What is “Employer of Record”?

Today your company’s in-country expertise or resources do not determine how fast you can get in to test the market for your product or service. If you’re aiming for a foreign market, there is plenty you can do, and Employers of Record services are here to help.

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An Employer of Record (EOR) is an organization that hires and pays an employee on behalf of another company and takes responsibility for all formal employment tasks.

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A global EOR provider has already done the burdensome and costly job of networking around the world with professional employer organizations – ensuring all banking, insurance, tax, HR, facilities, and contract requirements are taken care of.

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So what you’re getting from an EOR provider is the ability to employ in a foreign country without having an entity set up on-site, and the in-country expertise to hire in full compliance with local laws.

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How is EOR beneficial to SMEs?

Accounting for almost 70% of employment worldwide, SMEs are hiring employees globally more than ever these days.

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Micro, small and medium-sized businesses simply cannot capacitate expenses associated with opening a new legal entity in a foreign country. They have to look for other ways to satisfy the urge to go global.

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Since this urge is usually led by strong incentives:

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• increased revenue potential
• new customer base
• new markets entry
• competitive advantage
• widened access to talent.

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We’ll go over when an employer of record service may become essential for a small startup or a medium-sized business.

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Factors that impact international expansion

Companies have to consider a variety of factors when deciding to enter a foreign market. They include:

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• Time and expense establishing a foreign branch
• Distance-related HR issues
• Compliance management for payroll, taxes, and immigration
• Establishing secure office facility and bank accounts
• Evaluating the growth potential against the required investment
• Permanent establishment issues resulting in taxable local revenue
• Contingency plans on closing down of subsidiary.

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When should SMEs hire overseas?

Medium-sized companies as well as smaller ones, like startups, usually operate extremely cost-effectively. In simple words, they are making every penny count by going low key:

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• getting a virtual office instead of a large physical facility
• hiring remotely rather than locally to avoid overhead costs
• going picky with the talent they hire to multitask, etc.

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Today hiring remote talent is mainstream for companies of all sizes rather than something outstanding. Companies hire the preferred staff rather than prospects they are limited to locally. Remote and fully remote have grown to be the rule rather than the exception.

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Top reasons for SMEs to consider global employment outsourcing

These are:

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• Wider talent pool access. Thanks to overseas hiring capabilities, companies instantly gain access to a broader pool of candidates, each with unique skill sets, experience, and relevant qualifications. This gives smaller businesses a chance to find a much better fit compared to the local prospects scenario, where the HR department gets a geographical limitation
• Opening an entirely new market for the business. For many new companies, struggling with finding a market fit, the global expansion offers a chance to explore markets and gain access to millions of customers, thus increasing revenue
• Brand recognition. Entering a market such as the USA for example can mean a large boost in visibility, especially for companies from less-developed markets
• Competitive advantage. In over-saturated markets like the UK for instance, there is objectively less exposure to some products or services. A new market gives a new wide perspective on new audience volumes in a previously untapped location.

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This world is becoming more and more globalized. By not taking advantage of the opportunities companies would needlessly be giving their competitors an edge.

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Concrete benefits

SMEs that are eager to open up their hiring processes to international candidates should be aware of the benefits of professional employment organizations, as this will be the most feasible route for most employers:

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• Cancels the cost of setting up a company in a foreign country. Setting up a new company abroad can be a costly and time-consuming process. PEOs entirely remove the need to do this. Sometimes completely.
• Reduces HR and administrative work. An EOR provider undertakes your every responsibility relating to international hiring by handling most aspects of employee management.
• Allows you to take your time and plan your company’s expansion into new countries. In some countries setting up a legal entity, not to mention terminating one, can be an entire ordeal, a cumbersome process full of red tape and overheads. So getting guidance from a partner with strong in-country expertise is a must if you’re headed into a foreign market.
• EOR providers sometimes offer a viable long-term single contract option. It means that by signing in with an EOR once you single-handedly accept easy entrance into multiple foreign countries without the hassle of setting up your company’s own legal entity every time. Once you move past two or three employees in overseas locations this solution does come in real handy.

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Bottom line

We urge you to be challenged by the option of hiring overseas. Do not sweat the expenses, see a bigger picture. Invading a new market on time could be your business’s only chance to thrive and stand out in a new location like never before. The market history is full of examples of a brand or a product being mediocre in one country and booming through the roof in another, making it 100 times worth the effort for the company.

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As you move forward, keep in mind that professional employment organizations or EORs are usually the most feasible option for small companies. Drop us a line today and we will get back to you right away with an attainable plan for your company’s international expansion.