Three Reasons Why Demand is Growing for Employer of Record Services

man and woman talking and smiling

Global expansion and cross-border workforce management are about to become easier thanks to the Employer of Record (EOR) industry. While still unknown to many, EOR is expected to flourish at a steady but impressive compound annual growth rate (CAGR) of 6.9% through 2028, according to projections recently released by market research firm Valuates

This news comes at an opportune time when the global talent shortage is soaring at a 16-year-high, according to data recently published by the World Economic Forum. The following benefits are why more companies are implementing EOR solutions as part of their business growth and talent development plans.

No entity, no problem

Global expansion has become more of a business imperative rather than a choice in recent years. While building a local team is often the first step to success in a new market, the hiring of even a single employee usually requires a legal entity to be set up in the target country. Business incorporation can take longer than six months in some countries, according to data from the World Bank, and the process entails hefty startup costs

A company can circumvent the arduous business incorporation process by partnering with an EOR and workers can be hired almost immediately. The company pays one predetermined amount to the EOR, rather than putting up the usual capital requirements (setting up a local bank account, infrastructure costs, office overhead, registration fees, hiring local consultants, etc.). 

The EOR hiring model essentially removes global market entry barriers, empowering companies to tap into new talent pools around the world with flexibility and ease. At the same time, the worker is managed by the company and carries out day-to-day responsibilities – just like any other member of the team. 

Low-cost HR support

Managing a cross-border workforce can be a difficult undertaking, placing additional stress on the HR team in the home country. Payroll processing can also 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. However, 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. 

An all-in-one EOR, apart from employing the worker, offers specialized HR professionals who can handle cross-border taxation, payroll processing, statutory benefits, voluntary benefits, equipment procurement, employment contracts, terminations, renewals, visa support, compliance management and more. Because of this versatility, more companies are leaning on EOR partners to streamline administration, lighten the burden on their own HR departments and take advantage of low-cost, efficient HR services. 

Compliance and risk mitigation

Cross-border HR is rife with regulatory compliance risks, especially if a company is operating in a jurisdiction with unfamiliar labor and immigration laws. Moreover, these laws are constantly changing. For example, some countries, such as Chile and Norway, recently implemented new provisions to regulate remote work. Failure to comply with any law can incur expensive legal fees, compromise brand integrity or result in more serious sanctions.

An EOR partner can help companies avoid such pitfalls and manage their teams in a legally compliant way. By implementing an effective EOR solution, the company frees the internal HR team from having to navigate another country’s complex labor framework. The EOR’s job is to make sure all requirements are fulfilled, including contributions to statutory benefits, taxation and benefits. This way, the company can focus on core business-growth initiatives while scaling new opportunities in the country. With an EOR partner, companies can hire the best talent anywhere. 

Check out our ‘What is an EOR?’ guide or contact us to talk with an international HR expert.