How To Choose The Right Employer Of Record

Employer Of Record
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Introduction

The pandemic has brought dramatic changes in the work structure and has forced companies to adapt to different operation strategies. While hiring and managing globally distributed teams have always been difficult for multinational organizations, it will become a bigger challenge in the post COVID world.

Cross-functional, diverse, and globally distributed teams will be the new normal. It will become a resource-intensive task for human resource departments to conduct international and national hiring and manage employees from diverse geographical backgrounds and work remotely. Companies need to strategically align with partners who can help them achieve the same without too much resource investment. An EOR or an Employer of Record comes to the rescue here. An EOR can strategically boost a company in attaining efficiency and effectiveness in global employee management.

What Is An Employer Of Record (EOR)?

An EOR or Employer of Record operates as a third-party company that has been given the contract for employee management, which includes administrative operations, payroll management, taxes, insurance and benefits, visa applications, and others.

The EOR is preferred by companies today, as they directly help the latter in cost and time savings, increase the effectiveness of regulatory compliances for international and national scenarios, and reduce risks. The EOR is responsible for the regulatory and legal requirements associated with employment, immigration, payroll but does not have any management role in respect to the employee’s position. Therefore for a business, hiring an EOR is strategically, financially, and operationally profitable.

Starting The Process Of EOR Selection

International expansion and operation are the prime challenges for most companies, and therefore, choosing the suitable strategic alternative becomes a make or break game for an organization. Opting for an EOR has proved to be effective in managing international hiring and globally distributed teams. But the process of choosing the right EOR partner is critical and should be relevant to one’s organization. Researching about the choices available on specific criteria will help one streamline the relevant EORs for one’s needs.

  1. The infrastructure of the EOR in providing prompt and accurate support.
  2. Degree of customization and experience offered by the EOR in your industry.
  3. Ease of payment and the pricing model followed by the EOR.
  4. The experience level of the EOR in the target country and host country.

Choosing The Perfect Fit – The Process

In management literature, achieving the perfect fit between a need and its solution is touted as the strategy for success. Therefore, it is critical to identify and choose the EOR that will perfectly fit its needs and strategic vision. Once the company has streamlined several EORs based on the criterion mentioned previously, it is then needed to answer specific questions.

1. The local presence of the Employer of Record

As the regulatory framework for every country differs, it is critical that the chosen EOR needs to have a local presence in the country where the company intends to set up its international operations and does the hiring, or at least needs to have a strategic partner in that nation to handle all the compliances of employee management.

2. The limit that the target country allows EORs to operate

There are nations such as Germany that allow organizations to work through EORs for 18 months. Global EORs all operate on different time frames, and companies should utilize this time to set up their future strategies. While hiring the right EOR, the company should have complete knowledge of legal limits and its future game plan.

3. The security and data privacy offered by the EOR

Security and privacy are the two aspects that cannot be stressed enough in today’s business. Even before the regulations of GDPR, these have served as critical strategic aspects for the company. The task of an EOR is dealing with sensitive employee information. If the former cannot ensure complete privacy and security of the information, it can prove detrimental for the company. Therefore, it is of phenomenal importance to choose an EOR partner that has sufficient infrastructure.

4. The model of pricing used by the EOR

The company must determine the profitable pricing model that they want to engage in. Global EORs opt for either a fixed price per employee or charge a proportion of the employee’s earnings. It depends, therefore, on the country, employment rules, basic salaries of the employees to finally arrive at the suitable pricing model beneficial for the company. Therefore, before engaging with any EOR, it is pertinent to know about the model of pricing followed by them.

5. The flexibility shown in contracts of employment

Between the company and its EOR, it is required that their policies be aligned together. Situations may become complex if the two sets of guidelines are directed differently. It is necessary that before choosing, the company needs to strategize with the EOR into creating a host of standard policies that would work best rather than accepting what the EOR has to offer without flexibility.

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