Planning your business expansion in Africa is a challenging task, to say the least. From setting up your own entity to hiring qualified professionals, managing payroll and ensuring compliance: the tasks and processes you need to complete and manage are as crucial as they are time-consuming. So you may wish to turn to an Employer of Records (EOR) instead. But there is so much contradictory information about them that it is hard to separate facts from myths regarding EOR services.
Do EOR service providers really take over control of your employees? Are there hidden costs? Read on to find out the truth behind common myths and misconceptions about EOR services.
False. An Employer of Record (EOR) and a Professional Employer Organisation (PEO) are two different organizations that, at their core, offer similar services, namely HR management and compliance. But there are key differences as well between the two. For instance, you must possess an in-country entity in order to partner up with a PEO. Provided you do own a local entity, your partnership with a PEO is characterized as one of co-employment.
In contrast, Employer of Record companies are well-known for their capacity to allow businesses to legally operate in an African country without a local entity. The EOR then becomes a legal entity responsible for payroll, tax, and statutory compliance of your employees.
While EOR companies and PEO companies offer similar services, they operate differently.
It is easy to understand how such an assumption came to be. After all, legally speaking, an Employer of Record is recognized as the employer to your employees and the EOR is legally liable and responsible for any actions taken in the name of your company. So does that recognition ultimately strip you of control over your employees and operations? No, that is not the case at all.
The contract made between your company and the EOR partner guards against any such abuses, giving you ultimate free reign over your employees and the way operations are carried out.
For some, the line between outsourcing services and using EOR services is quite thin – understandably so. After all, both options involve delegating certain tasks to third parties. But outsourcing often means that the people who do the work are in the dark about whom they are working for, whereas this information is made clear to those employed via an EOR partner. Besides, if your company outsources a task, you must ensure that the task is completed up to standard. On the other hand, an Employer of Record is a worry-free solution that requires less input from you in order to operate.
Employer of Record companies cost significantly less than managing all HR services in-house. EOR service providers spare your company the high initial cost of setting up your entity in the African country of choice, buying specialized payroll software, and training your staff. Not to mention, they also spare you penalty fees for any failure to comply with local regulatory frameworks.
Typically, any EOR company of repute will clearly outline the cost of their services before the beginning of your partnership. Costs are usually broken down into: initial costs, which include software and management tools, setup, and a monthly service fee.
EOR companies are legally allowed to hire full-time, part-time, and even contract workers. They can also facilitate the entry of foreign workers in the African country you choose to expand into by processing visa applications.
There are no such hiring limits in Africa. An Employer of Record can hire people from any background, for any position, and with any desired skill level for your company.
While an Employer of Record’s range of activities is considerable, they cannot fully replace in-country entities. For instance, if your business grows past a certain point – the definition of which depends on the African country you are expanding in – you are obligated to set up your own local entity to continue operating. There are also some official procedures that your company can simply not carry out without a local entity.
Should your activities be found to be non-compliant with local law in any way – whether it be labour-related, tax-related, or other – who bears the penalties? Your company, or your EOR partner? Since the EOR is entirely liable in the eyes of the law, your company mitigates any legal or financial risks.
An EOR is a good solution for companies looking to test out new markets. They allow you to operate legally in the country of your choice without setting up a local entity, helping you to explore the possibilities for business without any of the cost and time setbacks.
With over a decade of experience working with companies seeking to expand in the African continent, Africa HR Solutions is uniquely qualified to facilitate your expansion. We walk you through the many complex processes and tasks that expansion entails, assisting you so that you can focus on your core business while we take care of internal operations including HR, payroll, and more.
Get in touch with us now to find out how we can work together for a smooth and hassle-free expansion of your business in Africa.