Above and Beyond Global Hiring: 4 Reasons Why an Employer of Record Solution Makes Sense

Two men and one woman walking on a deck

Hiring through an Employer of Record (EOR) helps organizations accelerate, safeguard and enhance their global expansion efforts. The EOR market size is expected to mature at a steady compound annual growth rate (CAGR) of 6.9% through 2028, according to estimates recently published by market research firm Valuates.

Much of this growth will involve going above and beyond helping companies hire in new markets around the globe. An all-in-one EOR, apart from onboarding and employing the worker, offers specialized HR services across a range of business functions.

In addition to global hiring, here are some other reasons why the EOR hiring model might be the right solution for a company.

Facilitates corporate transactions

Using an EOR can help mitigate underlying human capital risks in cross-border corporate transactions – including IPOs, wind downs, carve outs and M&As – while bolstering business development, cultural integration and talent retention.

The demand for companies to grow fast and save money often promotes short-term, shortsighted solutions, which can become costly in the long-term and compromise a company’s market value. For example, while engaging a worker as an independent contractor (IC) can contain fixed costs, it is not suitable for permanent employment. If not carried out properly, it can also expose a company to legal and operational issues.

As a company prepares for a global transaction, such a misstep is likely to come into clear view under the microscope. Before a transaction is concluded, regulators apply due diligence to identify red flags in intellectual property protection or compliance for misclassified workers. Not only are these situations detrimental to a business’s bottom line, they can also delay or even cancel exits, sales or IPO transactions.

Centralizes international payroll

Managing a cross-border workforce can be a major undertaking, burdening the corporate HR team. For example, global payroll processing can be further complicated due to different payment methods, bank fees, currency exchanges and benefits.

Companies often turn to an expert HR partner to handle cross-border workforce management, such as a professional employer organization (PEO) or an ‘all-in-one’ EOR that also offers HR services. There are distinct differences between these two options, with the PEO being a co-employer and the EOR being the sole employer of the worker.

If a company’s HR team has limited resources and is spending a lot of time navigating the nuances and regulations of other countries’ labor laws, an EOR partner can help centralize international payroll. By streamlining payroll processing through an EOR, HR teams can focus on strategic initiatives rather than administrative tasks.

Relocates employees

The world of work and travel has evolved drastically over the past several years, with the concept of a “workation” more commonplace than ever before thanks to the rise of remote work. According to data from Ladders, 25% of all professional jobs in North America will be remote by the close of 2022 and remote job openings will continue to grow through 2023. 

Companies increasingly want to offer employees the option of working abroad as an added benefit. However, before letting workers freely globetrot without guidelines, companies need to consider regulatory compliance risks:

  • What happens if a company is slapped with a lawsuit in another country for violating employment laws?
  • What if an employer is deemed to have permanent operations in a country by having a worker abroad?

There are also ‘what ifs’ that can impact workers:

  • What if a worker gets seriously ill or suffers an accident? Their healthcare benefits may not be valid abroad.
  • What if a worker faces visa or immigration issues?
  • What if tax authorities conduct an audit and find the worker is responsible for paying taxes in the country?

The EOR model, which can onboard a new hire in as little as 24 hours, effectively protects both the company and individual by mitigating the risks of labor-related audits, permanent establishment and visa-related issues.

Gaining agility, efficiency and peace of mind

An effective EOR model offers a company agility in hiring top talent in any market around the world – regardless of where they are located.

By knowing their business is operating compliantly and seamlessly, the company can then focus on the core business-growth activities that raise the bottom line. By relying on a trusted EOR partner, a growing company enjoys agility, efficiency and peace of mind in global hiring and other areas of business expansion.

Check out our ‘What is an EOR?’ guide or contact us to talk with an international HR expert about how an EOR solution can support your business goals.