For companies not content to limit themselves to growth in one country, a global growth strategy is the logical step. But as any business that has worked across borders knows, this kind of growth does not come without its challenges. Cultural differences, language barriers, timezone complications—all these and more can make building global teams a challenging endeavor.
That’s why so many organizations choose to work with a global employer of record, someone who can solve a lot of the issues faced by global organizations. Here, we’ll take a close look at what a global EOR is, what they can do for your business, and challenges you need to keep an eye out for.
What is an employer of record?
An employer of record (EOR) is your trusted local partner, handling all the tricky HR, payroll, tax, and compliance responsibilities that come with hiring employees in a different country. They act as the legal employer of your workers, even though you maintain control over their day-to-day tasks and responsibilities.
Learn more: Key Differences Between PEO vs EOR: Which Is Best for Your Organization?
What is a global employer of record?
While an EOR can simplify hiring in any country, a global employer of record takes it a step further. They specialize in helping businesses expand their workforce across multiple countries, navigating the diverse and complex legal and HR landscapes of different regions.
When to use a global employer of record?
A global EOR can be a valuable asset for businesses in various stages of growth and with diverse international hiring needs. Here are some common scenarios where an EOR can be particularly beneficial:
Expanding into new markets
If you're entering a new market and want to test the waters before committing to a full-fledged local entity, an EOR allows you to hire employees quickly and compliantly without the complexities of setting up a subsidiary.
A global employer of record can help you navigate the unfamiliar legal and regulatory landscape of a new market, minimizing the risk of compliance issues and potential penalties.
Hiring remote or distributed teams
A global employer of record enables you to access a global talent pool and hire remote workers in different countries, regardless of your company's physical location.
They handle the onboarding process for your remote employees, ensuring compliance with local labor laws and tax regulations.
Compliance and legal considerations
If you're unsure about the legal and regulatory requirements for hiring in a specific country, an EOR can provide the expertise and guidance you need to stay compliant.
An EOR takes on the legal responsibility of employment, reducing your exposure to potential risks and liabilities associated with misclassification or non-compliance.
Relevant reading: EOR Compliance: Ensuring Adherence to Local Laws
Short-term and project-based engagements
If you need to hire employees for a short-term project or a specific period, an EOR can provide a flexible and cost-effective solution.
They can also help you manage contractors and freelancers in different countries, ensuring compliance with local laws and tax regulations.
Resource allocation and focus
An EOR handles all the administrative burdens of international hiring, payroll, and compliance, freeing up your HR team to focus on strategic initiatives.
By outsourcing these tasks to an EOR, you can dedicate more time and resources to your core business activities and growth strategies.
Read next: Expanding Globally with an EOR: A Step-by-Step Guide
What are the benefits of a global employer of record?
Partnering with a global employer of record (EOR) can unlock a world of opportunities for your business. Here's a breakdown of the key benefits:
Global expansion made easy
- Effortless onboarding: Hire employees in new markets quickly and compliantly, without the hassle of setting up local entities or navigating complex legal frameworks.
- Access to global talent: Tap into a wider pool of talent, regardless of geographical boundaries, and build a diverse and skilled workforce.
Cost efficient
- Reduced overhead: Avoid the significant costs associated with establishing and maintaining foreign subsidiaries, including legal fees, office space, and local HR staff.
- Optimized HR operations: Streamline your HR processes and reduce administrative burdens, freeing up your team to focus on strategic initiatives.
Risk mitigation
- Compliance assurance: Ensure compliance with local labor laws, tax regulations, and social security requirements in every country where you operate, minimizing the risk of penalties and legal issues.
- Liability transfer: The EOR assumes legal responsibility for your employees, reducing your exposure to risks associated with misclassification, wrongful termination, and other employment-related issues.
Streamlined processes
- Simplified payroll and benefits: Your global employer of record handles all aspects of payroll processing, including tax deductions, social security contributions, and benefits administration, ensuring accuracy and efficiency.
- Centralized HR management: Manage your global workforce from a single platform, with centralized data, reporting, and streamlined workflows.
Cultural integration and local expertise
- Cultural awareness: An EOR provides valuable insights into local workplace cultures, customs, and communication styles, helping you build strong relationships with your international employees.
