As your business grows, you might have already considered expanding your operations to the next level. When I say “next level”, it means entering a new market to take advantage of business opportunities that aren’t easily available locally. It can also be a part of business strategy to gain a competitive edge.

Most companies often enter a foreign market to use a remote workforce for short-duration projects or set up a legal entity for long-term commitment. Yet, it isn’t easy for foreign companies to pursue either option due to the complexity of compliance regulations, lack of local market knowledge, cultural differences, etc. This is how employer of record (EOR) services rescue you and become a hand-holding guide.

In this blog, we’ll explore 7 benefits of using an employer of record for companies expanding business operations internationally. Irrespective of business size, nature of business, and industry, you can use EOR benefits for your business advantages. Before we dive into EOR benefits, let’s first understand EOR roles to get a better perspective of the services.

Understanding the Roles of an Employer of Record

Here are the insights into 7 roles of an employer of record, which provide a support system for a successful team operation and business expansion internationally:

Legal Employer

EORs are legal employers of remote professionals hired for foreign companies with no legal entity in the target country. As a local market expert, an EOR handles legal complexities around payment, taxes, and dispute resolution for your remote workforce on your behalf.

Payroll & Tax Management

An employer of record manages payroll and tax obligations for your employees to comply with local labor laws and employment regulations. An EOR prepares and pays employees’ salaries on time and takes care of tax withholding and filing for your employees. 

Employee Benefits Administration

EORs handle the administration of employee benefits, including medical benefits, healthcare and insurance, retirement plans, and bonuses for your employees. Also, an employer of record provides and manages statutory benefits as per local standards.

Compliance & Risk Management

An employer of record protects employees and remote operations from legal liabilities and compliance risks. Your EOR partner ensures liability mitigation and workplace safety by handling employment-related risks, like workplace disputes and wrongful termination claims.

IT Infrastructure and Office Support

EORs provides the necessary IT infrastructure and office space to allow a quick start of your remote operation. An EOR handles IT service support, such as buying and distributing devices like laptops to your remote employees.   

If you prefer your employees work from an office, EORs can lease an office and requirements such as Wi-Fi services for your employees.

Human Resource Support

EORs administer several human resources (HR) services from recruitment and onboarding to termination and offboarding. Besides governing contracts and non-disclosure agreements (NDAs), an EOR maintains employee records and documents.

Expat Transfer Support

An employer of record provides expat transfer service to ensure a smooth relocation of senior employees to lead your international remote team. EORs assist in visa and work permits for expatriate employees. Also, handling cross-border compliance is an EOR’s core service.

Benefits of Using an Employer of Record Service

Employer of record services are suitable and beneficial for both small and large companies. These services act as the backbone to support your international team expansion and operations. Also, you aren’t required to set up a legal entity to hire and employ remote professionals in a foreign country when using EOR services. Below are detailed explanations of seven key benefits of using EOR services. 

Access to a Large Talent Pool

Companies can easily access a large talent pool globally and hire them when using EOR services. EORs have robust networks, infrastructure, and databases that help you recruit talent quickly and effectively in a given location. However, local EORs are limiting their service offerings within the country they are based. Local EORs are highly efficient when companies target a particular country for hiring talent. For instance, Remunance is a local EOR that provides services in India only. 

Cost Reduction

With EOR services, foreign companies can set foot in a new market at reduced costs. It means, that with an EOR partner, you don’t need the upfront capital and hefty investment required in setting up a legal entity. EORs become legal employers of your employees and have all the infrastructure and office facilities to run your team on their payroll. For instance, subsidiary formation is nearly four times costlier than local EORs. Also, you get additional EOR benefits, including payroll administration, compliance assurance, and benefits management for your employees. 

Access to Legal & Financial Expertise

Partnering with EOR service providers means you have access to legal & financial expertise for your operational support. It means your EOR partner takes full responsibility for handling employment laws, compliance and tax regulations, and other legal and financial matters. While your EOR experts help minimize non-compliance risks related to legal and financial matters on your behalf, you can easily focus on your core business functions and goals. 

Understanding the Local Culture

When expanding a team abroad, cultural differences pose a major threat to smooth operation. You may face challenges navigating a new market’s cultural nuances, affecting your employees’ communication and coordination. Working with an EOR partner, you can easily grasp the local culture and forge a work culture that aligns with your business. EORs help you understand the local communication styles and business etiquette. Understanding the local culture helps significantly when you want to convert your team into a legal entity.

Assessing Work Culture & Ethics

Work practices differ significantly from one country to another. Knowing the work ethics and culture of employees is crucial for business success. Working with an EOR partner, you can assess the local work culture to understand the workplace environment, employee attitudes, and local labor trends. As a result, you can ensure better leadership/management styles, employee motivation, work-life balance preference, and communication methods within your team. 

Setting Up Employee Policies

Once you understand the local market and their work culture, companies can set up employee policies as per local compliances and yet unique to the specific business needs. Through EOR services experience, you can provide better employee policies that blend local employees’ aspirations and your unique goals. For instance, you can implement an HR policy related to employee benefits, such as giving good incentives/bonuses and medical benefits for better job satisfaction. 

Scalability and Business Expansion

EOR services help you expand your business as you can spend more time on productivity and innovation as your back offices or administrative burdens are taken care of. Also, you can easily increase your remote workforce with the same budget you allocate to your in-house team. With EOR service support, you can retain the best talent and encourage them to enhance productivity with minimal operational costs. 

When Should You Use an Employer of Record?

Employer of record services is more effective and beneficial when you have the following business concerns and goals:

• When you want to expand your business internationally without investing the upfront capital required in setting up a legal entity.
• When you want to explore and test the new market before deciding on a long-term commitment.
• When you have a team of contractors or freelancers but are worried about compliance regulations around them,
• When you want to minimize compliance risks related to hiring, employment, and payment of remote team members in a target market.
• When you want to know more about the local culture and work ethics to ensure a smooth transition to a subsidiary company.