Businesses often hire employees from different countries, states, and cities. It is critical for businesses to adhere to the multiple Employee Laws in various places.

Businesses often deal with employment tasks, costs, and liabilities in having an employee from a different country or state. Here, businesses have an opportunity to use Employer of Record and hire another firm to deal with those responsibilities.

In light of the current scenario and recent events, EOR can help create more opportunities for employees and organizations. In this article, we will learn about the pros and cons of Employer of Record and its effect on businesses.

What is an Employer of Record?

Employer of Record refers to a third-party company that hires employees legally for another organization. The company takes on the responsibility and employment tasks for the employee.

Organizations engage with Employer of Record to legally and efficiently hire employees and workers from different countries or states. It enables organizations to engage with workers overseas without a physical setup and without violating the local employment laws.

How can Employers of Record help Businesses?

One of the major roles played by an Employer of Record agency is to carry out legal and regulatory requirements. The agency takes on responsibilities like immigration, employment, and payrolls.

Employer of Record only registers itself as the employer, although it does not supervise, manage or train the employee for the job. The original employer or organization maintains the relationship with the employee.

Difference between an EOR and GEO

An EOR as mentioned is the Employer of Record and a GEO is the Global Employment Organization. A GEO utilizes EORs from different countries for employment.

A GEO mainly deals with hiring organizations. An EOR on the other hand is responsible for the employee’s onboarding and payroll.

GEOs overlook the functions played out by an EOR, employee, and the hiring organization. It is responsible to confirm that the participation by all parties is ethical and compliant.

While there remains a single GEO structure, there can be many EORs hiring employees locally from many host countries.

Here are the major Pros and Cons of Employer of Record:

Employer of Record services enables businesses to reach distanced borders. It plays an important role in hiring people from all backgrounds.

The Covid-19 pandemic has been a difficult time for businesses and their employees. EOR could help open up opportunities for employees all over the globe.

Pros of Employer of Record:

No Requirements for Local Incorporations

When organizations associate with the Employer of Record, they do not need to set up a local entity. The Employer of Record helps organizations avoid the steps for incorporations and registrations.

Organizations may still justify spending time and money by building offices and entities in host countries. Here, GEOs and EORs provide a better alternative to save time and cost.

Compliant with Immigration Policies

MNCs have to comply with many country regulations to run their businesses. Countries may have constant changes in the policies and rules.

Hence to avoid compliance challenges and immigration violations, organizations hire Employer of Record to mediate between the employee and the hiring company.

Cons of Employer of Record:

Cannot be Suitable for Running an Organization

If a company is thinking of outsourcing its entire workforce from a host country, it is unethical and a bit complicated for Employer of Record to work with. Right now, EOR is more of a medium to hire employees faster.

Employer Control

In some countries, employers may have to hand over their authority to the Employer of Record agencies for administrative purposes. Sometimes to comply with the rules they may also have to relinquish their rights as employers to the EOR.

By Manali

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