- On-the-ground support: They offer local expertise and support to your employees, addressing their questions and concerns and ensuring a smooth onboarding experience.
Better employee experience
- Competitive benefits: Your EOR can help you design and administer competitive benefits packages that meet local expectations and attract top talent.
- Timely and accurate payroll: Ensure your employees are paid on time and in full, with accurate deductions and contributions.
- Improved communication: The EOR facilitates clear communication between you and your employees, addressing any questions or concerns promptly and efficiently.
How does a global employer of record work?
A global employer of record simplifies international hiring by acting as the legal employer of your workers in different countries. You find the talent, and they handle the rest—drafting compliant employment contracts, managing payroll and benefits, ensuring compliance with local laws, and providing ongoing HR support. This includes tasks like onboarding new hires, processing payroll in multiple currencies, administering benefits, obtaining work permits, and addressing employee inquiries.
Factors to Consider When Selecting a Global Employer of Record
Choosing the right global employer of record is a crucial decision that can impact your international expansion success. Here are key factors to consider:
1. Geographic coverage
Ensure the EOR has a strong presence in the countries where you plan to hire, either through their own entities or a reliable network of local partners. Consider your future growth plans and whether the EOR can support your expansion into new markets.
2. Service offerings
Look for an EOR that offers a wide range of services beyond basic payroll and compliance, such as benefits administration, onboarding, and local HR support. Choose an EOR that can tailor their services to your specific needs and industry requirements.
3. Technology and integration
The EOR's technology should be intuitive and easy to use, providing a centralized platform to manage your global workforce. Ensure the EOR's system can integrate with your existing HR software to streamline data flow and avoid manual errors.
4. Cost structure
Understand the EOR's pricing model and ensure it's transparent, with no hidden fees or surprises. Evaluate the cost-effectiveness of the EOR's services, considering the value they provide in terms of compliance, risk mitigation, and HR efficiency.
5. Customer support and communication
Choose an EOR with responsive customer support and clear communication channels to address your questions and concerns promptly. The EOR should proactively keep you informed about any changes in local regulations or compliance requirements.
6. Reputation and reviews
Research your prospective EOR's reputation in the industry and look for any awards, certifications, or recognitions that demonstrate their expertise and credibility. Read reviews and testimonials from other businesses that have used the EOR's services to get a sense of their client satisfaction and service quality.
7. Scalability and flexibility
As your business grows and your needs evolve, your EOR should be able to adapt and scale their services accordingly. Choose an EOR that can support your long-term global growth plans and adapt to changing market conditions.
8. Security and data privacy
Ensure the EOR has robust data security measures in place to protect sensitive employee information and comply with international data privacy regulations like GDPR. If you're operating in countries with data localization requirements, ensure the EOR can comply with these regulations and store data appropriately.
Global Employer of Record Compliance and Regulations
One of the primary benefits of using a global EOR is their expertise in navigating the complex web of global HR compliance and regulations that govern international employment. Here's a breakdown of the key areas they handle:
Labor laws
A global EOR possesses in-depth knowledge of labor laws in each country where you operate, ensuring compliance with regulations related to:
- Minimum wage and working hours
- Overtime pay and leave entitlements
- Termination and severance procedures
- Employee contracts and agreements
They stay up-to-date on any changes in labor laws and update their practices accordingly, minimizing your risk of non-compliance.
Tax compliance
The EOR ensures accurate calculation and withholding of income tax from your employees' salaries, adhering to local tax laws and regulations. They handle all tax filings and remittances to the relevant authorities, meeting deadlines and avoiding penalties.
Your global EOR can assist with tax audits and provide the necessary documentation to demonstrate compliance.
Social security and benefits
A global EOR ensures compliance with mandatory social security programs in each country, including:
- Pension schemes
- Healthcare and medical insurance
- Unemployment insurance
- Work-related injury insurance
- Maternity and paternity leave benefits
They can help you design and administer competitive benefits packages that meet local requirements and employee expectations.
Data protection and privacy laws
Your EOR adheres to international data privacy standards, such as GDPR, CCPA, and PDPA, protecting sensitive employee information and ensuring compliance with local data protection laws.
They implement robust data security measures, including encryption, access controls, and regular backups, to safeguard employee data.
