What is an EOR? How do you pay remote contractors?

July 22nd, 2022 by Felix Cheruiyot

what-is-an-eor

What is an EOR? Why is it important? What other options do you have for you to pay remote workers? Businesses hire employees from all over the world - thanks to the gig economy. Freelancers and contractors get hired every day by some foreign company and they are paid for their time and work. However, when you’re hiring a remote employee, you need to adhere to local laws and make sure the employees are categorized correctly in order to avoid any unnecessary legal complications. 

Businesses are responsible for all employment tasks, costs, and liabilities associated with hiring employees. There are, however, some businesses that don't want to take on that responsibility. Alternatively, an employer of record or EOR can be used. If you’re wondering, what is an EOR? We’ve got you covered.

In this article, we’ll talk about what EOR is, including the tasks such companies handle, the benefits of having an EOR, and cross-border payments. 

Without further ado, let’s begin.

What is an EOR or Employer of Record?

While an employee works for another company, an employer of record (EOR) provides tax treatment for the employee. As part of its employment duties and responsibilities, the EOR assumes traditional employment liabilities. Employees are hired, paid, and handled by a third-party organization on behalf of another company. Companies can legally and efficiently engage overseas workers without having to set up local entities or risk violating local employment laws using an Employer of Records.

Some of the tasks that an EOR performs are: 

And this list goes on. Now, let’s look at the benefits of using an EOR for your company.

Benefits of Using an Employer of Record

The use of an Employer of Record in conjunction with GEO services has many distinct benefits for companies.  Often, the EOR is the most advantageous method of doing business abroad, where local employment can be prohibitively expensive, complex, and compliant.

No Need for Local Incorporation

Incorporating and registering a local entity is the first step if a company opts for a DIY approach. It can be time-consuming and expensive to ensure compliance, and it may require the services of skilled legal and accounting professionals.

Setting up a foreign subsidiary may not be as effective as partnering with a local Employer of Record. Payroll, employment, and immigration are already handled by the GEO in the host country. 

As part of their legal obligations, the EOR acts as a broker between the client company and the assignee as well as ensuring compliance with all laws and regulations.

Immigration Compliance

A foreign government's scrutiny of work permits, visas, and business activities constantly changes the guidelines and regulations for immigration. Companies and their employees are finding it difficult to comply with immigration laws because there can be long-term consequences.

Many companies are more likely to comply with immigration laws when using a GEO solution and local EOR. Remote payrolls, overspending business visas, and repeated entry into a country are eliminated with this method, and employees have the right to work in that country legally. The GEO partners at the local level handle everything related to visas and work permits, reducing complications.

Local Payroll in the Host Country

The majority of countries require companies with employees on assignment to carry out payroll in accordance with local procedures with a registered entity in order to comply. Payroll from the home country is rarely permitted, especially for long-term assignments.

A host country's payroll calculates and withholds statutory deductions from pay, including pensions, health insurance, and taxes. It is the EOR's responsibility to ensure that each employee's payroll is compliant and accurate.

In addition to providing financial information about the host country's withholding and tax rules, employers can use the EOR for payroll management. Managing your business in this way ensures that it isn't breaking any local laws or posing any problems for the local authorities in any way. In order to hire foreign employees, this is the most cost-effective method.

What are the Responsibilities of EOR?

EOR and the business that employed EOR have different roles and responsibilities. It is important to note both party’s responsibilities in order to better understand EOR and all of its intricacies. The business and the employer of record have different responsibilities. Let’s learn about the responsibilities of EOR and the business.

The employer retains control over the company in which the employee works. Safety and compliance within the workplace are also the responsibility of the business. EOR takes care of all the employment issues and making sure that payroll issues are sorted out and that they are in line with tax laws and compliance.

EOR Contract Staffing

Contract employees work for recruiting agencies offering contract staffing as their legal employer of record. It is often the contract staffing back office that assumes the employer of record responsibility. Back office responsibilities can be handled by recruiters themselves, or they can be outsourced to a contract staffing company.

You must decide who will be the employer of record for your contractors if you decide to add contract staffing to your recruiting business. It is important to make sure you have the time and resources to run the back office yourself.

As a last resort, a contract staffing back office provider can take over the responsibility of running the back office if you don't want to do it yourself. All payroll and employment responsibilities will be handled by the employer of record, including funding the payroll of the staffing agency (recruiter).

Global EOR

Employers of record (EORs) are also useful for businesses that do not recruit. EORs can be used by businesses that want to hire employees from another country, but do not have an entity there. Employees continue to work for the business, but payroll and HR issues are handled by the employer of record.

In this manner, the business can expand globally without establishing its own entity or paying taxes in different countries. For companies wishing to hire anyone, anywhere, global EORs are poised to play a crucial role in the global employment ecosystem.

Employers, whether they are recruiters offering contract staffing or business owners looking to hire abroad, must ensure employees are classified correctly, paid accurately, and handled correctly. Otherwise, state and federal authorities can take action.

