To grow your business, you may need to find global talent to fill various roles in your organization. But hiring employees on a global scale requires knowledge of payroll taxes and laws in the countries you’re hiring from. That’s where an employer of record (EOR) comes in.

Working with an EOR is how companies avoid legal issues and ensure compliance with other countries’ recruitment laws. Not to mention, having someone handle the entire recruitment process. Among other benefits, which will discuss in detail below.

In this article, we’ll explain what an employer of record is and the differences between an EOR and PEO. We’ll also explore the pros and cons of working with an EOR.

What is an employer of record?

Put simply, an employer of record (EOR) is an HR service provider for companies looking to hire employees in a different country.

The longer and more extensive definition of EOR is this:

An EOR provides various types of HR and recruitment services for employers outside of their home country. Because the employer has no legal entity in the country they want to hire from, they turn to EORs for their hiring needs.

The EOR finds and hires employees for the company. The EOR manages employee payroll, taxes, medical and social insurance, and other benefits the company wants. They also ensure the hiring company complies with the foreign country’s hiring laws and taxes.

EOR services include:

• Hiring and recruitment.
• Payroll and taxes for employees.
• Legal compliance with the foreign country’s laws and legislation.
• Legal and financial onboarding for employees
• Administrative services
• HR services for teams (recruited in the foreign country)

If, in time, you wish to expand to that country and create a legal entity, the employer of record handles this process for you. Often, when companies expand to new countries, they prefer to keep their employees’ payroll management under the EOR.

One major benefit of using EOR services is finding and hiring employees quickly, without worrying about the legalities of hiring.

EOR vs PEO: What’s the difference

There are some overlapping elements between an employer of record and a professional employer organization (PEO).

For starters, a PEO is more common in the United States than in other parts of the world. Second, a professional employer organization handles HR services and payroll services but with some shared responsibility with the hiring company.

Companies in the United States turn to PEOs for co-employment needs. Under this agreement, the PEO handles HR and payroll on behalf of the company. Meanwhile, the hiring company, that is the client, manages the employees.

Moreover, in a PEO agreement, the company and the PEO must be registered legal entities in the country where the employees are located. They also share legal responsibility for employees. This is not the case with the EOR.

It’s like outsourcing several HR services but not getting the full extent of what EORs and HR agencies can do. As mentioned, this is limited to the United States and its laws and regulations.

On the other hand, an EOR takes away this hassle of establishing a legal entity in the country where the employees are located.

For example, if you’re working with Tawzef as your EOR, Tawzef provides you with comprehensive HR, payroll, and hiring services in Egypt. Whether you want to hire 2 or 3 people, a full team, or create a new branch in Egypt, Tawzef does this for you.

You don’t have to have any presence in Egypt to hire from there or worry about taxes, laws and legislations, or anything of the sort. Tawzef handles it all for you.

Some companies will often refer to working with a global PEO or international PEO. However, this type of agreement isn’t similar to the one in the US. What they are really referring to is a global outsourcing solution provider or global EOR.

What are the benefits of employer of record services?

Now that we’ve covered what an EOR is and how it differs from a PEO, let’s look at the benefits of working with one.

1) No need for a legal entity 

The top benefit of using EOR services is not having to establish a legal entity in foreign countries. You also don’t have worry about creating contracts, managing payroll, complying with local laws,…etc. Because the EOR service provider handles all that for you.

The EOR may also handle renting or leasing office space, purchasing equipment for your new team, and so on.

2) Fewer risks

One of the top benefits of using an EOR is reducing the amount of risk involved when hiring abroad. This includes both legal and financial risks.

Hiring employees in a different country can result in legal risks if you don’t comply with that country’s hiring and taxation laws.

An EOR has the knowledge and expertise in handling the legal and financial aspects of hiring an employee or team. They’re also well-versed in the recruitment and selection of employees in different roles and fields.

3) Fewer expenses

Recruiting talent from overseas or in another country can be costly if you’re not familiar with the salary grades and levels in that country. Similarly, it can be costly because of the risks involved.

EOR service providers, like Tawzef, help companies navigate the whole recruitment process and find talents faster.

EOR service providers, like Tawzef, help companies by handling and managing all their payroll and hiring needs. This means they recruit people on your behalf, pay them and provide all the compensation and benefits perks you want.

4) You work with a trusted partner 

When working with an employer of record, you’re working with a partner. You may have to give up some HR privileges, but your HR partner, the EOR, handles those HR requirements based on your instructions.

Not only do they provide local expertise, they can provide various HR services for teams hired in a different country. These HR services can vary from one EOR to another, but generally include

• Creating an HR strategy (if you have several teams in the foreign country)
• Handling payroll, taxes, and compliance
• Ensuring you’re always in compliance with local laws

If you’re working with Tawzef, you can get additional services such as

• Support for your business development strategy
• Employee rewards, engagement, and recognition scheme(s)
• Creating HR policies 

5) Helps you overcome HR challenges 

Another benefit of using employer of record services is being able to overcome common HR challenges in foreign countries.

These challenges can vary from finding skilled talents, to retaining them, to creating a salary structure for employees in a different country, among other challenges.

6) Supports your different hiring needs

Often companies will turn to EORs for permanent or full-time employees. However, EOR service providers can help you find talents for part-time, temporary, full-time, and project-based or freelance roles.

7) Long-term partnership 

This may be a benefit to some companies and a disadvantage to others.

Working with an employer of record is often a long-term agreement. It could span months or years. It depends on your business and hiring needs.

However, most companies use EOR services for several years. That’s because they want to expand their teams while reducing costs. So, they turn to certain countries, like Egypt and India, where recruitment costs are more affordable.

For example, companies use EOR service providers, like Tawzef, to outsource their call centers. This allows them to provide better, round-the-clock customer support, while cutting the costs of hiring talent in their home country.

Conclusion

Working with an EOR helps you save time, expenses, and reduces the hassle of recruitment, compliance, and taxation in a foreign country.

In other words, you get to hire employees or a team with fewer headaches and problems, while getting HR expertise.

Hiring talents from countries like Egypt means you can cut costs easily, hire more, provide better services, and expand your business.

Learn more about Tawzef’s employer of record services. Talk to our team and we’ll help you fulfill your needs.