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As of 2025, the global business process outsourcing (BPO) market is projected to be valued at approximately USD 332.67 billion, and is projected to reach around USD 491.93 billion by 2030. With the rise of outsourcing, it’s only natural to question how you can source talent in the global market without establishing other bases around the world.
Many seamless solutions are there to help your business expand, such as a global employer of record (EOR), facilitating hiring and streamlining the recruitment process in foreign markets.
In this article, we’ll explore EORs, elaborating on their advantages and disadvantages to help you decide if an EOR is the right model for your business.
Defining an Employer of Record (EOR)
The EOR definition is a third-party agency that takes on the legal responsibility of hiring, recruitment, payment, management, and HR processes on behalf of your company. In other words, they serve as the registered employer for oversea’s employees while you remain in control of the day-to-day operations.
It’s crucial to note that Employer of Records don’t replace your HR resources (they only augment them) to help you manage your recruits. In that sense, they support your company’s goal of international expansion.
An EOR helps businesses of all sizes to employ talent from around the world, working across international borders with extensive knowledge and resources about various local markets and employment laws.
What are the types of EOR service providers?
- Global EOR companies: These companies operate in multiple countries, helping businesses to hire employees worldwide without needing to establish local entities. They are suitable for companies with a globally distributed workforce or those planning to expand internationally.
- Regional or Local EOR companies: These service providers focus on specific regions or countries. They often have deeper local knowledge, offer compliance support and potentially more competitive pricing within their regions.
- Industry-specific EOR companies: These EOR service providers specialize in particular industries, offering niche and tailored services that address sector-specific needs and regulations.
What are the responsibilities of an EOR?
So what exactly falls under the responsibilities of an EOR? Simply put, EORs have the legal authority to conduct tasks pertaining to employment, immigration, benefits, and payroll processing, which are as the following:
- Running background checks on potential candidates
- Drafting, issuing, and maintaining locally-compliant employment contracts
- Providing work visas and permits according to local laws
(such as helping navigate and apply for a Singapore employment pass) - Onboarding employees in the country you’re recruiting from
- Withholding payroll costs and taxes from employees
- Issuing wages and administering benefits
- Managing timesheets and leave allowance
- Terminating contracts when necessary
- Compliance with offboarding and termination labor laws
To appreciate the weight that an EOR takes off your shoulders, let’s assume your only option is the traditional employment route. Maybe you’re running a company in APAC and want to expand your business operations to Guatemala.
You’d need to establish a subsidiary in that country, register your company with the local government, comply with local employment laws, handle taxes, insurance, and banking. This is the same thing that happens if you’re also looking to expand to another country, you’ll need to start that process all over again and this can take a lot of time especially with varying requirements and regulations for different countries.
In other words, EORs make it easy for organizations to expand beyond their local borders while ensuring compliance with local laws and regulations.
Learn more: Global Hiring and Distributed Teams: A Comprehensive Guide
What is included in an EOR agreement?
Generally, an employer of record agreement outlines the specific responsibilities and obligations of the EOR, the client company, and the employee. Here are the key elements typically included:
- Identification of parties
- Scope of services
- Employee information
- Compensation and benefits offered for employees
- Ownership of any intellectual property - typically there's a transfer of IP from the EOR to the client company
- Agreement terms and termination
- Payment terms
- Confidentiality and data protection
- Liability and indemnification clauses
- Governing law and dispute resolution
It's important to note that some EORs may ask you to sign an exclusivity clause, locking you into a contract for multiple years. These could significantly harm your business if your chosen provider doesn't meet expectations.
How much does an EOR cost?
Most EO service providers either use a flat fee or a variable pricing structure.. Here are the pros and cons of each model:
Flat fee pricing
The EOR charges a fixed monthly fee per employee, regardless of their salary. This fee typically covers core services such as payroll processing, tax withholding, benefits administration, and compliance.
