How to Select the Optimal Employer of Record (EOR): 6 Inquiries to Consider

March 22, 2023by Panda Global Work0

The increasing prevalence of remote work offers significant potential for growing companies to attract and onboard skilled, enthusiastic candidates from virtually any country worldwide. Despite the benefits of global hiring, organizations engaging international employees must navigate certain challenges.

Employing individuals in countries situated thousands of miles away from the corporate headquarters, where laws, cultures, and customs markedly differ, can pose formidable challenges. Establishing a local entity may become a necessary, albeit potentially protracted and costly, undertaking for companies in such scenarios.

Moreover, opting for a permanent establishment could entail corporate tax obligations. Violating laws in the process may lead to severe financial repercussions, potential bans on future business activities in the respective country, and, in certain jurisdictions, criminal charges such as fraud in cases of employee misclassification. Nevertheless, viable solutions exist to address these challenges.

Companies aiming to venture into international expansion and recruit team members in foreign countries can collaborate with global human resources and payroll providers that offer Employer of Record (EOR) services, such as Panda work global. This partnership assists employers in maintaining compliance with tax laws, employment regulations, country-specific norms, and legal prerequisites, particularly in the face of evolving legislation.

 

What is an Employer of Record (EOR)?

 

In countries mandating a local entity, an Employer of Record (EOR) possesses an existing local entity, eliminating the need for the employer to establish a new one. The EOR facilitates the seamless hiring of a client’s workers. It streamlines the process for globally expanding companies to engage remote international employees while ensuring adherence to legal requirements. The EOR handles tasks such as hiring, onboarding, payroll processing, payroll tax payments, and provision of statutory benefits to employees.

 

Employer of Record Services

 

An Employer of Record:

  • Creates legally sound employment contracts for employees, ensuring compliance with local regulations.
  • Maintains a local legal entity, a prerequisite in numerous countries for foreign companies to hire personnel.
  • Mitigates risks associated with international employment by guaranteeing compliance and averting challenges linked to permanent establishment status.
  • Undertakes the recruitment and onboarding of new team members, serving as an encompassing HR department.
  • Designs comprehensive benefits packages for globally dispersed teams, ensuring adherence to local minimum statutory requirements.
  • Implements precise tracking of employees’ working hours and ensures accurate processing of payroll, disbursing payments in the local currency on time.
  • Manages payroll taxes, encompassing income tax withholding and contributions to government programs like social security, pensions, and insurance (e.g., unemployment insurance).

 

EOR services do not assume control of a client company’s operations. While an Employer of Record manages HR responsibilities, the client retains control over all other operational aspects.

 

In what ways can an Employer of Record assist companies?

 

An Employer of Record company can provide valuable assistance to expanding organizations in multiple ways:

  • Client companies employing an Employer of Record (EOR) experience a reduction in certain risks associated with international hiring.
  • The EOR provider assumes the responsibility of ensuring compliance, addressing regulatory issues with local government and labor inspectors, and ensuring adherence to all relevant labor laws.
  • The risk of establishing a permanent presence is diminished when using an Employer of Record (EOR) because the client company lacks ownership of a local entity and, from a technical standpoint, does not possess a presence in the country. EORs take ownership of a local entity, assuming the legal employer role on paper.
  • Companies can effortlessly recruit and smoothly onboard employees globally.
  • Payroll is handled, taxes are paid, and benefits are administered—all while maintaining compliance.

 

Without assistance, accurately processing payroll and making timely tax payments and social security contributions to foreign governments can be a challenging task. An Employer of Record (EOR) ensures precise payroll processing and on-time tax payments.

When a company maintains its local legal entity, an international Professional Employer Organization (PEO) can handle specific HR tasks and responsibilities, including payroll processing. If the company has a subsidiary in a particular country, it can legally engage in hiring employees directly from that entity.

Indeed, even in situations where a company has its local legal entity, critical HR tasks such as processing payroll, ensuring timely and accurate payment to employees in their local currency, handling precise payroll taxes remittance to local government tax authorities, and administering benefits must be addressed. A Global Professional Employer Organization (PEO) is equipped to manage all these essential HR functions for companies expanding globally.

 

What characteristics to seek in an Employer of Record

 

When choosing an Employer of Record (EOR) partner, employers should meticulously consider various factors. It’s essential to ensure that the selected EOR provider offers all the necessary components for your company’s success in establishing a global workforce.

Here is a compilation of crucial questions to contemplate when selecting the optimal Employer of Record for your business.

1. In how many countries does the Employer of Record facilitate hiring?

If you intend to recruit employees in a particular country or transfer them between countries, it’s essential to be aware of the geographical coverage provided by the Employer of Record Company from the outset. The EOR provider should furnish a comprehensive list of countries where they can facilitate employee hiring, and a superior EOR company will likely offer broader coverage compared to their competitors.

 

2. Does the package include a Global HR Platform?

The selected Employer of Record should possess technology that enhances your experience, simplifying the intricacies associated with hiring international employees.

For instance, does the EOR have the capability to automate manual tasks, mitigating the risks of human error? Can it facilitate swift and efficient hiring and onboarding of employees through its technology? Is the platform accessible from various devices? It’s crucial to ensure that the technology is user-friendly and the platform is easy for your team to navigate.

 

Integration with Technology Stack

Integration capabilities are another crucial aspect to take into account. Opt for an EOR provider that can seamlessly connect with the applications and HRIS/HCM systems you are already utilizing.

Protection of Data and Digital Security

Ask about the security and reliability features of the EOR platform. It’s crucial to verify that the EOR can offer secure hosting on a global scale.

