An Employer of Record is fundamentally a third-party organization that hires and pays an employee on behalf of another company and takes responsibility for all formal employment tasks.
Employer of record providers hires workers on behalf of a client company taking on the legal responsibility of payroll benefits and compliance with local employment and tax regulations.
As part of the contract, the client company is responsible for managing the employee’s day-to-day contributions and performance.
An EOR provider facilitates all employment requirements on behalf of a client organization.
If you don’t know what is an Employee Of Record Services?
If you don’t know which are the best Employee Of Record Services to choose from?
Hopefully, you will be able to find the answers to these questions in this article.
Let’s go,
So using Employee Of Record Services (EOR) allows companies to legally and efficiently engage with overseas workers either in a new country or state without having to set up a local entity or risk violating local employment laws.
An Employer of Record hires and onboards local employees with compliant employment contracts, remits salaries, taxes, and benefits owed, and supports in-country employees’ HR needs.
Here are some of the everyday situations in which organizations may need to use an Employer of Record as a vehicle for exploring new markets, to guard against an independent contractor, non-compliances as an entity stop-gap, or to facilitate an acquisition.
Let us give you an example of how an EOR might be valuable to you,
Suppose we had a possible client and that client had an employee located in an eastern European country and that country had a unique feature which was if you were a contractor in that country you actually owned all of the intellectual property that you made for that corporation.
Now, when the company wanted to go and get acquired, they actually had to say “hey can you hand over all of this intellectual property to the mother corporation” the employee lawyered up and he said, “no problem as long as you give me a half million dollar bonus”.
They had to give the bonus and it really sucks for them, that’s an example of what you need to know about the local employment laws of different countries?
And if your organization has omnipresence in many other countries all over the world it’s critically important that you understand all those laws particularly if you’re raising money or if you’re going to get acquired.
It’s super important and then long term actually I think that a lot of countries are going to start to recognize that this is a source of income.
We think very soon you’re going to see probably a lot of interesting conflicts and legal cases pop up where the location of the employee’s country says “hey I think you actually owe me a whole bunch of payroll taxes for these people that worked inside of your company”
Here is where the EOR protects you from all those things, let’s broaden our understanding.
What types of services does EOR handle?
1. Processing and funding payroll number
2. Depositing and filing taxes for the employee
3. Local jurisdiction handling worker’s compensation collecting and processing time sheets
4. Creating and maintaining employment contracts for employee onboarding
5. Maintaining a certificate of insurance
6. Doing background checks and drug screenings
7. Terminating employees from a legal perspective
Pros:
- An Employer of Record is a cost-effective way to outsource payroll in hr functions
- It’s also an efficient way to actually overcome employment requirements for non-resident companies doing business in different countries, so there is no reason to risk violating labor tax and employment regulations.
There is an EOR solution available in almost any country in comparison to the earlier way of doing it, which was effectively setting up subsidiaries and having long-term contractor agreements.
If you’re thinking of hiring an EOR company, you might want to ask yourself several questions namely,
- Has the EOR worked with companies earlier, similar to yours so they are capable of understanding your particular needs are you a startup are you a multinational corporation you’ve got to figure that stuff out?
- What are the EOR service history and performance record again these guys I mean, it’s payroll kind of mixed with like a law firm because you’re dealing with all of these different jurisdictions so service history and performance record are really important?
- Do you need other services or do you just need an EOR?
- How are their fees and rates set and what are the timing cycle for invoicing and payments?
- What is the difference between an EOR and a PEO i.e. Professional Employer Organization, which is kind of like an outsourcing company that primarily focuses on providing hr service support?
Professional Employer Organizations (PEO) don’t show up on any of the employee records they solely exist to assist in taking over the client’s human resources department.
Actually nowadays some EORs call themselves PEOs and some PEOs call themselves EORs. It’s like splitting hairs
Here are some of the companies that we recommend for running remote, the great part about this recommendation is that neither the companies that we mention are sponsored or participated in any kind of promotional activity with us.
Get your coffee/tea out for this one because it’s gonna be a long one-strap-in shield.
1. Velocity Global
This will handle everything from local payroll to task compliance to a bunch of other EOR plus type of services they’ve also been in business for years.
This will be a great choice if you’re looking for boutique services and they are a remote-first company as well so that’s a really important factor some of these EORs and PEOs are not necessarily remote first organizations.
They work in an office but yet they supply services to remote workers.
2. Globalization Partner
It has in-country teams ready to delegate.
Anytime they have full-on end-to-end control over their services there’s no hassle or delays when it comes down to the operation of their business they offer professional services and a lot of stuff that’s more than just payroll.
They are kind of payroll plus a law firm personally and some consider them the market leader when it comes to EOR services.
They raised about 150 million less than a year ago, they said they were doing over a billion dollars in turnover per year, it’s probably much more now.
They have been in the game for almost the longest out of any of the companies here, they started in 2012.
