What Does an EOR Do?
An EOR takes care of the legal and administrative tasks of employing workers. Here’s what they handle:
Payroll: Ensuring workers are paid on time and correctly.
Taxes: Managing tax filings and deductions in compliance with local laws.
Benefits: Setting up health insurance, retirement plans, and other perks.
Compliance: Following labor laws and regulations in each country.
For example, if you’re a U.S.-based company hiring a developer in Germany, the EOR becomes their legal employer. They handle the paperwork, while you manage the developer’s work.
Why Do Companies Use EORs?
Companies use EORs to simplify global hiring. Here’s why:
Save time and money: No need to set up a legal entity in another country.
Hire faster: Get talent onboarded in days, not months.
Stay compliant: Avoid fines and legal risks by following local labor laws.
Focus on growth: Spend less time on admin and more time running your business.
For instance, a startup in Canada used an EOR to hire a marketing specialist in Brazil. Instead of navigating Brazil’s complex labor laws, they relied on the EOR to handle everything, from contracts to payroll.
Types of EOR Services
EORs come in two main types:
1. Domestic EORs
Help you hire employees in different states or regions within your home country.
Handle state-specific tax and labor laws.
Ideal for companies expanding nationally.
2. International EORs
Help you hire employees in other countries.
Manage work permits, visas, and international compliance.
Perfect for businesses building global teams.
How Does an EOR Work?
Using an EOR is straightforward:
Find talent: Identify the worker you want to hire.
Engage the EOR: The EOR becomes the worker’s legal employer.
Manage work: You oversee the worker’s tasks and projects.
Let the EOR handle the rest: They take care of payroll, taxes, and compliance.
This setup lets you hire talent anywhere without the hassle of setting up a local business entity.
How Does an EOR Compare to AOR, PEO, and COR?
If you’re exploring global hiring solutions, you’ve probably come across terms like EOR, PEO, AOR, and COR. While they all help businesses manage workers, they serve different purposes. Here’s a simple breakdown to help you understand which one might be right for your needs:
1. Employer of Record (EOR)
What it does: Acts as the legal employer for your workers in other countries or states. Handles payroll, taxes, benefits, and compliance.
Best for: Companies hiring full-time employees in new locations without setting up a local entity.
Example: Hiring a sales rep in Germany without establishing a German business entity.
2. Professional Employer Organization (PEO)
What it does: Shares employer responsibilities with your company through a co-employment model. Handles HR tasks like payroll and benefits, but you retain control over hiring and firing.
Best for: Businesses that want to outsource HR tasks but keep full control over their workforce.
Example: A small U.S. company using a PEO to offer better employee benefits without setting up its own HR department.
3. Agent of Record (AOR)
What it does: Acts as an intermediary for contract workers, handling payments and compliance. Does not take on full employer responsibilities.
Best for: Companies that need help managing payments and contracts for freelancers or independent contractors.
Example: Paying a freelance graphic designer through an AOR without becoming their legal employer.
4. Contractor of Record (COR)
What it does: Becomes the legal employer for contract or temporary workers. Handles payroll, taxes, and compliance for freelancers or project-based teams.
Best for: Companies hiring temporary or project-based workers, especially in multiple locations.
Example: Hiring 20 developers for a 6-month project through a COR to avoid payroll and compliance hassles.
Which One Should You Choose?
Need to hire full-time employees in a new country? Go with an EOR.
Want to outsource HR tasks for your existing team? A PEO might be the right fit.
Working with freelancers and need help with payments? Consider an AOR.
Hiring temporary or contract workers? A COR is your best bet.
Understanding these differences can help you choose the right solution for your business. If you’re still unsure, many providers offer consultations to help you decide.
Benefits of Using an EOR
For Companies:
Save time: No more navigating complex hiring processes.
Reduce costs: Avoid the expense of setting up local entities.
Stay compliant: Follow local labor laws without stress.
Scale globally: Hire talent in new markets quickly.
For Workers:
Get paid on time and accurately.
Receive local benefits and protections.
Work legally in their country.
The Future of EORs
EORs are becoming essential for modern businesses because:
Remote work is growing, and companies want to hire globally.
Businesses need to scale quickly without legal hurdles.
Technology makes it easier to manage international teams.
Things to Consider Before Choosing an EOR
When picking an EOR, ask these questions:
Do they have experience in the countries where you want to hire?
What’s their pricing structure? (Look for hidden fees.)
Do they offer 24/7 customer support?
Can they provide references from other clients?
What technology do they use to manage payroll and compliance?
Real-World Example
A tech company in New York wanted to hire a sales team in Spain but didn’t want to set up a local entity. They used an EOR to hire and onboard five sales reps within two weeks. The EOR handled payroll, taxes, and compliance, while the company focused on training the team. The result? Faster hiring, lower costs, and no legal headaches.
Is an EOR Right for You?
If you’re hiring globally or expanding into new markets, an EOR can save you time, money, and stress. It’s a smart solution for businesses that want to focus on growth without getting bogged down by admin tasks.
Ready to explore EOR services? Start by researching providers with experience in your target countries and ask for a consultation to see how they can help your business.