Hiring international workers is a vital step for startups, as it facilitates a company’s entry into new markets and provides a more effective and efficient way to capitalize on growth opportunities.
A global workforce offers many advantages to organizations of all sizes. Some include access to a wider pool of skilled workers, new revenue sources, and increased diversity in the workforce.
Recruiting internationally offers employers significant benefits, but it also comes with risks and obligations. Each country has different employment laws and employer burden requirements such as minimum wage, mandatory benefits, termination procedures, and more.
However, companies can mitigate these risks in a few ways. One of the most popular and effective methods is partnering with an Employer of Record (EOR). A global EOR is an organization that becomes the legal employer of your international workforce, while your company remains responsible for managing everyday operations. The EOR handles employment-related tasks on the client’s behalf, allowing the company to streamline the international hiring process while mitigating legal and financial risks. A global Employer of Record offers expert-level guidance regarding complicated matters, including local labor law compliance, payroll regulations, taxation requirements, and more.
Organizations are increasingly leveraging these services to handle HR tasks and regulatory requirements for issues such as immigration and onboarding, alleviating the administrative burdens of growing internationally. The EOR market was valued at USD 1890.29 million in 2023, which is expected to nearly double by 2030.
What Does an Employer of Record Do?
Managing Employment Contracts
An Employer of Record helps companies draft and maintain locally compliant employment contracts or administer agreements with employees.
Onboarding
Your EOR partner handles new global employee onboarding, referring to the process of gathering required employee information necessary for legally compliant payroll.
Termination and Offboarding Support
An Employer of Record ensures companies successfully navigate termination procedures within the employee’s jurisdiction, such as notice period or severance pay requirements.
An EOR also handles offboarding, which is the formal separation between an employer and employee through resignation, termination, or retirement.
Payroll
An EOR acts as a global payroll provider, meaning the platform will pay employees in their local currency. Payroll refers to a business service that involves providing payments and other benefits to a company’s workers, and these processes include calculating wages, distributing pay slips, and employer contributions.
Tax Support
An Employer of Record enables companies to efficiently navigate tax regulations in each jurisdiction. Your EOR withholds the necessary tax amounts from each paycheck, maintains accurate employee data or tax records, and reports all relevant information.
Localized Benefits Administration
A global EOR also enables companies to access international benefits packages including local and customized plans.
Why Partner with a Global Employer of Record?
Speed to Market
Partnering with an EOR allows companies to access new markets quickly. Instead of waiting for entity registration documentation and other administrative requirements to be processed by the local authorities, which can take several months depending on the country, companies working with an EOR enter new markets almost immediately.
This means companies can swiftly begin hiring the right employees for each position and expanding operations across borders. Speed to market is important because it allows companies to reach potential consumers faster than their competitors, foster revenue growth, and build brand recognition as a leader in the market.
Compliance with Local Employment Laws
Partnering with a global EOR enables companies to remain compliant with all local labor laws and regulations. This is particularly significant because organizations that don’t follow all relevant employment laws experience significant punishments for non-compliance, including financial penalties, reputational damage, back pay with interest, and more. Non-compliance even results in business disruption and productivity losses, and a single non-compliance event can cost companies millions of dollars.
An Employer of Record offers in-depth expertise regarding local laws and helps companies abide by complicated employment practices, ensuring compliance at all stages to mitigate legal and financial risks. This includes providing employees with the country’s mandated minimum wage, following all overtime laws, and accurately processing payroll. EOR solutions also stay current with changing employment laws to provide effective guidance on any updates.
Misclassification According to Local Labor Laws
By partnering with an EOR, companies avoid other employer-related risks, such as misclassification. Misclassification occurs when an employer fails to properly classify the employment status of a worker. Companies are liable for punishment whether misclassification is done intentionally or not. This is significant because contractors and employees have different employment rights and tax obligations.
