How does an EOR work?

An Employer of Record (EOR) is a third-party entity that hires and manages employees on behalf of a client company. EORs typically take on all administrative tasks related to employment, such as payroll processing, tax compliance, benefits administration, and employment contracts. The client company remains responsible for the daily work assignments, management, and direction of the employees. Here is how an EOR works: Contract Negotiation: The client company and the EOR enter into a contractual agreement that outlines the scope of work, services to be provided, and fees for services. Hiring and Onboarding: The EOR recruits and hires employees on behalf of the client company. Once hired, the EOR takes on all the administrative tasks related to onboarding, such as employment contracts, benefits enrollment, and tax documentation. Employee Management: The EOR acts as the employer of record for the client company's employees. This means that the EOR is responsible for managing all aspects of employment, such as compliance with local labor laws, tax compliance, and payroll processing. Payroll and Benefits Administration: The EOR is responsible for payroll processing, including tax withholding and remittance, and administering benefits to employees. This includes health insurance, retirement plans, and other employee benefits. Termination: If an employee is terminated, the EOR is responsible for the separation process, including final payments and processing of any necessary paperwork. Overall, an EOR allows client companies to expand their operations globally without the need to establish a legal entity in a foreign country. The EOR takes on all administrative tasks related to employment, allowing the client company to focus on their core business activities.

EOR, or Employer of Record, is used in various situations, including: International Expansion: Companies that want to expand their business to a new country but do not have an established legal entity can use an EOR to hire employees and handle payroll and HR compliance. Staff Augmentation: Companies that need to quickly and efficiently scale their workforce or bring in specialized talent for a specific project can use an EOR to hire additional employees without having to go through a lengthy recruitment process. Compliance: Companies that want to ensure that they are following all the legal requirements and regulations of a particular country can use an EOR to manage payroll, tax compliance, and employment regulations. Cost-Effective Hiring: Companies that do not want to spend a significant amount of time and resources on hiring and HR can use an EOR to outsource these tasks to a third-party provider, which can be more cost-effective. Reduced Risk: Companies that want to minimize their risk when hiring employees in a foreign country can use an EOR to take on the legal and financial responsibility of the employment relationship.