What is an Employer of Record?

When hiring an employee, a business normally assumes all the responsibilities, such as costs and liabilities, associated with having additional staff. However, not all organizations are ready to deal with all the duties involved – there’s a ‘smarter’ way of hiring: using Employer of Record services (EOR).

What is an employer of record?

In simple terms, an employer of record is a third party organization that assumes all the responsibilities associated with the formal employment of staff. The employer of record is the officially registered employer for the worker, but the original company still manages the work and time of the recruit(s). The original employer takes all decisions about the worker, such as compensation, duties, and termination.

When should you use Employer of Record services?

This service is especially useful when hiring overseas. Below are a few scenarios where using an EOR can be very helpful to your business:

  1. You are testing a foreign market and do not want to commit yet by opening a branch office.
  2. It would help if you had a way to run in-country (local) payroll for employees that you have hired remotely.
  3. Your organization is not familiar with the different laws and regulations of the foreign country.
  4. Part of your expansion strategy is to outsource employment and administrative tasks to gain a competitive edge.

Whichever scenario you fit in, choosing the right Employer of record provider is essential to run your business efficiently.

General services provided by EORs

  • Provides you with a complaint and registered entity to hire employees and handle payroll legally
  • Visa and work permit arrangements for the employee, which very often helps in avoiding delays or even refusals
  • Advises on the host country labor laws to legally onboard your workers
  • Provides advice of required termination regulations, notice periods and severance pay

Different service providers may have various additional perks. Listed below are the most common functions handled by an EOR:

  • Employee onboarding
  • Creating and maintaining employment contracts
  • Doing background checks and drug screenings if required
  • Complying with E-Verify
  • Collecting and processing the worker’s time sheets
  • Processing in-country payroll
  • Handling workers’ compensation
  • Keeping their certificate of insurance up to date
  • Tax filing
  • Issuing Forms W-2
  • Completing and storing Forms I-9
  • Handling employee termination
  • Providing and administering employee benefits

The benefits of using an employer of record service

One key advantage of using an employer of record is not having to incorporate locally. This allows you to get past all the hurdles of registering a new entity and dealing with all the legal constraints attached. Usually, this allows your organization to penetrate the new market in less time.

Another benefit incurred by any organization using EOR services is the massive gain in time. Dealing with payroll and HR functions can drain resources. When an employer of record handles all these, the organization generally has more time to focus on other aspects of the business.

Thirdly, a proper employer of record guarantees compliance for your business. This is especially useful when dealing with foreign markets, with complex regulations. Again, this saves your resources and provides peace of mind – you do not have to continually stay up to date with changing legislation and laws.

Moreover, if you are dealing with multiple countries, an EOR provides you with peace of mind. You will never have to use your time or resources to stay up to date with ever-changing labor laws or corporate regulations. Most of the time, you will be informed of any upcoming changes, with the advice on how to tackle them compliantly.

How to choose the right employer of record

We compiled a quick checklist to make it easy for you to choose the right service provider.

1.Does the EOR cover your country of assignment?
Consider only the services of an employer of record that already operates in your market region.

2. How long have they been in operation?
It is essential to verify their years of experience, simply because older companies providing this service have more exposure to deal with the in-country laws and regulations.

3. Does their proposed contract protect your commercial interests?
Before signing anything, you must ensure that the agreement accommodates the protection of your intellectual properties. It is also worth asking if NDAs can be signed so protect yourself for competitors.

4. Are your information stored securely?
Another critical point is data security. Ensure the employer of record has adequate security infrastructures in place as they will be handling sensitive information about your company and your employees.

5. Is support included?
Support should be readily available. You never know when a hurdle comes up, and you should make sure the EOR is responsive to your requests and queries.

6. Are the fees presented clearly?
Every single employer of record charges a service fee. This can be variable (e.g., a percentage) or a fixed rate. Ensure all your costs can be calculated upfront and that the rate offered is a competitive one.

Follow this checklist, and you will be on your way to choose the right employer of record for your requirements.

Do you need employer of record services in Africa?

Africa HR Solutions provides employer of record services across the African continent. With our years of experience, we can handle projects of all sizes.

We also offer an array of outsourcing solutions in over 48 countries in Africa and guarantee 100% compliance for your project. Focus on your core business while we handle the complexities of doing business in Africa.

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