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Reduced time, costs, and risk: The true benefits of an Employer of Record solution

May 9, 2023

9 Mins Approx

When To Use An Employer Of Record

An Employer of Record or EOR allows businesses to employ local workers legally without having to set up a local entity in a foreign country… That much you can find from searching the definition.

But how does an Employer of Record really benefit your company? And how do you know when you should use one?

These are the questions we explore in this article, using insights from Multiplier’s Co-Founders Sagar Khatri and Amriptal Singh, who have grown a distributed team of 400+ people.  

What is an Employer of Record?

First things first, let’s recap exactly how an Employer of Record works. 

When you’re looking to hire staff in another country, you can use an EOR to onboard, pay, and manage employees. Let’s say your company is based in Canada, for example, and you want to hire a new team member in Brazil. With an EOR, you can quickly hire and onboard new team members without having to set up a local entity that complies with local laws. 

As the legal employer, an Employer of Record takes on responsibility for compliance and manages HR tasks while you retain operational control over your team members. This means you don’t have to worry about compliance or handling HR tasks like payrollbenefits administration, expense management, and IT asset distribution. However, you’ll still manage the employees’ day-to-day activities, including job duties, performance, and work schedules.

Employer of Record benefits: A closer look

An Employer of Record is more than just a solution to facilitate remote work. It’s a strategic necessity as companies expand and encounter talent shortages.

Whether due to aging populations that shrink the workforce, emerging technologies that leave skill gaps, or the inevitable challenge of finding enough workers to scale, many companies can’t find enough workers.  As Singh puts it, the problem is simple — “the only way for a country to expand its economy is to grow its companies. And the only way for companies to grow is to add more people.” 

An Employer of Record helps them fill gaps with global hiring — expanding their talent pools without massively increasing their overheads or workload. Here’s how. 

1. Reduced complexity 

An Employer of Record uses entities that are already established and leverages local experts with in-country knowledge. This means you can move into a new market more quickly and secure talent before the competition. These industry experts will then stay on top of any regulatory changes within each area.

2. Cost savings

Global hiring methods often come with quickly accumulating and unexpected costs. With a local entity, you have to pay for local advisors, payroll accounting, and entity maintenance, for example. 

An Employer of Record allows you to hire talent more affordably. You’ll usually pay a fixed rate rather than a percentage of your new hire’s salary. You’ll also avoid paying for local advisors, payroll accounting, entity maintenance, and transfer pricing (a tax introduced by the country where you employ workers). 

This makes Employer of Record solutions equally well suited to small-medium enterprises as to large companies. As Khatri says, “EORs expand access to global talent to SMEs and mid-markets by dealing with the costliness, clunkiness, and compliance for them.”

3. Time savings

An Employer of Record helps you enter new markets more quickly; then it handles admin-heavy workforce management tasks for you, helping you save time throughout the employee lifecycle. 

Multiplier’s EOR, for example, simplifies the onboarding process and then handles payroll, benefits administration, IT asset distribution, offboarding, and more, ensuring that every update is compliant and seamless for your employees. 

4. Reduced risk

Using an Employer of Record is a far less risky approach to global hiring than setting up an entity because the burden of compliance doesn’t sit on your shoulders. What’s more, you can leave markets just as easily as you enter them.  

Get a closer look at Multiplier’s EOR platform

When should you use an Employer of Record?

One of the major benefits of an Employer of Record is that it’s a flexible solution that suits businesses of different sizes and growth phases. 

Here we take a closer look at some of the main use cases of an EOR.

1. When you’re testing new markets

Expanding into a new market can be a high-risk endeavor, especially if you’re uncertain about long-term viability. As Singh explains in our global hiring guide, “it’s a very real risk that you could open an entity that doesn’t have a long lifespan because wage prices increase in that area.”  An EOR allows businesses to hire local talent and establish a presence without the cost and commitment of setting up an office.