A fixed fee makes it easier toforecast your expenses, especially if your workforce is relatively stable. Similarly, if your employees have high or fluctuating salaries, a flat fee might be more economical than a percentage-based model. However, a flat fee pricing may not reflect actual service usage as you are paying the same fee regardless of the individual employee's specific needs or activity level.
Variable pricing
A variable pricing model charges a percentage of each employee's gross monthly salary. This percentage typically falls between 10-25% of the employee's gross salary.
A benefit of this model is that the cost is directly tied to the employee's compensation, making it more cost-effective for companies with lower-wage employees. You can also adjust your EOR fees accordingly based on the changes of your payroll costs. However, this also means that fluctuations in salaries such as raises, bonuses, and inflation adjustments can impact your EOR. Furthermore, there's a high potential for hidden costs as some EORs might have additional fees for specific services.
Ultimately, choosing the right EOR pricing model depends on your company needs such as number of employees, salary levels, growth plans, and budget predictability. Not to mention, these additional costs:
- EOR set up fees
- Offboarding fees
- Currency exchange fees
- Benefits administration fees
- Security deposits
What are the alternatives to using an EOR?
If an EOR might not be the right move at this time, there are plenty of ways that you can expand without one:
Set up a local legal entity
To hire employees in another country without an EOR, the only other option is to establish your own legal entity. To do so, you must file the proper paperwork with local authorities and prove your case as a registered business. However, each country has different requirements, which can me extremely time consuming and costly.
Setting up a local legal entity may not make sense for a handful of employees, but if you are planning to expand globally and hire a big team, opening a local legal entity might just be your best bet. Ultimately, the choice depends on the location and your company's strategy and future hiring goals.
Hiring global contractors
If you're not looking to set up a local entity nor partner with an EOR, you can still hire independent contractors. This can be agreat way to grow your business or handle specific projects or time-specific tasks without needing to hire and onboard new employees.
However, there's a high risk of worker misclassification if the working relationship resembles employment. Misclassifying employees as contractors can lead to severe penalties, therefore, it's important to be aware of these risks and understand how to avoid them.
See also: How to Pay and Hire Independent Contractors Worldwide
Using a Professional Employer Organization (PEO)
A PEO co-employs your workers in the target country. You retain control over the day-to-day work and management of your employees, but thePEO handles HR administrative tasks like payroll, benefits administration, and compliance. However, it's important to note that you still typically need to have a legal entity in the country where the employees are located.
Read next: What Is a Professional Employer Organization (PEO)? Understanding the Pros & Cons
Differences Between PEO and EOR
In most companies, it is very common to outsource HR responsibilities while expanding or managing their workforce. The two typical alternatives available are the Professional Employer Organization (PEO) and the Employer of Record (EOR); each has specific benefits and it’s mostly based upon the needs of the company in terms of risk management, service coverage, and benefits.
Below is a comparison that helps in understanding the differences between these two solutions:
Learn more: Key Differences Between PEO vs EOR: Which Is Best for Your Organization?
The Pros of Using an EOR
EORs can open up a wealth of opportunities for organizations looking to expand their network of talent and business operations.
Global Expansion and Compliance
If you dream of your business expanding worldwide, that’s exactly what EOR is designed for. It facilitates global expansion by eradicating the need for a local entity in the foreign country, a process that consumes time, effort, and money.
Thanks to this employment arrangement, you pass on the logistics to the EOR who becomes responsible for negotiating complex international employment laws and negotiations. They empower you to tap into the global talent pool.
Speed and Flexibility
It can be weeks or even months before you hire international talent the traditional way. With an EOR, it can take only a few days, rendering this the fastest method of building a global workforce. That’s because you can skip establishing an entity in the foreign country you want your business to operate in. Also, EORs have a preset entity and on-call network of employees to help you dip into a well-trained talent pool.
After their recruitment, this system saves you the time needed for HR processes. You won’t need to spend hours processing and paying taxes in the different countries that your company employs in.
