Employer of Record (EoR)
An Employer of Record (EoR) is a third-party organisation that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This arrangement allows businesses to hire and manage employees in different countries or regions without establishing a local entity, making it an invaluable solution for companies looking to expand globally or hire remote workers.
Understanding the role of an Employer of Record
The primary function of an EoR is to act as the official employer for tax purposes while the client company maintains day-to-day direction of the employee's work. This arrangement offers numerous benefits, particularly for businesses operating across multiple jurisdictions or those seeking to hire international talent without navigating complex local employment laws.
Key responsibilities of an EoR
An Employer of Record typically handles the following aspects of employment:
- Payroll processing and tax withholding
- Benefits administration
- Compliance with local labour laws and regulations
- Work permit and visa sponsorship
- Employment contract management
- Workers' compensation and unemployment insurance
By taking on these responsibilities, an EoR enables companies to focus on their core business activities while ensuring legal compliance in various jurisdictions.
The importance of EoR in global business
As businesses increasingly operate on a global scale, the demand for Employer of Record services has grown significantly. This trend is supported by research from Deloitte, which found that 50% of organisations are looking to increase their use of contingent workers in the coming years (Deloitte Global Human Capital Trends, 2019).
Benefits of using an EoR
There are several advantages to utilising an Employer of Record service:
- Rapid market entry: Companies can quickly establish a presence in new markets without setting up a local entity.
- Reduced compliance risk: EoRs ensure adherence to local employment laws, minimising legal exposure.
- Cost-efficiency: Businesses can avoid the expenses associated with establishing and maintaining foreign subsidiaries.
- Flexibility: EoRs allow companies to scale their workforce up or down without long-term commitments.
- Access to global talent: Organisations can hire the best talent regardless of geographical location.
At YunoJuno, we recognise the importance of global compliance and offer Employer of Record services that enable businesses to hire and pay contractors in over 150 countries, ensuring full compliance with local regulations.
EoR vs. Professional Employer Organisation (PEO)
While often confused, Employers of Record and Professional Employer Organisations (PEOs) serve different purposes. An EoR becomes the legal employer of record for tax purposes, whereas a PEO typically co-employs workers alongside the client company.
Key differences
Employer of Record (EoR):
- Legal Employer: Is the sole legal employer
- Geographic Scope: Often international
- Employment Relationship: Has full control over employment terms
- Liability: Assumes full employment liability
Professional Employer Organisation (PEO):
- Legal Employer: Co-employs with the client company
- Geographic Scope: Typically domestic
- Employment Relationship: Client company maintains more control
- Liability: Liability is shared between PEO and client
The EoR process: How it works
The Employer of Record process typically follows these steps:
- Client company identifies a candidate: The business selects an employee they wish to hire.
- EoR onboarding: The EoR provider collects necessary information and documentation from both the client and the employee.
- Employment contract: The EoR drafts and executes an employment contract compliant with local laws.
- Payroll and benefits setup: The EoR establishes payroll and benefits administration for the employee.
- Ongoing management: The EoR handles ongoing payroll, tax withholding, and compliance matters while the client company manages day-to-day work.
Our platform at YunoJuno streamlines this process, allowing businesses to onboard contractors in minutes with automated contracts and workflows, ensuring a smooth and efficient hiring experience.
Legal and compliance considerations
Employers of Record must navigate a complex landscape of employment laws and regulations, which can vary significantly between countries and even regions within countries. Key areas of compliance include:
- Labour laws and employment standards
- Tax regulations and reporting requirements
- Immigration laws and work permit regulations
- Data protection and privacy laws
- Health and safety regulations
A study by the National Association of Professional Employer Organizations (NAPEO) found that businesses using EoR services experience up to 14% lower employee turnover and are 50% less likely to go out of business (NAPEO, 2019). This highlights the importance of proper compliance management in sustaining business operations.
The future of work and EoR Services
As the global workforce continues to evolve, Employer of Record services are poised to play an increasingly important role. Trends shaping the future of EoR include:
- Remote work revolution: The shift towards remote work is driving demand for EoR services to manage distributed teams.
- Gig economy growth: The rise of freelance and contract work necessitates flexible employment solutions.
- Global talent acquisition: Companies are increasingly looking beyond borders to find the best talent.
- Regulatory complexity: As employment laws become more complex, businesses are turning to EoRs for compliance expertise.
According to a report by Grand View Research, the global EoR services market is expected to reach $6.8 billion by 2028, growing at a CAGR of 6.8% from 2021 to 2028. This growth underscores the increasing importance of EoR services in the modern business landscape.
Conclusion
Employer of Record services have become an essential tool for businesses navigating the complexities of global employment. By taking on the legal and administrative burdens of employment, EoRs enable companies to expand their global footprint, access international talent, and maintain compliance with diverse regulatory environments.
As the world of work continues to evolve, the role of Employers of Record is likely to become even more crucial. Businesses that leverage these services can gain a competitive edge in the global marketplace, ensuring agility, compliance, and access to top talent worldwide.
At YunoJuno, we're committed to supporting businesses in this evolving landscape, offering comprehensive EoR services that enable seamless global hiring and compliance. By leveraging our expertise and technology, companies can confidently navigate the complexities of international employment and focus on what they do best – growing their business.