2. When you’re sourcing specialized skills 

When you’re hiring specialized skills, you need to move quickly to secure talent before the competition. An EOR gives you the infrastructure you need to do so. Your new hires will never be waiting around for three different partners to send them a compliant contract. With an EOR like Multiplier, they can have one in minutes and be ready to work in hours. 

3. When you’re converting freelancers to full-time hires

If you’re working with a freelancer who you find to be a great fit for your organization, you probably won’t want to set up a whole entity just to employ them. With an EOR, you can manage the entire transition, ensuring compliance with local laws at every stage. 

4. When you’re scaling quickly 

Rapid growth requires expanding across regions. As Khatri explains: “In today’s world, because demand has gone global, the customer base is global. From day one, it’s important to have talent from global countries so that they can also give you input on what people in Sweden use, what people in Australia use, what Indonesians use.”

Setting up legal entities in each location can delay progress. An EOR accelerates the process, enabling you to onboard employees and focus on scaling operations without administrative delays. 

When is an Employer of Record not the right solution?

It’s still important to note that an EOR is still not the right global hiring solution for every team. In this section, we take a closer look at some of its alternatives. 

1. When you’re hiring freelancers 

If you’re looking for someone to help you hire international freelancers, manage HR tasks, and ensure that contractors are classified properly, you’ll need the help of an Agent of Record (AOR) not an Employer of Record. 

An AOR will create contracts that align with local laws and helps you manage payments, ensuring your contractors get paid on time, in their currency of choice, and in line with local requirements. An EOR only works with full-time employees.

2. When you already have a local entity 

If you already have a local entity set up in a region and you just want help with HR tasks, a PEO might be a better fit for your needs. A PEO establishes a co-employment relationship with you, sharing responsibilities such as payroll, benefits, and compliance management. Learn more about the difference between EOR and PEO solutions. 

3. When you’re bidding on government contracts 

If you’re bidding on government contracts such as defense contracts or energy projects, you’ll need to have a local entity established rather than use an EOR. This is because government contracts often require direct accountability with extra regulations. 

What to look out for when choosing an EOR

Now that we have highlighted when an Employer of Record is used, and the advantages of partnering with them, the next step is to find the right provider. Here’s a checklist to guide you through the decision-making process of selecting an EOR service. You can also check out our comprehensive guide to choosing an Employer of Record.

Be sure to look out for: 

  • Low total cost of ownership. Choose an EOR with a complete set of features so you don’t have to pay for different solutions. This should include insurance support, expense management, automatic time-off tracking, and full onboarding/offboarding to manage the employee lifecycle seamlessly.
  • Robust entity network. Opt for an EOR that owns most of its local entities to avoid extra costs, delays, and fragmented communication.
  • Compliance by design. Ensure the EOR automatically handles local laws so you get accurate labor cost calculations and full compliance without manual work.
  • Reliable customer support. Look for round-the-clock support with dedicated points of contact to resolve payroll discrepancies, contract updates, and compliance questions quickly.

Get a head start on global expansion with Multiplier

Multiplier’s EOR allows businesses to expand, scale, and test new markets without risk or hassle.

Hire in over 150 countries without setting up a single foreign entity. Then outsource onboarding, IT asset delivery, benefits, and payroll, but still maintain complete control from an easy software solution. 

We can generate 100% compliant, multilingual contracts in any country in just a few minutes. You’ll get 24/5 support from the moment your contract starts.

Book a demo to find out more.

FAQs

Q. Do you own entities in different countries? Are you dependent on third parties?

Multiplier currently has over 150+ local entities across APAC, Europe, and the Americas. We own over 100 of our entities.

Q. How will the EOR help you if you need to end an employment agreement?

Multiplier helps with the offboarding process to end an employment agreement. Our platform ensures that the entire contract is drafted compliantly and according to the employee’s local labor laws.

Picture of Supriya VS
Supriya VS

Senior Product Marketing Manager

Supriya is the Senior Product Marketer at Multiplier.

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