Even better, an EOR allows you flexibility in the size of your workforce. So, you can scale up or down your team to accommodate the workload and skill sets needed.
This flexibility is perfect for companies with fluctuating and project-specific needs. It’s also ideal for those who want to test the waters before they commit to a particular talent pool. Without the commitment of establishing an entity, you’re free to do so.
Risk Mitigation
The fear of breaching international labor laws will dissipate as another entity assumes full legal responsibility for compliance. An EOR is well-versed in the regulations for international employees and can evade penalties, fines, and legal disputes.
This is a more convenient arrangement than co-employment for business owners who are just delving into the international market, as a co-employment model holds companies partly responsible for legal compliance.
As for the international employees, they also enjoy a reduced risk since they feel at ease working under a local staffing agency.
That’s because this entity will withhold the right taxes, handle employee benefits as required by the law (such as paid, maternity, and sick leaves), compensate workers in cases of worksite accidents, and plan insurance policies.
Focus on Core Business
When you hire an EOR, you outsource administrative tasks. They carry out the onboarding process, prepare hires for the job, have their individual payroll software, and handle payment for all the employees they help recruit. This takes a significant amount of work off of HR’s plates, allowing you to focus on more strategic initiatives such as building company culture and closing performance gaps.
Learn more: Shrinking Employee Performance Gaps Through Analysis and Continuous Learning
Even with this, as a business owner, you still maintain control. This efficient and productive employment process enables you to truly focus on your core business operations, as you have the resources and time to do so.
The Cons of Using an EOR
Understanding the downsides will help you determine if EOR is the right choice for your company.
Cost Considerations
If you’re recruiting many employees, the cost of an EOR structure can add up. You might be paying a premium to the EOR-providing service along with additional costs for issuing benefits for a big workforce.
On the flip side, if you are running a smaller team, paying for an EOR can have the opposite effect, saving you administrative and management costs (particularly in the startup phase).
Not to mention, EORs can help you avoid penalties for labor law breaches thanks to their in-depth knowledge of local regulations.
Loss of Direct Control
While EORs help administer your payroll processes, it comes at a loss of control for your HR team. EOR providers operate on their own pay schedules that may differ from your organization, resulting in EOR managed employees being paid at a different frequency than local employees.
Consider the payroll process and insurance policy of your EOR before committing to them if this is a concern. You’ll find processes and policies stated in the service agreement, you can also recommend them to use tools and strategies you have in mind for your company.
Complexity in Global Operations
It’s common to face communication and coordination issues when you globalize your team. Whether it’s a cultural barrier, language barrier, or time difference, many factors can make communication a challenge between local and international employees.
This draw-back isn’t so much a result of utilizing an EOR as it is the growing pains of a global workforce. Much like managing a hybrid workforce, global organizations need to prioritize culture and ensure communication and expectations are clearly outlined and nurtured to remain aligned across teams.
Hire Globally with Omni EOR
Omni makes it easy to support employees across multiple countries, time zones, and currencies with EOR support and multi-country payroll across Asia Pacific.
How Omni supports global team expansion
- Our expert support and multi-country payroll features help you manage your distributed workforce efficiently, ensuring compliance with local laws and regulations in 190+ countries and 10+ languages.
- Centralized document management to help make gathering the necessary data required to apply for employment passes, rental schemes, and other country-specific initiatives seamless and timely.
- Customized workflows and automated reminders empower your employees to manage the deadlines and documentation requirements for applications and renewals.
- Real-time, secure data allows easy access to accurate salary information and produces customized reports and documentation necessary for verification and compliance.
- A customizable employee portal for teams to set and manage calendars pre-loaded with country- or region-specific holidays and timezones, seamlessly onboarding individuals in various locations and supporting leave management across borders.
Ready to start employing team members in other countries using Omni? Book a demo with our team to learn more!
