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What is an Employer of Record (EOR)? A Complete Guide to EOR

Home - Business - What is an Employer of Record (EOR)? A Complete Guide to EOR

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Today, operating a business in a foreign country isn’t necessarily a cost-intensive and time-consuming process. With the globalized economies and availability of advanced technologies, a foreign company can easily access global talent and hire remotely from multiple countries or a target location at reduced costs.

Before the COVID-19 pandemic, only a few players could take advantage by relying on international employees as a key workforce. The pandemic has brought a drastic change in the ideas and practices of international employment. Irrespective of how big or small, every business adopted cost-cutting measures to stay afloat in the cut-throat global market. One significant transformation that the pandemic brought in the business world was the rising acceptance of remote work setups.

With the increasing adoption of remote work across industries, it is believed by analysts that the remote work culture will stay relevant in the coming years. As Forbes mentioned, many companies would prefer working remotely, or at least in a hybrid mode to align with their employees’ preferences for work design. Also, one major development seen during the pandemic is the increasing remote hiring by small & medium enterprises (SMEs) for their business operations. It’s safe to say that the pandemic has a major role in accelerating the practice of hiring remote workforce for business needs.

Now, you may ask, “Is that easy to assemble a remote team and start operations quickly in another country?” The answer is “yes” if you know the market thoroughly and have all the necessary support to ensure a successful business operation. However, not every business has the same answer.

We’d say that hiring international employees today is relatively easy compared to a few decades ago. Technological advancements, favorable government initiatives, and rapidly evolving business ecosystems have helped ease international hiring. But, hiring remote professionals and employing them today still have several complications and challenges.

One major challenge of international hiring is businesses must ensure compliance with the existing employment regulations in that foreign jurisdiction. Setting foot in a foreign market requires adherence to various legal and compliance norms. It becomes more complex if a business aims at hiring remote talent from multiple countries as employment regulations differ significantly from one country to another.

This is where employer of record (EOR) services come into the picture and play a crucial role in your team expansion and operation strategy. EOR, as an expert service provider, offers compliance assurance and support to allow smooth hiring and seamless operations in the remote local market. It means that EORs enable a company to set foot in a foreign jurisdiction with zero complications.

For instance, EORs help Western companies hire the best professionals globally and employ them remotely in compliance with the employment laws of that specific country. This facilitates easy team expansion and smooth operations in a foreign country. The best part of employer of record (EOR) services for Western businesses is that the services play a crucial role in filling talent gaps and shrinking talent availability in the West. Talent deficit is currently a major threat in the Western corporate world.

Things you’ll learn from this blog

In this blog, we’ve explained every major aspect and fundamental of employer of record (EOR) services. It consists of 13 key areas, covering the meaning, evolution, benefits, and challenges of EOR services. Moreover, you can learn the difference between an employer of record (EOR) and other competitive business models helping you build a successful remote team in a foreign country.

Also, the blog has a detailed approach and study to showcase how India is a major destination for team building and operation expansion. It explains why EOR is essential in Indian expansion, the cost of using EOR services in India, and how to select the best Indian EOR service providers. Last but not least, the blog explains why Remunance can be your EOR partner in your Indian team-building journey. Let’s begin exploring EOR services and key aspects of EOR services.

Employer of Record (EOR) Meaning

An employer of record (EOR) is an organization that provides legal support and compliance assistance when a foreign company wants to employ a group of remote professionals internationally. Entering a new market, a foreign company often faces challenges in navigating a complex set of employment regulations. EOR  makes it easy for foreign businesses.

In addition to compliance support, an EOR takes full responsibility for managing administrative services such as payroll, taxes, and benefits for your international employees. It means an employer of record provides an all-in-one service package that helps you hire international employees compliantly and get your human resource (HR) services done on your behalf.

In short, an employer of record (EOR) is an organization that legally employs a team of local professionals on behalf of foreign businesses. Thus, EOR acts as the local guardian of employees who work for a foreign company. On the record, it’s an employer of the local employees and handles all legal and administrative responsibilities related to the employees. Simply put, with EOR support, a foreign business can easily hire a team of remote talent in another country and employ them successfully.

 

Benefits of an Employer of Record (EOR)

Employer of Record (EOR) services offer several benefits, including compliance support, risk mitigation, access to global talent, operational efficiency, and cost savings. As global businesses increasingly compete to tap skillful resources internationally, an EOR provides diverse benefits for small and large companies. Let’s explore the major benefits of using EOR services for businesses.

