What is an Employer of Record? A Complete Guide

Looking to expand your business and reach new markets in other countries and regions? This is an important growth strategy, but how do you find the local talent to support expanding operations? When faced with local employment laws, language barriers, and compliance and regulatory considerations, international growth can seem like a time and resource-heavy challenge. One popular solution to this problem I’m seeing a lot more is the use of an Employer of Record (EOR).

Rather than establish a legal entity in a country before you have operations up and running, an Employer of Record acts as a third-party that takes on the legal responsibilities of employing staff on your behalf there. The EOR will manage the different employment-related tasks for you. Including ensuring compliance with local labor laws and regulations. They will represent your company, your culture, values and mission to find the right talent as if it were your own Human Resources and talent team.

I’ve seen a rise in the popularity of EOR services from growing organizations over recent years. It’s a great way to quickly access new markets and local talent pools without making significant infrastructure and operational investments upfront. This is backed by the current data as according to the World Economic Forum, the employer of record market is projected to reach $6,795 billion by 2028 at a compound annual growth rate (CAGR) of 6.8%.

Unsurprisingly, in the world of people management and talent acquisition, there is often confusion about how EORs work and how they differ from other services. One service it is often confused with is the Professional Employer Organization (PEO). While both provide HR services, they are very different.

A PEO enters into a co-employment arrangement with your business. That means they share employer responsibilities with your company for your workforce. In contrast, an EOR would be the sole legal employer of your workforce, handling all employment liabilities. It’s important to understand the difference as EORs can navigate international legal landscapes more effectively.

For instance, in the United States, PEOs often work within domestic boundaries, helping businesses manage HR functions like payroll and benefits. However, an EOR is particularly beneficial for global operations because it eliminates the need for the client company to set up a legal entity in each country where they hire employees.

In short, an EOR allows you to focus on your core business functions without redirecting a lot of time and effort towards international hiring. Your Human Resources, legal, and leadership team can continue to focus on company culture and strategic business goals.

Employer of record services include:

It’s a comprehensive list of services! Employers of Record really do take on all of the duties of an employer on your behalf. Allowing you to benefit from streamlined expansion, faster timeframes, and fewer risks.

If you’re looking to scale up global operations and expand into new regions and countries, you have a lot of options to source talent. But choosing to use an Employer of Record offers several advantages:

Demand for EOR services is on the rise. Especially with the growing need for entities to tap into international talent pools and the increasing regulatory complexities. In my experience, they allow organizations to remain agile and compliant while hitting the ground running in new regions and countries. And in this day and age where time is money, businesses can’t afford any roadblocks to expansion.

Learn more about Pierpoint’s tailored talent solutions or book a call today to discuss your needs.