Health and safety regulations
A global EOR ensures your workplace complies with local health and safety regulations, minimizing risks to your employees and protecting your company from liability.
They can assist with providing safety training and resources to your employees, promoting a safe and healthy work environment.
Immigration compliance
If you're hiring foreign nationals, the EOR handles the complex process of obtaining work permits and visas, ensuring your employees have the legal right to work in the respective countries.
They stay informed about any changes in immigration regulations and ensure your company remains compliant.
Anti-discrimination laws
The EOR ensures your hiring and employment practices comply with local anti-discrimination laws, promoting a fair and inclusive workplace.
They can assist with implementing diversity and inclusion initiatives to create a welcoming and supportive environment for all employees.
Read next: HR's Cheat Sheet to Diversity Management
Audit and reporting requirements
The EOR conducts regular audits to ensure your company's HR practices and policies comply with local regulations.
They provide regular reports on payroll, taxes, social security contributions, and other compliance-related matters.
Challenges for Using a Global Employer of Record
While a global EOR offers numerous benefits, it's important to be aware of potential challenges to make informed decisions and ensure a smooth experience.
Understanding local regulations
Even with an EOR, it's crucial to have a basic understanding of local labor laws, tax regulations, and cultural norms in the countries where you operate. This helps you make informed decisions and collaborate effectively with your EOR partner.
Communication barriers
Coordinating meetings and resolving issues can be more complex when dealing with multiple time zones. Establishing clear communication channels and expectations can help mitigate this challenge.
Limited control over employment practices
While you maintain control over your employees' day-to-day tasks, the EOR handles the legal and administrative aspects of employment. This requires a level of trust and collaboration, as you'll have less direct control over certain HR processes.
Integration with existing systems
If you're transitioning from a different HR software, migrating employee data to the EOR's platform can be a complex process.
Employee experience and onboarding
Your EOR should be culturally sensitive and provide adequate support to your employees during the onboarding process and throughout their employment.
Best Practices for Using a Global Employer of Record
Partnering with a global EOR can be a strategic move for your international expansion, but maximizing the benefits requires careful planning and ongoing collaboration. Here are some best practices to ensure a successful partnership:
1. Research and assess EOR options
Don't rush into a decision. Thoroughly research potential EOR providers, comparing their services, expertise, geographic coverage, and pricing structures.
2. Establish clear communication channels
Foster open and frequent communication with your EOR provider. Establish clear communication channels and protocols to ensure smooth information flow and timely resolution of any issues.
3. Align employment practices with company culture
Work with your EOR to ensure your employment practices and policies align with your company culture and values, even when operating in different countries.
4. Integrate systems for seamless operations
Ensure the EOR's technology platform integrates seamlessly with your existing HR and payroll systems to streamline data flow and avoid manual errors.
5. Monitor compliance regularly
Conduct regular compliance audits, either internally or with the assistance of an external auditor, to ensure your EOR is meeting all legal and regulatory requirements.
6. Gather feedback from employees
Regularly gather feedback from your employees about their experience with the EOR, addressing any concerns and ensuring their needs are being met.
7. Build a strong partnership with the EOR
Treat your EOR as a strategic partner, fostering a relationship built on collaboration, trust, and open communication.
8. Evaluate performance
Conduct periodic reviews of the EOR's performance, assessing their compliance, responsiveness, and overall service quality.
Unlocking Global Talent Potential with Global Employer of Record
With Omni, it’s easy to support your global workforce across multiple countries, time zones, and currencies.
Our centralized document management solution makes gathering the necessary data required to apply for employment passes, rental schemes, and other country-specific initiatives seamless and timely. With customized workflows and automated reminders, HR can help empower employees to manage the deadlines and documentation requirements for applications. And centralized documents and real-time data make it easy for employees to access salary information and produce reports and documents necessary for verification.
Offering a comprehensive global payroll solution tailored to various countries specific requirements with features like support for HKD, SGD, and MYR, automated tax calculations, and managed contributions, Omni can help HR teams simplify their payroll processing and ensure compliance with ease.
Additionally, Omni’s customizable employee portal allows your 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.
Book a demo with our team to learn more about how Omni can support and grow your international workforce.
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