Benefits of an Employer of Record

Compliance Support & Risk Management

employer of record (EOR) services offer compliance support for companies expanding their business operation internationally. When using EOR services, foreign companies can enter a new market and operate their business without worrying about compliance issues. Being a legal employer, EOR companies mitigate compliance risks by shielding your business from potential tax liabilities, legal disputes, and non-compliant activities.

Access to Global Talent

EOR services allow companies to access a diverse talent pool without establishing a legal entity in a different target country. Companies can hire skilled professionals quickly and compliantly regardless of geographical barriers with employer of record (EOR) support. Small companies can compete globally by accessing specialized skills readily unavailable locally. Accessing and leveraging a global talent pool is key to staying competitive in a rapidly evolving global marketplace.

Reduced Administrative Burden

EORs help reduce the administrative burden of businesses as your EOR partner is solely responsible for handling HR services related to your international employees. On your behalf, EOR companies handle payroll, tax filing, and benefits administration, freeing up your valuable time and enabling you to focus on your core business tasks. Also, employer of record (EOR) services help improve the overall employee experience and productivity.

Saving the Cost of Setting Up a Legal Entity

Due to the unique nature of the EOR model, a global enterprise can work with dedicated full-time employees and operate its business without establishing a legal entity in the target country. Using EOR services saves businesses from spending hefty sums and making the upfront capital investment required for setting up a legal entity in a foreign country. It’s a major EOR benefit for small & medium enterprises (SMEs) aiming to set foot in a new market with minimal investment.

 

Why Do You Need EOR for Business Operations in India?

 

India has emerged as one of the most attractive countries when looking for the right destination for global expansion. There are multiple reasons why businesses find India a promising destination for business operations. The availability of a skilled workforce, cost-effective operation, government support, thriving startup ecosystem, growing market potential, and stable political environment are major reasons for eyeing India as a key destination.

However, entering the Indian market without a local guide or expert can be daunting and risky due to legal complexities, cultural differences, work culture differences, and more. This is where the employer of record (EOR) services come to your assistance as a local guide in the Indian market. Let’s see how EOR helps you access numerous advantages and expand business operations in India.

Talent Availability & English Proficiency

The abundant availability of a large English-speaking population and skilled talent is one of the primary reasons global companies prefer to expand their business operations in India. Each year, India produces a large pool of highly educated professionals who graduate from top Indian universities. Their skills can be used in various industries, including information technology, engineering, design, medicine, and finance. Through EOR, you can take advantage of building remote teams in India by hiring top talent smoothly and employing them compliantly.

Cost-Effectiveness in Hiring Indian Talent

One significant advantage of hiring Indian talent is its cost-effectiveness. Compared to the West, India offers a cost-effective workforce that allows SMEs to pursue Indian expansion with a limited budget. Working with an employer of record (EOR) partner, you are completely protected from compliance risks and hefty financial penalties in case of non-compliance with employment regulations. As compared to other employment models, EOR services are highly cost-saving options.

Government Support & Tax Benefits

Over the years, the Indian government has taken several initiatives to increase investment inflows from foreign countries and facilitate ease of doing business. On various occasions, India entered into multiple bilateral agreements with major global economies to boost cross-border business opportunities by reducing tariffs and providing tax incentives. In India, EOR services attract zero-rated goods and service tax (GST) as the service allows more employment opportunities for Indian talent in global companies.

Thriving Startup Ecosystem

India boasts a thriving startup ecosystem, characterized by the rising number of successful startup operations and a surge in entrepreneurial activities. Major Indian cities like Bengaluru, Mumbai, Delhi, Chennai, and Pune have become the hotspots for innovation and entrepreneurship, leading a path for a supportive ecosystem for startups. You can decide on any office location for your EOR employees and EOR service will provide IT and infrastructure support for your new office.

Market Growth Potentials

India’s impressive economic growth in the last decade has attracted the attention of foreign companies across the globe. With the increasing middle-class population and a vast consumer base, foreign companies can tap into this rapidly growing market and expand their customer base. Partnering with EOR services, a foreign business can easily learn about Indian cultural differences and work culture to ensure a successful business operation. EOR services also help you establish a legal entity in India when your team grows significantly in the Indian market.