They’re definitely a company that i would personally take a look at because they’re gonna offer you not just the basic EOR services but they’re gonna offer you much more complicated services.
If you’ve gotta deal with multiple countries like 20 plus countries they’re probably really good at understanding the unique situations that you need to be able to address inside of those companies as opposed to like a self-serve model.
3. Remote.com
Remote specialized in HR payroll and benefits for remote first teams.
platform is the first global employee API that allows small and big businesses to connect their employees and payroll data across the whole HR stack.
Their job is to plug into your existing HR stack so that you’re not out of bamboo or gusto or whatever it might be.
Their goal is to literally integrate themselves inside of your stack that already exists.
of third-party entities like some partner pays another partner to run your payroll in a particular country remote.com is focusing all its energy on first-party entities.
That means all the subsidiaries that remote works with are their own, this is much more complicated for them in the short term but it will probably mean easier services and functionality and cost in the long term.
They also raised a bucket load of money at almost 200 million dollars from the last that we saw.
Check them out particularly if you’ve got a really complicated technology stack and you have the engineers to be able to do that integration remote is probably a really good direction for you.
4. Deal.com
Is one of the newest companies in the space and they’re almost four years old but they’ve also raised over 600 million dollars they focus all their energy on contractors and making those contractors compliant, unlike the companies.
The companies mentioned above focus on contractors first and then take the direction of full-time new hires instead of doing it in reverse which is what most of the other companies do.
They have raised a lot of money and probably have the most gas in their tank but we’d also like to prefer to see more first-party entities as opposed to integrating with partners for payments and compliance.
However, if you’re primarily focused on contractors versus full-time hires we would probably think about going there first versus some of the other companies mentioned that focus more on full-time hires.
Also, their UI is pretty fantastic.
5. Oysterhr
If you are running a startup business oyster hr may be the one for you they literally got founded recently before the pandemic.
They already raised 75 million dollars did we mention that this space is actually red hot because it is absolutely exploding there’s money just flying throughout the EOR space which makes it quite exciting for us is to be able to watch it on the sidelines.
One approach we like about these guys is they’re actually taking a quasi-freemium approach with their free plan that lasts for a year so you can already access their most basic functionality for zero dollars.
This may actually be the smartest strategy as there are so many
people building up their capacity in this space the product-led marketing approach that they’re taking may be the only way to actually make it work and really crack into this market in a meaningful way.
The three-free plan includes two contractors perfect for firms that are just starting to venture out of their local talent pool.
If you are a startup honestly we’d start there we’d at least check it out and look at it in comparison to some of the other companies that we’ve mentioned above.
6. Gusto.com
The remote team is an all-in-one operating system that supports companies with hr services in 200-plus countries.
They handle global payroll PEO and EOR services tax compliance ic contracts and hr apps they started in 2019 and they literally got acquired by gusto in 2021.
We’re probably going to see a lot of the large payroll platforms acquire more EORs in the next year or two once they recognize how many workers will be remaining remote and out of the country.
if you’re using gusto you should probably be using remoteteam.com.
8. Canadian payroll services
CPR works on the Canadian market as you can obviously guess from their name with their help you can hire remote Canadian workers from anywhere without setting up a local entity or registering with the cra.
For those of you that are not Canadian, that is the Canadian revenue agency we give hundreds of thousands of dollars to take care of all of the hiring needs onboarding, and payroll processing that you would need to do in Canada.
We know a lot of you are probably not Canadian but if you are then this is probably the first stop shop for you or if you are hiring Canadians this is probably the first stop shop for you so check them out.
9. Safe Guard Global
Safeguard global enables organizations to get workforce data insights before exploring a new market they have an impressive network of over 179 countries that will handle both payroll and hr issues.
We actually think they are officially the oldest EOR being founded in 2008.
If I understand it correctly my biggest concern is most of those 179 countries are third-party entities versus first-party entities which is what we mentioned above.
So if you’re truly remote in dozens of different countries you can probably get really good coverage but you may pay a bit more from what I heard.
They have 11 first-party entities as of right now and they’re looking to probably expand that or we’d assume they’re probably looking to expand that the game is literally going to be who gets there first.
So whoever builds the most first-party entities inside of their EOR will probably be the company that ends up winning everything but it’s incredibly complicated because it’s literally bureaucracy on top of bureaucracy on top of bureaucracy which obviously you don’t want any part of you.
So, EORs are a super easy decision if you’re in that space if you have people in a lot of different countries safeguard and globalization partners, and possibly papaya which I didn’t really mention here are the place to probably be if you use something like gusto definitely go with remote teams.
If you’re more on the tech startup side we’d go with remote.com again they got that cool API or oyster they have that free plan or if you’re really in deep with contractors deal.com is probably the spot for you.
Or you can just keep doing what you’re doing and possibly get sued by multiple countries for payroll taxes it’s totally up to you.
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