Remote work is the new normal. In 2022, 16% of companies in the world are 100% remote which shows that remote work has grown and evolved. To follow that trend, businesses are embracing global mobility strategy and widen their talent pool by hiring international talents. However, setting up an entity in another country to hire your talent is often costly and time-consuming. Good news: an EOR partner can make processes easier and less costly. Let’s find out how to hire your first international talent with an EOR.
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What are your options when hiring abroad ?
hire a talent as a contractor
Basically, an independent contractor is an individual that may work for your business on a contract basis for a set number of hours, time frame or duration of a project. They can work independently for multiple businesses and may save you money.
They would be best for your business if you’re looking for :
- Someone to achieve a task that is not your core business
- Someone independent that does not need supervision
- Someone to handle a short-term project
- Someone who has a specialist expertise
Overall, hiring a contractor offers a flexible alternative compared to hiring an employee. It is less complex but requires a strong knowledge of the tax and employment laws in the country your business operates.
hire an employee with your local entity
Setting up a local entity is one solution to hire your talent as an employee. This solution is time consuming and costly but should be taken into account if you’re looking to develop your business in the country or if you’re looking to hire a big team. Here is some risks to assess before setting up your own legal entity:
- Cost: it can be really expensive to create and maintain a local business
- Time: Setting up your company is usually time consuming. Generally, the process takes months.
- Number of employees: Do you want to hire a large number of employees ? If no, then setting up a local entity may not be the best solution.
- Purpose: Are you looking to expand your business permanently in this country – eg sell to clients, work closely with suppliers… ? If yes, then creating a local entity might be right for your business.
Setting up an entity can be one solution to hire your employee in countries you do not cover yet. However, it does exist a simpler way to hire international talent compliantly without setting up your own foreign entity: use an Employer Of Record (EOR) service.
hire an employee with an Employer of record (EOR)
An Employer Of Record (EOR) partner is a third party companies that will hire your international talent on your behalf. They do so by taking on the responsability of employing the candidate in compliance with local employment laws and regulations. On paper, the Employer of record (EOR) is the employer of your international talent but you and your business maintain control over the day-to-day activities of your candidate.
This solution is less risky than setting up an entity and may be the solution for your business to hire your international talent. The main question then would be how to hire your first international talent with an EOR ?
When to use an EOR ?
There are several situation when it makes sense for your business to use an Employer of Record (EOR) service. It could be when :
- Your business is looking for a bridge solution to test a market before setting up a legal entity
- The management is looking to retain your talents by giving them the opportunity to relocate
- Legal and HR department have some concerns regarding misclassification
- Your business is looking to convert its contractors to employees.
- You would like to hire internationally without setting up an entity
- The company needs to protect its IP globally
The way it works
How does an eor work ?
The Employer of Record is legally responsible for your employees as they hired your talent through their own entity.
They ensure compliance and have a great expertise of the market they operate in. They ensure complianec while offering the following services:
- Onboarding
- Payroll
- Benefits
- Severance and termination
- Collective bargainning Agreement
- Local labor laws
Basically, the EOR is responsible for drafting and co-signing the employment agreement with your employee. The client will also sign a service agreement to make sure the employee is assigned to their company.
This process places the EOR as the legal employer of your talent while you’ll be in charge of his day-to-day activities.
The different types of contracts you'll see
When you’re working with an EOR, you’ll be signing and see different contracts which are the legal base to hire your employee and be able to manage him/her.
- Service agreement: This contract is signed by the Employer of record (EOR) partner and the final client (you). This contract outlines the relationship between your business and the EOR partner. It usually defines the scope of responsabilities regarding both parties. It should be written that the EOR is legally responsible of the employee and will comply with the local labor laws and legal responsabilities. Also, your role must be clarify and limitation of liabilities should be demonstrated.
- Employment contract: The EOR is responsible to draft a first draft of the ocntract agreement including local labor laws and mandatory benefits. There might be some room for flexibility even if the contract must comply with the minimum local requirements. For instance, you might be able to add supplementary benefits.
- Other contracts: Depending on your EOR partner, addendums could be added and could cover Intellectual protection clauses or non compete clauses for example.
How to choose your partner?
strong local expertise
Cross border employment can be tricky and time-consuming. It is pivotal to consider a valuable EOR partner which has a strong expertise of the applicable labor laws and regulations in the market you are looking to engage talents. On top of that, they should have an extensive experience of payroll and in-house HR. For instance, investigate if your EOR partner is able to explain what the statutory benefits in the given market are or what is included in the severance payments. This decision may save you non-compliance issues and fines. An experienced provider will know the ins and outs and help you stay compliant.
own local entity
Many EOR services around the world focus on one local jurisdiction or region. And there is a simply explanation for that : it is quite difficult to own a accounting company in every country.
Then, you need to understand your needs: Are you looking to hire in a specific region or do you want to recruit globally ?
While you’ll be looking for EOR partner in the first case, you may need to investigate PEO businesses if you are going to recruit globally.
Excellent employee experience
Most EOR businesses will promise transparency, expertise and responsiveness. Make sure your can trust them and look at the record of sucess and testimonials. To do so, rely on unbiased sites and ensure the actual customers are happy with the service provided.
Find more reason on how to choose the right EOR partner.