3. Does the Employer of Record encompass support services?

 

Ensure that the Employer of Record provider has proficient HR professionals capable of offering the necessary support during the hiring and onboarding processes of new international employees, as well as throughout the entire employee lifecycle. It’s crucial to have confidence in the consultative services provided by the EOR and to gauge their responsiveness to your inquiries.

Top-tier Employer of Record companies will offer guidance and support for all fundamental human resources responsibilities. Your team should be able to depend on in-house experts proficient in global payroll, country-specific taxation laws, employment regulations, benefits, and global compliance. Opting for an EOR company lacking expertise in any of these areas introduces the risk of liabilities, errors, and the potential for costly penalties.

4. Does the Employer of Record offer services related to international compliance?

 

Labor laws dictate how employers must treat employees and afford specific protections to the workforce. These laws vary from one country to another globally, and within each country, they are subject to potential changes at any time.

When a company is expanding internationally and entering diverse territories globally, it becomes challenging to monitor the variations in labor laws and potential changes that may occur. Typically, companies must ensure compliance in multiple areas. An effective Employer of Record (EOR) solution will ensure that an employer adheres to these regulations.

 

Protections Against Discrimination

Numerous countries have laws against discrimination that forbid discriminatory practices in the processes of hiring, employment, and termination.

 
Employment Agreements in Accordance with Compliance

All employment agreements and contracts must be drafted and executed in accordance with local laws. Depending on the laws of the specific nation, contracts may be subject to various requirements. For instance, certain countries mandate contracts to be presented in specific languages.

 

Base Salary Standards

Employers may be obligated to pay employees a minimum wage, which could be set at the national, regional, or local level. In some instances, countries enforce minimum wages based on industry or job roles.

 

Mandatory Employee Benefits

Each country has distinct laws governing mandatory benefits that employers are required to provide, including aspects such as health insurance, unemployment insurance, social security or pensions, and leave entitlements.

 

Data Privacy Regulations

Privacy is of utmost importance, and data must always be kept secure. Regulations, such as GDPR, must be adhered to, and data should be collected with care and in accordance with legal standards.

 

Standard Working Hours and Overtime Regulations

Employee working hours are typically stipulated by labor statutes. For instance, employees may not be compelled to work beyond a certain number of hours per week, such as the standard 40 hours. Additionally, some countries mandate specific days or hours of rest during which no employee can be obligated to work.

If there are regulations governing overtime, any hours worked beyond the standard work week may be subject to additional compensation as per the law. An EOR partner will be well-versed in understanding these nuances in the country where you intend to hire.

 
Employee Termination Safeguards

Beyond the United States, which predominantly follows an “at-will” employment approach allowing employers to terminate employees without notice for any legal reason, international employees may be entitled to termination protections. These protections could encompass the prohibition of terminating employees for specific reasons, such as filing complaints, a stipulated notice period, provision of severance pay, and even granting the terminated individual a paid day off each week to seek new employment.

5. Does the Employer of Record provide a global team of HR experts?

 

In the quest for the ideal Employer of Record solution, companies should seek an EOR that maintains teams of local experts in each country where they are hiring. Each country has its unique laws, customs, and bureaucratic procedures, and having local experts is crucial to ensure that all employees are legally hired. Without access to local expertise, companies are at a significant disadvantage and face potential risks.

It’s crucial for a company to respect country-specific customs and business etiquette. An effective Employer of Record will have in-country partners to facilitate the personal onboarding of a new employee in their language. A company that acknowledges and respects local culture and values is likely to foster strong relationships, more productive working partnerships, and achieve optimal outcomes. Conversely, a company that overlooks the cultural nuances of an unfamiliar country runs the risk of unintentionally causing offense to a new employee and jeopardizing the working relationship.

6. Does the Employer of Record Company provide a comprehensive portfolio of global benefits?

 

When aiming to attract top international talent, it’s essential to contemplate the type of coverage and benefits you can provide them.

Is your EOR partner capable of delivering complete health coverage along with pension packages? Can you tailor the benefits packages and adjust the levels of coverage available for your employees?

It is essential for your business to be able to provide appealing health insurance, life insurance, and AD&D (Accidental Death and Dismemberment) coverage to your international employees while aligning with your business requirements.

 

Expanding Your Workforce Globally with International Hiring

 

Panda work global goes beyond being merely a payroll platform. We possess a network of experts and partners across the globe who are well-versed in local laws and business customs. This ensures that every hire is conducted accurately, and the processes of recruiting, hiring, and onboarding are seamless.

Our global employment solution provides international Professional Employer Organization (PEO) and Employer of Record (EOR) services in 214 countries and territories. For companies looking to hire their next remote team member in any of these countries, we handle the entire process. We ensure that each hire and onboarding is conducted in compliance with local laws and regulations, helping employers avoid costly mistakes.

Navigating labor laws and regulations can be intricate and challenging without the guidance of local legal experts. Panda work global can guarantee compliance by leveraging the expertise of professionals well-versed in local laws, customs, and regulations. This ensures a smooth hiring process with adherence to all relevant local labor laws throughout the entire procedure.

New employees will undergo a thorough onboarding process, with all necessary paperwork securely saved. They will seamlessly integrate into the company’s payroll system and receive statutory benefits. This ensures that the employee is fully prepared to contribute to the company, allowing the business to focus on its core operations and sustained growth while entrusting HR and hiring responsibilities to us.

Employers opt for Panda work global EOR services due to the simplicity, flexibility, and affordability they offer in hiring international employees. With the assurance of our experts, you can navigate the complexities of international hiring, compliance, payroll, benefits, labor laws, and more with confidence.

Arrange a meeting to explore how we can assist your company in hiring global team members and delve into your organization’s aspirations for international expansion.

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