With the globe more interconnected than ever before, businesses can say goodbye to geographical boundaries – and hello to international expansion!
Businesses are now looking to expand more quickly and smoothly, and are able to grow on a much larger scale.
But where do you begin? How do you even set foot in another market, where you’re facing a completely different economic, social, cultural, and political context?
And in light of the COVID-19 pandemic, how can one expand their business when there are travel bans and borders remain closed?
Good news.
Global experts in business setup, employment, immigration, compliance and tax regulations offer various services to simplify your international expansion.
With so many options available and the uncertainty of not knowing which is best for your situation, we break down one of the most commonly used so you may explore your options before planning the next step of your growth journey!
EOR for Global Business
International business expansion was once a long-term, multi-year foreign assignment.
Nowadays, however, global mobility is a hot topic. In fact, more companies can now enjoy the idea of shorter, more flexible overseas postings in shorter time frames.
This trend has made the DIY approach of incorporating in every market untenable. As a result, demand for local employment alternatives has soared.
Companies began to explore options such as outsourcing payroll, hiring immigration attorneys and seeking local business partners to alleviate some of the regulatory burdens.
But a more complete solution was needed, allowing for the development of a single-source service that could manage the full range of local employment criteria.
The EOR model meets a modern business need, allowing companies to quickly enter a new market and deploy workers legally and efficiently.
What is an EOR?
An Employer of Record, as a service, essentially refers to the outsourcing of all employer responsibilities and liabilities to a third party.
Adopting a back-end administrative role, the EOR, with their local knowledge and expertise keeps your business compliant when entering and operating in a new country.
EOR is likened to Employment Outsourcing, Global Employment Outsourcing (GEO), Portage, or Co-Employment.
Other terms for a third-party partner offering EOR services include local employer, local partner, Professional Employer Organisation (PEO), or back-office staffing provider. In China, Foreign Enterprise Service Company (FESCO) is also used.
Why use an EOR?
Businesses who need to hire staff overseas face a series of processes and obstacles.
Researching and complying with the numerous local laws can present a huge challenge.
Every country (and even each state or region) will likely have different employment, payroll, and work permit requirements for foreign companies doing business.
Partnering with a legal Employer of Record saves you from having to set up a formal entity in the host country. They become the in-country employer of your staff, saving you an enormous amount of time and effort.
Whilst a company can organise its own incorporation, registration and local payroll, this may not be ideal for those new to the market, or smaller businesses with limited resources.
How does EOR work?
Your EOR is legally authorised and equipped to handle your business’s administrative processes on your behalf.
You remain in charge of the day-to-day management of your employees. Meanwhile, your EOR administers all local employment steps such as employment contracts, payroll, tax & withholdings.
Specifically, the EOR is the legal entity that:
- acts as a stand-in entity in order to run a local compliant payroll for your staff
- meets all host country labour laws pertaining to local contracts and worker protections
- advises you of required notice periods, termination rules and severance pay
- is the host country interface between the employee and government authorities.
Benefits of using an employer of record:
1. No need for local incorporation
Setting up a business overseas can be time-consuming and expensive. It often requires local knowledge and support to ensure compliance.
Instead, an EOR partner will already have a legal entity in place that can handle various aspects of employment and payroll requirements in the host country.
The EOR is an intermediary between your company and the employee.
2. Localised payroll
Most countries will require a company with employees on assignment to run payroll according to local standards with a registered entity. The practice of ‘remote payroll’ (transferring or remitting from the home country payroll) is rarely allowed, especially for long-term assignments.
A key aspect of running a host country payroll is the calculation and withholding of statutory deductions from pay, including pensions, health insurance and taxes. The EOR takes care of all of these critical details, to ensure the payroll is accurate and compliant for each employee on assignment.
The EOR is the perfect employment solution, providing the required entity to run payroll with expertise in host country withholding and tax rules. This ensures that there are no issues with local authorities and is the most cost-effective means to quickly deploy employees abroad.
3. Fast-tracked expansion
The path to becoming operational is fast-tracked. With the help of a capable & knowledgeable EOR, the employment process is simplified and streamlined.
An EOR will already have the procedures in place and an understanding of the local country requirements.
4. Simplified operations
Partnering with an EOR means they take care of what would usually be your administrative responsibilities. This includes new employee set-up, data collection, employment contracts, and all correspondence with regulators for continued compliance with taxes and insurances.
This frees up your time and energy to focus on your core business operations and goals.
The future of Global Employment
Businesses and economies are growing exponentially moreglobal.
The need for EOR is here to stay. Countries continually change regulations on immigration, employment and tax in order to boost and protect the economy.
As businesses continue to navigate the global marketplace and its intricate legislations, EOR is becoming a core strategy for employing staff – whoever and wherever they may be. Where could an EOR solution and growth partner take your business?
