What is an EOR and Why Use One?

Posted on 8 July 2024 by IRIS FMP

Expanding to a new international market can feel overwhelming. For many countries, to do business and hire employees in a new market, you have to go through the bureaucracy and paperwork of establishing a legal entity. The process can be drawn out and complex, and that’s just to get your company started. Once you are able to hire employees, you become responsible for the local tax, labor, and compliance laws, which becomes even more complex.

When growing your business, you can try to shoulder the responsibility of your global expansion or use an Employer of Record (EOR). Find out what an EOR is and how to use IRIS’s EOR services to simplify your global expansion.

What Is an EOR (Employer of Record)?

In global expansion, an Employer of Record (EOR) is a solution that allows you to have employees in a new market without establishing a legal entity. The EOR serves as the legal employer of those individuals in the market while meeting your needs in the new market. This means that the EOR is responsible for all aspects of employment, including hiring, payroll, taxes, benefits, human resources, and compliance, and assumes all responsibility for local labor and employment laws.

For example, what if you wanted to hire a remote worker for your company, but they lived in Thailand? Without an EOR, you are required to establish a legal entity in Thailand, which is a notoriously complex and bureaucratic process. However, partnering with an EOR in Thailand helps you better navigate those requirements. Rather than trying to establish your own legal entity, you are working with an existing entity within the system that takes complete responsibility for payroll, tax, HR and compliance matters without requiring any additional work from your company.

Why should I use an EOR?

An EOR streamlines your global expansion. Here are five of the biggest benefits of utilizing an EOR.

  1. Tap into a Global Talent Market
    You deserve to have the right talent working for you. You need to have the right people filling crucial roles to make your company succeed. You could settle for those who are in the same city or even state as you and hope that you find the right talent, or you could open your search to a global market, finding the perfect talent match for your needs.
  2. Make Payroll Easy
    With the US workforce switching to remote work, many companies are starting to experience how complex payroll can be in different states but imagine how complex payroll can become when you’re dealing with different languages, different currencies, and drastically different tax and labor laws. When you work with an EOR, you are no longer responsible for understanding or managing the complexities involved with global payroll, giving you time back to focus on your company.
  3. Automatic Contract Generation
    Employment contracts are mandatory, and in many countries (like France), the contracts can become lengthy and complex. A trusted EOR partner will automatically generate and manage all employment contracts ensuring they are tailored to each employee.
  4. Assure Tax Compliance
    Tax withholdings and deductions are mandatory for your company’s success. Avoiding, manipulating, or incorrectly filing taxes will lead to fines and potential legal action. An EOR handles all tax complexities and ensures you are compliant. This includes making the appropriate tax deductions and filing as well as any deductions for social security, unemployment, or income taxes.
  5. Provide Benefits for Your Team
    EORs handle benefits administration. This includes contributions to government programs like social security and workers’ compensation, but it also covers contributions to private health insurance. EORs can provide competitive benefit packages that meet local labor laws and expectations.
    Make Globalization Easy with IRIS EOR Services

Partnering with the right EOR can serve as a valuable foothold in the global market, allowing you to get access to the talent you need without forcing you to manage piles of paperwork and bureaucracy. Find out how IRIS’s EOR Services (powered by Globalization Partners) can help you streamline your global expansion strategy.