Article

What Does an Employer of Record (EOR) Do?

November 14, 2024

Expanding your business across borders brings unique challenges. From navigating local labor laws to managing compliance, global hiring can be complex. An Employer of Record (EOR) simplifies these processes, allowing companies to focus on growth. Let’s explore what an EOR does, why it matters, and how it can benefit your business.

Key Takeaways

✔️ An EOR simplifies global hiring by managing compliance, payroll, and HR tasks.

✔️It allows businesses to operate in foreign countries without setting up a local entity.

✔️ Employees work under the EOR legally but follow the client company’s directives.

✔️ Costs vary but typically include a percentage of the employee’s gross salary.

✔️Choosing the right EOR provider ensures a seamless and compliant hiring process.

What Is an Employer of Record (EOR)?

An Employer of Record acts as the legal employer for your international workforce. While you retain control over day-to-day operations, the EOR handles administrative and legal responsibilities. This setup ensures compliance with local laws without requiring you to establish a legal entity in the country.

For instance, if you’re hiring a marketing manager in Brazil, the EOR would handle the employee’s payroll, taxes, and benefits while you oversee their tasks and deliverables.
➡️ Learn more: What Is an Employer of Record (EOR)?.

What Does an EOR Do for Businesses?

An EOR provides comprehensive support for managing employees in foreign markets. Here’s a breakdown of its core functions:

Compliance management

Every country has unique labor laws. An EOR ensures compliance with local regulations, such as tax filings, social security contributions, and employee benefits. For example:

In Mexico, the EOR ensures compliance with the 13th-month salary (aguinaldo), a mandatory benefit.
In Brazil, the EOR manages FGTS (Severance Indemnity Fund) payments to protect employee rights.

Payroll and Tax Processing

The EOR handles salary payments, deducts taxes, and ensures compliance with local payroll regulations. Imagine hiring in Argentina, where taxes like INSS and IRPF must be deducted from salaries—an EOR handles this seamlessly.

HR and Benefits Administration

EORs manage employment contracts, health insurance, paid leave, and retirement plans. For instance, in Colombia, an EOR ensures employees receive mandatory health benefits and vacation allowances.

Risk Mitigation

By acting as the legal employer, the EOR shields your company from non-compliance risks, reducing exposure to fines and legal disputes.

Global Onboarding

EORs simplify the onboarding process for new hires by ensuring employment contracts comply with local standards. This allows employees to start work faster, especially in competitive markets.

Why Should Companies Use an Employer of Record?

An EOR can be a game-changer for businesses expanding globally. Here’s why:

Fast Market Entry

Setting up a legal entity can take months. An EOR allows you to hire employees within weeks, enabling quicker market access.

Cost Savings

Establishing a subsidiary in countries like Brazil or Argentina can cost thousands in legal and operational fees. With an EOR, you save on setup costs.

Flexibility

Test new markets or manage short-term projects without committing to a full-scale operation.

Focus on Growth

By outsourcing payroll, compliance, and HR tasks to an EOR, your team can concentrate on business development.

➡️ Learn more: Employer of Record vs. Entity Setup vs. Contractors.

Do Employees Work for You or the EOR?

Employees hired through an EOR technically work for the EOR, as it serves as the legal employer. However, they report directly to you and follow your business processes. For instance, a developer hired through an EOR in Chile will work on your projects but receive their salary and benefits from the EOR.

How Much Does an EOR Cost?

EOR costs vary depending on the country, the number of employees, and the required services. Common pricing models include:

A flat monthly fee per employee.
A percentage of the employee’s gross salary (e.g., 10-15%).

➡️ Learn more: How Much Does an EOR Cost?.

How to Get Started with an EOR

Here’s how to integrate an EOR into your hiring strategy:

Identify Your Needs:
Determine the country and roles you want to hire for. For example, if you’re expanding into Argentina, identify roles like software engineers or sales representatives.
Evaluate EOR Providers:
Choose an experienced provider with a strong presence in your target market.
➡️ Read: How to Choose an EOR.
Onboard Your Team:
Share job details and start dates with the EOR. They handle compliance and contracts.
Monitor Performance:
Maintain regular communication with your employees to ensure productivity and satisfaction.
➡️ Learn more: Employee Experience Using an EOR.

EOR vs. PEO: What’s the Difference?

While both EORs and Professional Employer Organizations (PEOs) provide HR and payroll services, their roles differ:

EOR: Acts as the legal employer, managing compliance and risk.
PEO: Acts as a co-employer but requires you to have a local entity.

For example, if you’re hiring in Peru without a local entity, an EOR is your best option.

Partner With Europortage for EOR Solutions

Europortage specializes in EOR services across Latin America and beyond. With direct entities in Brazil, Mexico, and France, and a vast partner network, we provide tailored solutions to help your business grow. From payroll to compliance, our team ensures your global expansion is smooth and compliant.

Let’s make your international hiring seamless—get in touch today.