- Remote work allows global companies to tap into talent worldwide, expanding beyond local markets for the best workforce.
- EOR legally employs workers on behalf of businesses, handling administrative tasks, compliance, and payroll.
- Lightsource Global is an exceptional EOR partner, offering rapid access to the U.S. market, compliance, and customized services for growth and innovation. Contact us to get started!
Remote work has been embraced around the world so, more than ever, companies no longer have to limit themselves to their local market to get the best talent. Today, you can have global companies with employees distributed worldwide who bring knowledge and new visions to your company.
However, this globalization is not without difficulties. Each country has its labor standards, and when you hire an employee from that country, you must comply. To lighten that load and solve that problem, an Employer of Record, or EOR, hires the employee who works for your company, saving you the burden of registering your company in the country, paying taxes, or having a physical location.
At first glance, this sounds strange and complicated, but keep reading because this blog will explain everything you need to know about the EOR and how you can benefit from the best international talent with this service.
What is an Employer of Record (EOR)?
An employer of record (EOR) is an entity that legally employs workers on behalf of another business.
This may sound strange; some other company hired my employee for me. What is that like? Are they my employees then? Let’s take it easy, and we will explain everything to you in detail.
An EOR serves (on paper) as an employee’s employer. However, this employee works for your company. They come in at the time your workers come in, they do the work that you tell them to do, and they leave at the time your company ends the day. The EOR only appears each time the check must be written to the employee since the EOR oversees paying them, in agreement with the rules of the country in which they are hired. This means that an EOR takes full responsibility for all aspects of employment, including compliance, payroll, taxes, and benefits.
Employer of Record simplifies recruiting international talent, turning borders into bridges for international growth.
Functions of an EOR
The functions of an EOR depend on the company and the contract it has made with your company. However, there are some services that they will always provide, for example:
- Compliance with local labor laws: An EOR ensures that employees are hired in accordance with local laws and provides them with compliant employment contracts.
- Incorporation of new team members: Once your company has found the candidate it needs, the EOR will manage the employment contract and establish all the necessary processes for the new worker to join your company.
- Payroll management: These can be at a local, national, or international level, depending on the EOR. As an employer, the EOR will fully manage the payroll and local taxes of your team members they employ.
- Compensation and benefits management: EORs typically offer a variety of benefits, but they vary from service to service. Benefits may include health insurance, time off policies, parental leave, etc.
- Processing contract terminations: When you want to terminate the contract of an employee hired using an ERO for some reason, they are the ones who take care of all the necessary details.
Example of an EOR
Imagine you have a company outside the U.S. and need an American employee to help you communicate and contact customers. Your company does not have representation in the U.S., so you do a lot of paperwork and legalize your company there or look for an EOR to help you hire that employee.
This worker will work remotely, but they will comply with the tasks you set for them, your company’s rules, and your schedules. In the meantime, the EOR will pay their salary and benefits and meet all that employee’s legal obligations following the regulations.
Differences Between EOR, PEO, and Staffing Agency
Employer of Record is one of many ways to outsource the hiring of employees. Two other different types of companies also offer similar services, but with significant differences that can completely change your obligations to the employee and your relationship with them.
The first type of company is a PEO or Professional Employer Organization. These companies are especially characterized by their co-employment agreement with your company. A PEO manages some HR functions like payroll, taxes, and benefits. However, this means that both your company and the PEO share legal responsibilities with the employee, and in some cases, it is not very clear who is at fault in the event of a legal dispute.
On the other hand, there are staffing companies. These companies serve as intermediaries between talent and your company from the beginning, even helping with the employee search and hiring processes. For this reason, they offer services such as:
- Advertising the role on job boards
- Running background checks
- Reviewing applicants and filtering for role fit
- Filing paperwork
The EOR, on the other hand, only appears when signing the contract; they do not help you find the candidate. Whom you hire is your choice.
A contractor or a freelancer is also subject to regulations within their country and most company managers don’t pay attention to legal penalties for not drawing the line between contractors and full-time employees. Save yourself the legal problems by working with an EOR.
Advantages of Using an EOR
The global Employer of Record platform market was valued at US$4.5B in 2022. This shows that companies’ interest in diversifying their workers and taking advantage of international talent is thriving. Remote work is already a reality, and the younger generations (Millennials and Gen Z) are taking advantage of this modality to find jobs that present them with more interesting opportunities to develop professionally. But what advantages does this have for your company?
- Compliance with local employment laws: Hiring a foreign employee without all the labor regulations being met is a risk for both you and your employee. An EOR is responsible for keeping current with regulations and ensuring everything is in order.
- A more diverse talent pool: It is already proven that having diversity in a work team allows for new and fresh ideas that enhance productivity.
- Cost savings: Savings are a significant benefit. You save on all the costs that your company may have to create a legal entity in another country, you save on all the expenses that may arise from complying with the laws and regulations of that country, and you also save on the different payments such as salary and benefits that you must make to your employees in that country.
- People operations compliance: An EOR can offer different services for managing Human Resources, such as running payroll in local currencies, onboarding, benefits, etc. These services may vary depending on the EOR.
There are also other benefits, such as ongoing HR support, onboarding talent quickly, or flexibility in staffing, that can make the option of hiring an EOR extremely attractive.
Getting Started with an EOR: Lightsource Global
Regarding EOR, at Lightsource Global, we stand out as an exceptional partner for companies looking for an employer of record. With a fluid expansion plan in the U.S., we allow companies quick access to top-level American talent without needing a physical presence or complex legal processes.
Acting as a legal employer, we handle all administrative tasks, ensuring compliance with local, state, and federal laws. Our services go beyond paperwork to customizing employment terms, offering flexibility in benefits, payroll, and more.
Lightsource’s experience in navigating the complexities of global sourcing ensures companies rapid and compliant entry into the U.S. market, fostering growth and innovation without the administrative burdens. If you need quick access to the U.S. market, don’t hesitate to contact us!