Employer of Record (EOR) is the registered employer of your employees on paper, they are only for record. They make remote work easier for your company. Employer of Record helps small to enterprise-sized companies build their remote team. From screening to onboarding, EOR reduces the friction in hiring, paying, and managing remote employees without a local legal entity.

What is an Employer of Record (EOR)?

Employers of Record or EOR are third-party providers who are responsible for all employment and administrative tasks on behalf of another company. Hiring an EOR gives small to large enterprises the opportunity to legally and efficiently engage with overseas staff from another country or state. All this while minimizing the risk of non-compliance with local employment laws.

When you Hire someone, your usual step is to complete the necessary employment paperwork and processes: how your employee will be paid, deduct the applicable taxes, apply for employee benefits, and process, verify, and record work permits.

It’s the same when you hire offshore, but you’ll also have to study your international legalities. This is where EOR comes in, studying these laws and regulations so you don’t have to.

To make their complex work simple, here’s an example:

A US-based company is planning to hire eCommerce customer support staff from the Philippines, but they don’t have an existing footprint. So instead of hiring by themselves, they hired an EOR.

The EOR is the ‘go-between’ between the US-based company and its Filipino employees. The EOR screens and hires the best applicants. They are responsible for every employee-related task, entirely covering areas of risk.

They can either build a local legal identity or share risks with other outsourcing companies.

Is EOR the same as other staffing agencies?

The term EOR is used interchangeably with outsourcing and staffing agencies. It can be quite confusing for clients new to outsourcing but once you get to know what these are, it’ll be easy to distinguish.

Staffing agencies are contact search companies. They are professional recruiters specialized in specific fields like healthcare, education, engineering, or IT. Clients pay fees for a staffing agency for everything employment-related. They find, vet, and bring in new hires.

PEO (Professional Employer Organization) shares and manages employee-related responsibilities and liabilities with a company that already owns local and legal identity. They act as the worker’s co-employer. They apply to businesses with multiple employees in a single host country.

EOR (Employer Of Record) providers manage employee-related responsibilities and liabilities on behalf of a company that doesn’t have an existing local and legal identity. They are the legal substitute where they are fully responsible and liable to the employees. They apply to businesses that want to hire temporary employees and independent contractors.

Functions and Responsibilities of an EOR

EOR commonly handles human resources, tax and legal matters, compliance, and employee benefits based on where the international employee is from. The most common functions and responsibilities of an Employer of Record include:

Human resources:

• Hire and terminate employees on the client’s behalf of the employees
• Manage employee contracts and onboarding processes
• Maintain compliance with the host country regarding employee protection, insurance, local contracts, and local labor laws
• Act as an intermediary between clients, employees, and government programs (health insurance, social security, or additional government programs)
• Arrange client’s work permits and visas
• Screening employees

Payroll services:

• Process collected timesheets
• Employee time record and attendance monitoring
• Process employee payrolls and incentive schemes in local currencies
• Depositing and filing tax forms and fixing issues in employee labor management

Cost-structure of EOR

EOR has two pricing models: the flat fee structures and the percentage structures.

Percentage structures used to be an industry standard. But the dynamic began to change when businesses noticed how they needed to fork more money to a third party for employee promotion or bonuses. This discourages clients from increasing compensation to employees.

Flat fee structures are honest pricing where companies pay EORs one low flat rate without hidden fees. It doesn’t have transaction fees or percentages tied to salaries which are usually deducted from the percentage structures pricing model.

When is the best time to hire an EOR?

Hire an EOR when you want to save time accessing international markets. HR services are both time-consuming and can waste a lot of your resources. EOR can centralize your management of international hires and avoid bumps during business expansion with their understanding of local labor laws.

Hire an EOR when your talent pool is dispersed around the world. You can have employees from Japan, Vietnam, and the Philippines all at the same time. EORs are flexible in different clients from more than one hundred countries.

Hire an EOR when you want to prevent incurring penalties due to non-compliance. When you have yet to fully grasp the laws and regulations of new markets, you are susceptible to non-compliance risks. Employee misclassification and mistakes in local employment laws can penalize your business. EOR covers all risks by being the legal employer on record.

Hire an EOR when you want to protect your IP. Intellectual property laws and invention rights complications vary by country and businesses should be extra vigilant in protecting their IP. EOR works with local legal experts and IP transfers to guarantee IP protection and retention of invention rights while still hiring international talents.

