activities.
When you have an internal team to manage H.R. activities, you and your resources need to spend more time generating reports from time to time. This is, of course, a monotonous process. However, you can end this practice with a trusted Employer of Record.
The best Employer of Record service providers should be able to maintain all data-supported reports on your behalf. More than that, they should offer real-time insight into your company’s payroll activities without spending time and energy on the actual process.
No regulatory risk
As noted above, managing employees and payroll globally means maintaining legal compliance. However, keeping track of the labour laws of different countries at once is difficult when you do it yourself.
On the other hand, an EOR keeps up-to-date tax tables and easily tracks social standards in countries worldwide. With an Employer of Record behind you, you no longer have to worry about regulatory risks.
Ease the sting of taxation
If you open an international entity and decide against using an Employer of Record once you are up and running, you will become a permanent establishment in the country in which you operate, and it will be your responsibility to ensure that you are fully compliant. This means that your business will become liable for local corporate taxes, income tax, indirect employer tax and value-added tax (VAT).
If you decide to use an EOR partner, it will be the local and employer for foreign entities managing taxation and statutory requirements. If a compliance issue comes about, thankfully, it will be our problem to deal with and not yours! Using Employer of Record services can also save you a ton of money by allowing you to be exempt from permanent establishment taxation.
What are the Key Responsibilities of an Employer of Record?
An Employer of Record partner absorbs the legal liability for the international talent you hire, which means it will act as the legal employer on paper.
Employer of Record partners are responsible for:
- issuing work contracts,
- processing multinational payroll,
- keeping you locally compliant in each country,
- tax and contributions,
- termination legal support,
- and even paying bonuses.
Having the right EoR partner in your corner can help you avoid an array of potential risks that you could face, including legal and taxation issues. Keep in mind that non-compliance is dealt with differently depending on the country. While in some cases, you may face reputational damage and penalties, in other cases, you may land yourself some jail time! We say it’s better to be safe than sorry!
Hiring and Firing Can Be Tricky Without an Employer of Record Partner
An EOR partner worth its salt can do all of this and more for you, making your international expansion much easier and reducing the number of sleepless nights while keeping your international talent happy.
The cool thing about expansion is that it opens the door to a literal world of possibilities in terms of growth and talent. But, as any H.R. guru will tell you, talent is not always found in the next block, and sometimes not even in the next city, which means that companies need to broaden their spectrum when expanding internationally.
It’s also just not that easy to hire international employees due to various employment compliance laws, which is where an Employer of Record comes in.
An Employer of Record can ensure that, if your company decides to hire international talent, you will not be held legally responsible for any compliance issues.
Besides Key Responsibilities, How Does an Employer of Record Work?
EORs often act as a go-between for companies and their overseas talent. The Employer of Record will take care of the difficult tasks when a company branches overseas, such as meeting country-specific labour laws, payroll and work permit requirements.
However, if a company chooses to expand into another country without using an Employer of Record, it will often have to jump through a series of fiery hoops to come out unscathed. The legal requirements needed to start a business abroad are extensive but ultimately boil down to residency, documentation and registration.
In some countries, the director of a foreign entity needs to hold a residence visa when setting up a business. If this is not possible, the company would likely need to hire a local director.
The most important part of the compliance process is properly preparing documentation to be submitted to the local authorities (sigh). This is a time-consuming process and needs to be done correctly, which could incur high costs.
Multinational companies are often in direct competition with many global companies and therefore need to sweeten the deal with benefits to attract and retain top talent.
Payment regulations can differ hugely among countries, making this difficult to navigate. Salary increases, holiday payments, profit sharing and meal and transportation allowances are just some of the mandated payment structures in some countries.
Without an Employer of Record, you’ll be on your own in determining a relevant reward strategy in the international markets you operate. With an EOR partner, all that gets taken care of with zero legal liability placed on you—and it gets taken care of correctly, given that worthwhile EOR partners will have the ready-made infrastructure and years of experience.
Your Employer of Record Partner Should Also Help With International Employee Benefits
The best Employer or Record partners should be able to clearly explain how they can help you take care of benefits specific to each country you operate. Plus, they should offer to manage the painstaking process or salary increase negotiations.
Top-drawer Employer of Record service providers should tick most, if not all of these boxes in their efforts to facilitate your overseas expansion:
- Speed up creation and send pre-compliant work contracts
- ensure consistent, continual multinational payroll with tax and contributions accounted for,
- provide on-the-ground expertise and consultation to guide continued, locally compliant expansion,
- keep you locally compliant with employment regulations in each country you hire in,
- assist with contract-termination legal support,
- plus, provide free H.R. cost and compliance resources.
With the day-to-day HR and financial compliance responsibilities off your shoulders, you’ll have time to do what you do best – run your business.
With an Employer of Record Partner Smoothing the Path to Building Global Teams, Everyone Benefits
Having the right EOR partner on your side can improve your company from top to bottom in many ways. It won’t just save you money, time and hefty legal costs but also help your business reach the next level by finding employees who can be the change that your business needs as you take on the world.
MDs and CEOs
Looking to expand overseas but not sure where to begin?
Your Employer of Record partner should help you expand your business into international markets without you having to worry too much about all of the added risks that come with the territory.
A change of scenery may just be exactly what your business needs to take it to the next level and partnering with an Employer of Record can make it that much easier. Sometimes overseas talent can improve your business hugely and branch out overseas with your EOR partner at your side can help you find and retain this talent
Looking after the human resources sector of your business can be a hassle when your personnel are based locally.
Imagine how much more of a headache you’ll have when your employees are based in another country. Thankfully, if you take on an EOR partner, you won’t have to. They’ll be the ones who (should offer to) simplify multinational HR admin into one semi-automated, intuitive workflow.
They should also reduce the risk of legal issues when terminating foreign employees, as different countries have different employment compliance laws.
Payday can be a nightmare for any business as the employees managing your payroll rush to make sure that they pay everyone correctly and on time.
This doesn’t necessarily need to be the case however as these processes can easily be automated with help from a worthy EOR service. This will save payroll professionals ridiculous amounts of time every month.
CFOs and Financial Controllers
Hiring and relocating talent abroad can come with many unforeseen costs and financial risks.
This is definitely not something you want to get wrong as it can land you in legal trouble and leave you with confused and unhappy employees. Selecting the right EOR partner can not only help you with reducing the costs you incur when expanding abroad, but can also help you onboard remote international employees and make them feel more welcome in your company.
Top talent is not always easy to find and as a recruiter, if you are only searching for personnel in your own country, you are limiting the number of suitable candidates to fill the roles that you need to fill.
Employer of Record services can expand your talent search and allow you to find prospective personnel from all over the globe. This ensures that you will be able to find the right person for the job as it is not common to find superstars in your backyard.
Playroll Is More than Just an Employer of Record Partner
We’re also veteran global expansionists having built Playroll’s physical employment infrastructure over the course of 20+ years of building teams around the world on behalf of the VAT IT Group, used by 50% of Fortune 500 companies.
It’s thanks to this ready-made global infrastructure that we’re able to quickly, easily and compliantly hire and pay your global teams on your behalf. In which countries? All of them!
Getting started with Playroll is easy. It’s not only easy, but it’s also free. Log into your free Playroll dashboard and start planning HR expansion costs completely free.
You won’t be billed until you make your first Playroll hire.