Cost Efficiency
Leveraging Employer of Record solutions allows companies to experience significant cost savings throughout the hiring process. Setting up a local entity abroad costs companies an average of $15,000 to $20,000, apart from the associated ongoing administrative costs of office rentals and other such factors. By hiring through an EOR, international organizations avoid the long-lasting financial obligations of a local entity and can explore new markets with greater flexibility.
The average cost for companies with a legal entity to hire an employee is roughly $4,700, according to the Society for Human Resource Management, though it can be as high as 1.2 to 1.4 times the employee’s salary. An EOR provides companies with a more cost-effective way to build a workforce of talented individuals, allowing companies to efficiently manage spending and allocate resources towards core competencies.
Top Five Countries for Seamless Hiring with a Global Employer of Record
Partnering with an EOR simplifies hiring in various international jurisdictions. However, certain countries are known to have more favorable employment regulations than others. These flexible and favorable employment policies make some an ideal destination for employers to hire talent.
1: United States
The US is an ideal option for growing companies to scale operations, as it currently boasts the world’s largest economy in terms of GDP.
US labor law also allows for at-will termination and various types of employment relationships, providing companies greater flexibility when addressing staffing needs. Additionally, the United States’ labor force is projected to reach 163.8 million people in 2024, with consistent annual growth. This gives companies hiring in the US a large pool of workers with specialized knowledge to choose from.
2: United Kingdom
The United Kingdom is another country that enables an EOR to streamline operations. Factors that make it friendly towards an Employer of Record include its stable and predictable regulatory environment, meaning companies can kick off the hiring process with minimal risk by following clear guidelines regarding employer obligations. This ultimately supports your global Employer of Record by streamlining administrative requirements and simplifying compliance efforts, as having well-defined rules and regulations makes it easier for an EOR to address employment-related issues and provide all necessary statutory benefits to employees.
The UK is also the 8th-easiest country to do business in, meaning an EOR faces minimal hurdles when setting up an entity or carrying out other business functions to support the client and legally engage employees.
3: Singapore
Singapore ranks as the second easiest country to do business in, providing a regulatory landscape that makes it easy for an EOR.
Singapore’s tax requirements are also favorable for businesses and easy to navigate. The Income Tax Act of Singapore is a single-tier tax system with a low corporate tax rate of 17%. Ultimately, Singapore’s growing and free economy is a landscape that supports businesses and its intuitive regulatory requirements make it one of the world’s most EOR-friendly countries.
4: Australia
Australia boasts relatively transparent regulatory requirements and legislation, meaning businesses benefit from operating in a secure and consistent legal landscape. Australia also excels in terms of economic strength and currently possesses the world’s 14th-largest economy.
The country has a highly skilled workforce, with its education system ranking 8th globally and a labor force of 14,232,300 people in several booming sectors. This means that international companies will be able to hire skilled workers with expertise in various industries by partnering with an Employer of Record.
5: Canada
Canada offers a favorable environment for an Employer of Record due to its clear labor law framework. For example, Canada has clear rules regarding terminations, providing businesses with a defined procedure to follow. Employment legislation in Canada is also stable. This means your Employer of Record won’t have to navigate changing employment-related policies often.
Borderless AI - Redefine Your HR Stack
Borderless AI enables businesses to compliantly hire, manage, and pay talent worldwide without establishing a foreign entity. We alleviate the complexities and risks associated with hiring global employees with zero deposits, dedicated in-house support, and AI-powered global employment law resources.
Alberni - Your HR Agent: Ask. Create. Analyze
Alberni is the first-ever AI agent for global HR and legal compliance. In seconds, Alberni can answer global employment questions about labor laws, generate employment contracts, and provide insights regarding the hiring costs for employees in over 170 countries.
Contact us today to learn how we enable companies to scale operations and seamlessly hire top talent in over 170 countries worldwide.
Disclaimer
Borderless does not provide legal services or legal advice to customers, contractors, employees, partners, or the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
