Best Employer of Record (EOR) Services - 2023

There are many benefits to partnering with an employer of record in order to fully hire an employee overseas. The main one is that you save a lot of time and money, since you won’t have to set up a legal entity in each country that you hire someone. Aside from the fact that the services firm will be doing the heavy lifting of hiring, compensating, and managing taxes for each worker, you can use the same EOR services firm for a wide variety of countries.

If let’s say, further down the line you decide that you’d like to hire a new salesperson in Southeast Asia, the EOR services firm is likely to already have an operation there and guide you through each step of the process. You can then focus on finding the right talent, knowing that you’re able to offer at least as many benefits and security to them as a local company would.  

Also, while an EOR services company is not a staffing agency, some of them can indeed help with recruitment. Some of these companies will have staffing purposes done in-house, while others partner with staffing agencies in each territory so they can add that to their offering. 

Other Employer of Record Use Cases 

There are many reasons why an organization would prefer the speed and local expertise of an employer of record as opposed to setting up a legal entity of their own. Here are some of the main ones: 

• For remote-first teams: For businesses that have been remote since their inception and intend to stay that way, EOR services are a great option. It doesn’t make sense to set up a full operation within a country if you’ll only have 1-3 employees there. 
• Explore a new market: For other types of businesses wanting to develop a stronger foothold in a foreign country, EOR is a great place to start and get a feel for what it’s like to operate there. 
• To get started faster: Additionally, even companies that are sure of wanting to set up a new entity in order to expand could benefit from an EOR services firm. If there’s a strong need to begin operations quickly, for example, if they have already found a few workers there, an EOR can help with getting started while the process of setting up an entity is done simultaneously. 
• As part of an acquisition: EOR services can also be used as a part of an acquisition process. If the deal didn’t include a new legal entity in a target country but did include a local workforce, an EOR provider can ensure the employment relationship continues with complete peace of mind. 
• Stay compliant: There is also the case where a company will have many independent contractors overseas but no intention of making them full-time employees. This is common with remote startups, for instance. In this scenario, an EOR firm can help with mitigating any non-compliance risks that could derive from each local regulation.

Another benefit of using an EOR service provider is that the risk of being an employer falls almost entirely on the employer of record, reducing your liability. In other words, the employer of record bears the burden of all responsibilities and liabilities regarding the employer-employee relationship.

That being said, hiring people overseas through an EOR is no picnic. Here are some of the main considerations you should still bear in mind in order to stay on the safe side.   

• Knowing local laws: Just because a software company/services provider will be doing the work for you, doesn’t mean you shouldn’t be aware of what that work is. Like with any good manager, delegating doesn’t mean ignoring. As an employer or HR professional, you should know what laws and regulations you need to adhere to in each country where you’ll be paying someone. This not only helps with making sure that you’re staying compliant through the tool. It also aids when creating a budget, deciding whether to hire someone or not, shifting from contractor status to full-time, etc.
  
  Note: Luckily here, most of the top vendors put together resources to educate their user base on this. We mentioned Globalization Partners’ Globalpedia above, but there’s also Papaya Global’s super-detailed CountryPedia, Remote’s Country Explorer, and Deel’s Global Hiring Guide, to name a few.
  
  
• Know your costs: While fees for some of these international payroll companies may seem high, it helps to try and calculate how much you’d spend if you choose to go with individual providers in each country, or even set up an operation there and handle it in-house. That should help determine how much is reasonable to spend on the project, instead of trying to find the lowest-cost provider. Among these costs, you should also consider the fines that you would incur if you stay non-compliant, or even the potential cost of churn if your employees and/or contractors leave you for not providing the full range of benefits. ‍
• Be mindful of data protection: Data protection laws, especially GDPR, should be one of your concerns if you’re planning on hiring people in new markets. If you’re trusting a software company with your employees’ personal data, you should know which laws are being obeyed when it comes to said data’s safe-keeping. You should also know what kind of practices are put into keeping it safe, beyond the legal requirements.

This article should let you choose 2-3 vendors that start to feel like they would align well with your international expansion strategy. Once you get in touch with them, here are some of the questions you should be asking in order to ensure a smooth co-employment relationship: 

• How much do they know about the country (or countries) you’re expanding in? You can also check if they have published anything that demonstrates thought leadership about hiring and employment laws in that place. Ideally, they should be true experts in tax laws, work permits, payroll processing, health insurance, background checks, employee onboarding, and everything about the employment relationship within the foreign country. 
• Do they have a permanent local entity in the country you’re looking into? Some companies rely on local partnerships instead of having an entity of their own. This is common if they are barely starting to operate there, or haven’t seen much interest in that geography from their current clients. To make sure of this, you can ask if they have an LLC or some type of legally-incorporated entity within the country. This tells you how much of a priority your target country is for them.

One other thing you need to know about Employer of Record companies is that they are not the same thing as a Professional Employer Organization (PEO). The distinctions between one and the other are subtle, but very important, as we’ll see: 

• Liability: As mentioned before, an EOR takes the better part of the liability of hiring somebody. Through working with a PEO, the client company is much more liable, as they will be the ones that hold and sign the employment contracts, assuming all liabilities and responsibilities.
• Geography: Naturally, since a PEO is typically a co-employer, hiring someone overseas through a PEO would entail having to set up a legal entity within that country. This also means that a PEO wouldn’t be completely in charge of ensuring compliance with local labor laws, as is the case with an EOR.  
• Insurance and other Benefits: With a PEO co-employment situation, the client usually has to pay for an insurance policy provided by the PEO, but as the actual employers, they need to provide the workers with insurance of their own. The same goes for other benefits such as a retirement fund or expenses. When working with an Employer of Record, on the other hand, the client’s employees are fully covered under what the EOR provides, which will be tailored to the local laws and regulations, or what local companies are able to offer top talent.
  

The reason why PEOs are sometimes confused with EORs is that they are not required to be the employer of record in order to take care of a good portion of your HR processes. However, some PEOs do become employers of record, but not all of them offer that option. Also, they typically don’t operate in many countries. A PEO will typically focus on a certain market, which is why some EORs will partner with them to further their scope of operations within a new country.

• Papaya Global: Hire and pay all employee types in 140+ countries.
• Deel: Payroll and savvy local expertise for remote international employees.
• Remote: HR services & payroll platform for remote teams. 
• Globalization Partners: Global Employer of Record platform. 
• GoGlobal: Fastest-growing independent EOR firm

What is an ERO? 

ERO stands for ‘Employer of Record’. It is an essential component of an internationally-compliant payroll, since it’s what most providers use in order to be the legal employer of a worker in their country. Through this practice, a company doesn’t need to set up a legal entity in that country in order to stay compliant with the local labor laws. 

What is global payroll?

The term “global payroll” refers to the compensation that a company needs to make to its foreign employees, independent contractors, and freelancers. Typically handled by the HR or finance departments, it includes salaries, tax withholdings, invoicing, benefits, bonuses, PTO, overtime, commissions, and of course, international bank transfers.