What is Employer of Record?
When it comes to hiring a remote team independently, the process can become quite intricate. Fortunately, Employer of Records (EORs) can simplify this by handling all the necessary tasks on your behalf. EORs play a crucial role in helping businesses achieve their goals and objectives while ensuring adherence to legal requirements. Explore further to understand what an EOR entails and why it is essential for your business!
What Defines an EOR?
An EOR, short for Employer of Record, functions as a third-party entity responsible for managing essential employment tasks on behalf of a business. This approach to talent insourcing allows businesses to establish offshore teams with minimal local law risks and liabilities. Discover more about what an EOR is and why its incorporation is beneficial for your business.
Responsibilities of an EOR
The primary responsibility of an employer of record is to act as a mediator in the existing employer-employee relationship. This involves handling all legal requirements related to employment and payroll. However, day-to-day work tasks remain the responsibility of the client company, which is registered as the employer on paper. The client company oversees management, supervision, project decisions, employee roles, termination, and compensation.
Key Functions and Responsibilities of an EOR
Employers of record offer a comprehensive range of services and responsibilities, allowing client companies to customize their services based on their specific needs. Generally, an EOR manages basic personnel functions while ensuring complete control over business operations.
The EOR serves as a legal entity with a wide range of responsibilities. Its tasks include processing employee payroll, obtaining work permits and visas, and generating invoices. Additionally, the EOR stays updated on local labor laws, evaluates legal benefits, and serves as a liaison with local authorities. Its role also extends to managing employee onboarding, creating timesheets, devising incentive schemes, and facilitating employee terminations.
Benefits of Utilizing an EOR in the Philippines
Employers of record provide efficient end-to-end solutions for talent insourcing, enabling companies to optimize time and resource allocation. Some advantages of having an EOR in your business include reduced employee accountability, enhanced time and cost efficiency, compliance checking and monitoring, and the ability to bypass unnecessary local incorporation expenses.
When Should you Engage an Employer of Record (EOR)?
Engaging an EOR proves beneficial for companies planning to expand their reach, offering a practical and convenient solution for growth and expansion. Utilizing an EOR can assist in exploring new markets, ensuring compliance with independent contractors, serving as an entity stopgap during operations initiation, and facilitating acquisition processes for companies without a legal business entity.
Decreased Employee Accountability
EORs act on the responsibility of ensuring employee welfare. They carry out duties directed by authorities and health maintenance organizations, including insurance coverage and payroll processing.
Boost Time & Cost-Efficiency
Working with an EOR allows companies to focus on tasks significant to business growth. They will have more room to do these as they would no longer need to manage payroll and HR matters. Moreover, this partnership enables businesses to save costs by paying a fixed hourly rate for each employee.
Compliance Checking & Monitoring
Tax and labor laws differ from country to country and can be so complicated to understand. Having an EOR can help ensure that the company remains compliant with all necessary laws in the country they’re hiring from. This matter makes it convenient for overseas clients who are talent insourcing.
Part of the EOR’s duty is to remain up-to-date with local laws for compliance checking and monitoring. They also ensure that the processing of payrolls stays compliant with applied employment laws.
When to Use an Employer of Record (EOR)?
Having an EOR onboard proves to be helpful to companies with plans to expand their reach. An EOR is reliable in advancing this process, thanks to their local expertise. Thus, an EOR can be the most practical and convenient way for a business to meet its vision for growth and expansion.
That said, below are some ways working with an EOR can be of help:
To Help The Company Explore New Markets
An EOR will make the needed research and assessment for the company’s international market readiness. If deemed necessary, they will hire employees in the client company’s target countries.
In this way, the company can evaluate the operations with local employees in said locations. Plus, the EOR will take care of matters concerning the establishment of an entity.
To Guard The Company Against Non-Compliance Of Independent Contractors
There is a risk in hiring independent international contractors in terms of employment and tax violations. Fortunately, the business can leave out the processing of requirements to the EOR to ensure compliance with all necessary processes.
To Act As An Entity Stopgap For The Company
Working with an EOR can help speed up the beginning of operations for a company with no entity yet.
The EOR will handle the company’s services as the entity gets set up at the same time.
To Facilitate Acquisition For The Company
It is the EOR’s duty to pay new employees in compliance with labor laws and regulations. They will handle the payroll if the company has no legal business entity yet. In this process, the EOR facilitates acquisition for the company.
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