Understanding Employer of Record (EOR): Benefits for Small Businesses
If you’re a small business striving to expand your talent pool, you may have encountered the term “Employer of Record” (EOR). This powerful tool can significantly enhance your hiring capabilities, particularly when exploring international talent.
The World Economic Forum highlights the EOR as a game-changer, enabling smaller firms to hire globally, even in the face of resource limitations. As skilled professionals migrate to different countries and demand for specific expertise grows worldwide, sourcing talent from countries like Italy or Brazil is increasingly attractive.
However, tackling international employment laws, benefits, and other legal requirements can add stress to your daily operations. This is where an Employer of Record becomes invaluable.
What is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party organization responsible for managing the legal aspects of employment and accompanying obligations. While you supervise the employee’s day-to-day work, the EOR takes care of:
- Payroll management
- Employee benefits
- Tax compliance
- Adherence to local employment laws
- Employee record maintenance
- Onboarding and offboarding processes
- All related administrative tasks
It’s important to note that while employing an EOR is common in many countries, you should always consider local labor laws when utilizing these services.
When is an EOR the Right Choice?
Opting for an Employer of Record is a strategic decision when venturing into new markets. It’s particularly effective if you’re looking to recruit international talent who are not based in the UK or if you intend to establish a physical presence in another country.
Here’s a detailed overview of the advantages and disadvantages of using an EOR:
Pros of Using an EOR
- Access to a global talent pool
- Maintains compliance with international regulations
- Increased flexibility in staffing
- Simplified hiring processes
- Accelerates business scaling and expansion
- Facilitates entry into new international markets
Cons of Using an EOR
- Potential limitations on hiring locations
- Compliance with varying legal constraints in different countries
- May lead to a loss of control over certain business operations
It’s essential to factor in the additional cost associated with partnering with an EOR. According to Neontri, the typical monthly cost ranges between USD 200 and USD 500 per employee.
Top Players in the EOR Space
Here are some of the leading Employer of Record providers:
Velocity Global
Velocity Global boasts an AI-powered platform, streamlining hiring, workforce management, and compliance—all without hidden fees. Utilize their Employee Cost Calculator to estimate per-employee expenses.
Features:
- Payroll assistance
- Mobility services
- Reporting and analytics
- Employee data management
- 24/7 support
- Operations across 185+ countries
Pricing: Contact Velocity Global for a custom quote.
Rippling
Rippling is a comprehensive Human Capital Management (HCM) system that seamlessly guides employees through onboarding, transitions, promotions, and offboarding—all in one unified platform.
Features:
- Automation for global compliance
- Integrations with over 600 applications
- Custom policy creation
- Workflow automation tools
- Intuitive reporting capabilities
- Service across 185+ countries
Pricing: Pricing is customized; inquire for a quote from Rippling.
Deel
Deel claims to save businesses up to $210,000 (£166,600) in entity setup costs per country. As a fully-owned entity, Deel provides a unified contact point for your employees.
Features:
- Local payroll services
- Benefits administration
- Tax handling and compliance
- Custom benefits packages
- Multi-currency payment options
- Services in over 160 countries
Pricing: Starting at $599 (£474) per month.
EOR vs. PEO: Key Differences
Another option to consider is a Professional Employer Organization (PEO). However, unlike an EOR, a PEO functions as a co-employer. Below, we outline the core differences between an EOR and a PEO:
Business Presence
PEO: Requires the client to have a physical presence in their operating region.
EOR: Allows businesses to find employees wherever they operate, without the need for physical presence.
Insurance
PEO: Clients must be covered under the PEO’s insurance policy, potentially requiring additional coverage.
EOR: Has comprehensive insurance policies in place.
Minimum Number of Employees
PEO: Typically requires a minimum number of employees to engage with their services.
EOR: Can accommodate organizations of any size.
Learn More
For further insights, check out these valuable resources:
10 Ways Employers Can Mitigate Risks When Sending Employees Overseas
