The gig economy has opened our minds to the many benefits of hiring employees from all other countries to work in their countries of residence. Most of these hires work as freelancers and independent contractors.
However, when you hire a remote employee, you must adhere to local laws and ensure the employees are categorized correctly. Otherwise, you could invite unnecessary legal trouble.
Businesses that hire remote workers are keen to tap into the abundant talent resources of the larger global market. However, hiring outside their own countries does not absolve them of the responsibility and obligations associated with hiring employees.
That is where an EoR (employer of record) comes in.
In this article, we’ll define EOR, explain how it operates, and list the benefits of using one. We will also cover EoR payments and how to make the securely.
Without further ado, let’s begin.
An employer of record is an agency that takes on the staff employment obligations on behalf of another company. It allows another company to legally employ full-time workers in another town, province, or country.
An EoR takes on the legal obligations of hiring and maintaining payroll for another company in a region where setting up a local legal entity would take too much time and cost a lot of money.
Under an EoR arrangement, employees are hired, paid, and handled by a third-party organization on behalf of another company. This way companies can legally and efficiently engage overseas workers without the risk of violating local employment laws.
When you engage an EoR, it is important to know what its responsibilities are and what your own obligations are in the relationship. You and the EoR have different responsibilities.
How are these roles different?
In an EoR arrangement, the employer is responsible for safety and compliance within the workplace. The EOR takes care of the human resources function. They make sure that employees are hired and paid in accordance with local laws tax laws.
Here are some of the tasks that an EOR performs:
An EOR has many benefits for companies that do business abroad, especially in countries where local employment can be prohibitively expensive, and complex.
Here are some of those benefits:
Incorporating and registering a local entity is the first step if a company chooses to open an office and hire employees in another country. But that process can be time-consuming and expensive. To ensure compliance, it may require the services of skilled legal and accounting professionals.
So setting up a foreign subsidiary may not be as effective as partnering with a local Employer of Record. An EoR takes care of payroll, employment, and immigration laws that you will not be familiar with.
Laws around immigration, work permits, and visas are constantly changing. Maintaining compliance in a legal environment that is constantly shifting can become a challenge.
Since EoRs are treated as local businesses, they help remove these immigration-related headaches. Issues around remote payrolls, overspending business visas, and repeated entry into a country can be eliminated with an EoR.
The EoR, which understands local laws better and will have established relationships in the right offices will also help senior executives of the client company sort out visas and work permits when they have to work in the country.
Managing payroll for a foreign subsidiary from another country is fraught with challenges and in some instances may violate laws in the host country. In many countries, managing payroll for locally stationed employees is not permitted, especially for long-term assignments.
Every country wants to collect taxes from all people formally employed and stationed within their borders country. So they enact laws specifically for this. They know it will be hard to collect statutory deductions from pay, including pensions, health insurance, and taxes if a company’s payroll is processed in another country.
Even when you are keen to make good on your tax and other legal obligations, it may be difficult to do so from outside. An EoR takes over this task and ensures that each employee's payroll is fully compliant with local laws.
Thanks to the Covid-19 pandemic that forced many employees to work from home, there is now a growing awareness among organizations that remote workforces are not only possible but also beneficial.
For companies looking to recruit talent from around the globe can expect to save on visa and relocation costs. And practically any white-collar job can be done remotely these days.
Let’s dig into the steps involved in the hiring process of remote employees.
Your first task is to consider the pros and cons of hiring global employees. For some businesses, hiring local employees may be better. For example, if you’re hiring someone for the role of accountant, you want someone who understands local accounting conventions and financial reporting laws.
For some roles, however, casting your net wider may be more beneficial. For instance, if you’re hiring for a brand manager or another position that requires creative talent, expanding your search beyond your borders boosts your chances of landing a person with the right attributes.
Again, hiring locally is much easier and quicker since you don’t need to deal with unfamiliar laws and regulations. So if there’s a stronger business case for hiring remotely, the decision is easier to justify.
Compensation packages are important to consider when hiring remote workers. The attract talented people with the right experience, the salaries and benefits you are offering must be competitive.
For every position you hire for, consider the experience level, seniority, and perks. For example, if you’re looking to hire sales agents with a minimum of 5 years of experience, you’ll need to offer the following:
For employees other than those in sales, you probably won't need to offer sale commissions and target bonuses. So, based on the job position, you have to decide what salary and benefits you have to offer.
But, the question is how will you decide on pay based on employees’ location? For local employees, companies consider the salary benchmark and cost of living based on whether the office is in a big city or not. The cost of living is typically higher in big cities, so companies must offer suitably competitive salaries when hiring there.
Similarly, when you’re hiring remote employees, knowing the salary benchmark for their countries of residence is crucial if you are going to make offers that interest the best talent there. Your salary offers have to be competitive.
You will not catch the attention of the calibre of talent you are looking to recruit if they don’t have open positions at your company. You have to advertise in the right places.
Your job ad should be clear on what qualities you are looking for in the role you are hiring for. Be concise but make sure you include all the essential information so the candidate can get a good sense of what the job entails. When recruiting globally it is also important to use culturally appropriate and inclusive language.
An eye-catching remote job advertisement should,
With the copy for the job post decided, go ahead and post it on relevant job boards. Places like LinkedIn and Upwork are some of your options.
To find the right candidates to interview you may also decide to work with a recruitment agency. Even though it will cost you money, you and your team will save time you would spend trawling through resumes at the beginning of the hiring process.
Unlike traditional office-based hiring, remote interviews are unique in their challenges. To create the right remote candidate experience, it is imperative to streamline the remote interview process.
It not only helps to create a better remote candidate experience but also allows you to determine if the candidate has the right qualities for remote work.
When you hire remote employees, you need to go through the involved process of making cross-border payments. Payroll for remote employees can be hard to manage. Whether you’ve engaged an EoR or not, IntaSend can help you make quick, secure and affordable payments for your employees.
With IntaSend, you can disburse payments to up to 5,000 recipients in a single request. You can use either the IntaSend dashboard or the transfer API to upload the beneficiary details directly.
You can bank on IntaSend’s robust security and risk management systems to make EoR payments across borders and disburse salaries securely. Our system provides diverse payment options so you can pay anyone, anywhere, anytime.
IntaSend is the ideal partner for all your cross-border payment needs. IntaSend is a one-stop solution for cross-border payments, whether you are using an EOR or not.
Sign up with IntaSend and enjoy smoother, faster, and more secure EoR payments.