USource as an Employer of Record (Philippines)

USource Global Services, Inc is a Philippines-incorporated company. We serve international businesses as your human resources, compliance, and administrative team when hiring offshore Philippines-based staff.

We can assist with:

• Hiring staff from a skilled talent pool of existing staff – up and running in 24 hours
• Hiring and onboarding new staff members
• Arranging fortnightly payroll and tax obligations
• Setting up and managing Government contributions (SSS, PhilHealth, Pag-Ibig)
• Paying 13th Month and bonuses
• Managing annual and sick leave entitlements
• Providing ongoing human resources support
• Establishing procedures for staffing arrangements

Unlike many outsourcing companies that use EORs, we have skin in the game. The team members you hire are full-time employees of USource Global Services, not contractors. To deliver specialist digital services we believe in hiring, training, and building the skills of each of our employees. Through our month-to-month agreements, we make our employees available to our clients for their digital projects.

We have listed EOR providers below. Before using these services it’s important to understand:

• Is their position permanent? At USource it is. If a client stops working with a team member they don’t lose their position as they’re our employees. Ask the question and find out – what happens to your worker if their contract finishes. Do they lose their work?
• How does the EOR find your worker? Do they publish job ads, and shortlist unknown candidates? This comes with a lot of risks. The workers are unknown, with no track record. At USource we have already hired the digital staff. They have specific digital skills. We know their history, experience, and attitude towards work – we then make them available to you.

Global Employer of Record Providers

Deel: Serves over 11,000 customers from more than 150 countries. They cater from SMEs to large corporations like Shopify, DropBox, LG, and Cloudflare. Their goal is to help business owners adopt their global team easily.

Globalization Partners: Bringing clients the best diverse talent from over 180 countries, with end-to-end solutions. Multibillion-dollar companies like Netflix, Zoom, and Papa John’s collaborated with G-P for diverse talents and global expansion.

FoxHire: Expansion can drain a client’s resources and FoxHire makes it easier. From payroll to compliance, FH serves industries like healthcare, office, engineering, and education. Their recent success story is from a large Texas-based university that hired them for their software and retention of top employees.

Horizons: Global EOR that allows you to hire talented contractors in more than 150 countries. They take pride in their experts who give ongoing support with navigating in-country legislation and employment compliance. Their partners include multimillion-dollar companies like Huawei, Devialet, and CPA Global.

Velocity Global: Offers easier international employment with simpler remote management. Their services are well received by their partners including Prezi, Shopify, Databricks, and Concensys.

EOR companies located in the Philippines

Sky Executive: Allows you to hire anyone in Asia freely. Their goal is to develop extensive procurement capabilities, enhance their performance measurement, improve their strategic sourcing, and increase their collaboration across international departments. They offer consultations trusted by companies like Hyatt, AYA, Yvon Mau, and more.

East Vantage: They promise to take the ‘challenge’ off your business. They serve over 60 countries collaborating with businesses from various industries including healthcare, recruitment, database management, electronics, eCommerce, consumer goods and services, education, and more.

Atlas: With a presence in more than 160 countries, simplifying global expansion. They also have local experts to assure that your business is complying with all the local rules and requirements.

Risks of using an Employer of Record

EOR takes away the need for immediately establishing a branch or subsidiary in your employee’s host country. This makes global expansion easier. But there are risks in using EOR.

You do not own the working relationship. Even if it is your worker, EOR is their direct and legal employer. They have separate contracts and agreements which may lessen influence over your workers.

You are susceptible to permanent establishment risks. A company can be accidentally considered a permanent identity in a foreign country. Structure your EOR so you do not have to be liable for any penalties, income taxes, and interest charges.

Unforeseen hidden costs with subpar employees. Many outsourcing agencies are using EOR. They have no skin in the game of skills. And when you unluckily choose the wrong firm, you can be charged with hidden fees affecting your employee’s salary affecting their productivity. Always look for reputable EORs with flat fees. Always ask for transparency.

See if your competitors from the same industry hire EORs. If they hire, do they succeed? Look for reviews or ask for references. What you’re staking is your business growth so make sure you keep everything in check, from their functions, rates, and the risks you’re walking into.

If your company is looking for an Employer of Record (EOR) to fill a variety of positions for digital services, speak to us.