Employer Of Record: What It Is, Uses, And Benefits

Employer Of Record: What It Is, Uses, And Benefits

Planning to expand your business operations in overseas territories like the United Kingdom (U.K.)? Many companies aim to enter the international market to showcase their products and service solutions to the world. One way to do this efficiently is with the help of an employer of record (EOR). 

But what does it entail if you work with an Employer of Record in the UK or any other country where you'd want to operate locally? Continue reading below to determine what an EOR is, its uses, and its benefits.


What Is An EOR?

An EOR is a third-party company that manages the legal and financial procedures of a business to efficiently run an office overseas. An EOR firm oversees employee benefits, payroll, and tax documentation.

In terms of project-related activities, EOR firms don’t intervene in business operations. This allows company owners to manage their workflows the way they want.

Below are some of the primary responsibilities of an EOR:

  • Represent a business as a proxy registered as an employer in a particular region;

  • Ensure adherence to the local tax and labor legislation (e.g., creating valid agreements and contracts);

  • Fill in forms on behalf of the employer (e.g., tax and insurance forms);

  • Manage work permits and other documents associated with visas if there’s a need to relocate an international employee;

  • Provide consultation services when it comes to employee onboarding, contract termination, and severance pay;

  • Deposit and file taxes;

  • Collect and process time sheets; and so on. 

If you’re expanding your business in the UK, consider hiring a UK Employer of Record to help you handle crucial business operations. 

Uses Of An EOR

If you’re a company looking to expand operations overseas, think of the EOR as your partner. Upon signing a partnership agreement, the EOR firm will assume responsibilities and duties related to the legal and financial aspects of doing business locally. 

And as the owner, your team will still be in charge of the company’s local day-to-day operations; the assignment of employee roles will fall into the hands of your team. Also, your company will be held responsible for the health and safety of your on-site team members, not the EOR firms.

Hiring and working with an EOR firm can be useful in the following fronts:

  • Elimination Of The Need To Form A New Foreign Subsidiary

When you hire an EOR, you don’t need to create and register a new subsidiary to hire employees overseas. This is because EOR firms are considered legal entities locally and come established with the expertise to execute employer duties on behalf of the foreign company they’re working with.  

With an EOR on your side, you’ll be able to get your local operations up and running in no time. 

  • Ensured Local Legal Compliance

Running operations overseas is akin to testing new waters – waters that can be very turbulent and difficult to navigate for those who don’t have any experience. 

Part of navigating through choppy waters is complying with local labor and business laws. Therefore, having a thorough understanding of the established rules and regulations is crucial. 

EOR firms have the requisite knowledge of the laws of the land where they’re based in. With their expertise in the local laws, you’ll be rest assured that your company’s local operations will be within the bounds of the law. 

  • Working With An EOR Can Help In Risk Mitigation

There are many risks related to doing business, and they’re all compounded to a much higher degree if it involves doing business in a land you know very little about. But hiring an EOR means dealing with fewer risks—one of these is employee misclassification. 

When you operate in another country, it’s crucial to understand how the market works and how employees and contractors are paid and classified. You’ll be able to circumvent such risks when you work with a certified EOR firm because they’re knowledgeable and equipped with the appropriate know-how in handling such risks. 

What Are The Benefits Of Hiring An EOR?

Working with an EOR is a common practice for businesses operating in foreign countries. Reaching out and hiring an EOR firm that can act as an intermediary between government officials and other local enterprises helps company owners minimize risks, reduce operational costs, and improve overall efficiency. 

Take a closer look at the primary benefits of collaborating with an EOR firm below:

  • Removes Entry Barriers

Countries with high-level bureaucracy (e.g., Argentina and India) often wait for the embassy’s approval to conduct business operations overseas. This may take several months. During this period, businesses will be in an unclear state, not sure whether they should push through or give up on penetrating the global market.

Yet hiring an EOR allows businesses to start recruiting talents and working on their projects immediately. This is because EOR firms have already undergone all the licensing and registration procedures required by local governments. 

  • Helps Companies Save Time

Administering employee benefits, managing payroll, tracking important paperwork, and terminating contracts can be time-consuming. Trying to handle multiple managerial tasks can eat up the time that companies should be spending on core activities, such as developing strategies, strengthening customer relationships, and improving products and services. 

Hiring a reliable EOR firm can take over tasks like complying with tax requirements, payroll, and other essential formalities, helping you save a lot of productive time.

  • Reduces The Costs Of Establishing An International Office

Setting up a global office can be expensive. From forming a subsidiary to recruiting financial and legal assistants, establishing a team overseas can make cost companies an arm and a leg. 

Hiring an EOR enables company owners to save on hiring financial, legal, and human resources (HR) consulting companies. The flexibility of working with an EOR allows companies abroad to explore new markets and close international offices when the collaboration is no longer efficient without worrying about termination costs and upkeep.

Final Thoughts

An EOR firm is a third-party company that deals with the legal and financial activities of a business operating overseas. They represent the company as a registered local proxy, file taxes, process work permits, manage payroll, offer consultation services regarding contract termination, onboarding, and so on. 

When you hire an EOR, you’ll be able to ensure compliance with the local rules and regulations, reduce management costs, and save a lot of productive time. If you plan to enter the overseas market, consult an EOR today. 

Editorial Team
This article was written by Editorial a Consultant at Industrial Psychology Consultants (Pvt) Ltd

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