Now, let’s move towards the hiring process. When you employ EOR and they take control over the hiring process, you’ll need to know the steps when it comes to hiring remote employees.

How to Hire Remote Employees?

As a result of the pandemic, a huge percentage of the workforce had to work remotely during 2020 and part of 2021. However, remote work was still on the rise. 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, dismantling geographical barriers opens up the global market.

To attract top candidates, organizations either hired people who live near their facilities or hoped their jobs would entice them to relocate. Even then, a huge percentage of global workers moved to the U.S. to find better work opportunities or to join organizations they had employment offers from.

The benefits of hiring international talent are too many - the biggest one being the ability to get the best possible talent. If your business is able to provide quality employment opportunities - the type that would rival other companies, you’ll definitely find what you’re looking for. Remote employment removes the need to relocate and also removes excessive costs that came with hiring international talent from across the world. Costs such as, relocation and visa are now least of your concern. Since the employee can work online, you don’t need to worry about these costs.

Let’s dig into the steps involved in the hiring process of remote employees.

1. Do you Really Want to Go Global?

In the first step, you really need to consider the pros and cons of hiring global employees. For some businesses, hiring local employees is better. For instance, if you’re hiring someone for the role of accounting or taxation, you would want employees who belong to the local area and know the intricacies of the country your business works in. 

On the other hand, many jobs require foreign talent and a diverse set of minds in order to give your business the boost it deserves. For instance, if you’re hiring someone for brand management position, it would be beneficial to open the search criteria to remote employees in order to find the most creative talents out there.

Hiring locally is much easier and quicker since you don’t need to worry about a different country’s laws and regulations. However, the on the downside, you lose a lot of quality applicants - therefore, you need to choose whether hiring remote employees is something you really want. 

2. Decide on Salary and Benefits

Compensation packages are very important to consider since you’ll need these to be attractive if you’re hoping to hire remote employees with experience. For every position you want to seek employees, consider the experience level, seniority and perks. For instance, if you’re looking to hire Sales agent with minimum 5 years of experience, you’ll need to offer the following:

For employees other than sales, you probably wont need the sale commission and target bonuses. So, based on the job position, decide on the salary and benefits. 

‍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 big city or not. Since, big cities are quite expensive to live in, companies offer higher salaries to make the salary market competitive. 

Similarly, when you’re hiring remote employees, having the knowledge of salary benchmark for that particular country would help you land on a salary range which you can decide from. At the end of the day, it is up to you and you can offer whatever salary you seem appropriate. However, you should atleast ensure whatever you offer is competitive based on employee’s country. 

3. Create an Attractive Job Advertisement

It will be difficult to find the right candidate for a job without an effective job advertisement. It is imperative to be concise when posting remote job ads. However, you should also provide enough information for the candidate to get a good sense of what the company is looking for. Recruiting globally requires culturally appropriate and inclusive language.

An eye-catching remote job advertisement should include:

4. Use the Right Channels

The next step is to post your job advertisement on relevant job boards once you've developed one that stands out from the competition. To reach the right talent you should use specific channels designed to reach remote and flexible workers, such as job sites and social media platforms, like LinkedIn, Upwork etc.

If you would like to find top remote talent, you could also partner with a recruitment agency that specializes in this area. Even though it will cost you money, you and your team will save time and energy by avoiding trawling through resumes at the beginning of the hiring process.

5. Optimize your remote interview process

Unlike traditional office-based hiring, remote interviews are unique in their challenges. In order to create the most effective 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.

How Can IntaSend Help?

When you hire remote employees, you need to go through the tiring process of going through cross-border payments. Salaries for remote employees can get tricky. Whether you’ve employed an EOR or not, IntaSend can help you make quick, secure and affordable international payments for your employees. You can disburse payments to a variety of beneficiaries at the same time through payments disbursement. The IntaSend dashboard or the transfer API can be used to upload the beneficiary details directly.

Up to 5000 beneficiaries can be paid with the IntaSend system in a single request since the system is scalable and reliable. A business with a large number of payments to settle at the same time will benefit from this feature. Among these applications are payroll payments, vendor payments, loan disbursements, dividends, etc. As bulk disbursements encounter retries and failures, IntaSend is always available to assist. As a result of IntaSend’s innovative solution, you can move faster and accomplish more.

A secure approach must be taken when conducting international transactions. In spite of their best efforts to keep money safe, banks have historically been easy targets for hackers in the past. Insufficient security policies and access policies contribute to high-level security breaches. It is preferred by businesses and customers to work with institutions that have high levels of security and risk management systems. Your employees' salaries can be successfully disbursed across borders with IntaSend thanks to its fast, secure, and diverse payment options.

Clients and businesses want faster, more reliable, and more convenient cross-border payments in this fast-paced world. In the current economic climate, transaction delays are nothing new; however, a business or client can easily find it more convenient and cost-effective to pay with a cheaper and faster service provider - IntaSend is that ideal partner for your cross-border payment needs. IntaSend is one stop solution for cross border payments with or without EOR.

Cover Photo by Daniel Thomas on Unsplash


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