Expanding a team or operating a business abroad comes easy when you have a local partner in the target country. Employer of record (EOR) as a service provider primarily stands out when a company chooses a partner for team expansion in another country. The reason is simple. An EOR provides an all-in-one solution that enables a company to navigate the hurdles standing in the way of a successful team expansion.
One significant benefit of using EOR is that it enables a company to build a remote team in the target country without establishing a legal entity. Additionally, companies get the advantage of easy access to the global workforce and hiring the best talent at reduced costs.
It’s because your EOR partners have vast knowledge, experience, and expertise in the local markets and take full responsibility for handling all the necessary support services for your team. On your behalf, EORs handle various services ranging from talent acquisition to compliance risks. Simply put, you can easily build a remote team in a foreign jurisdiction with minimal risks and drive for successful team operations with EOR support.
In this blog, we’ve explained every major aspect and fundamental of employer of record (EOR) services. It consists of 13 key areas, covering the meaning, evolution, benefits, and challenges of EOR services. Moreover, you can learn the difference between an employer of record (EOR) and other competitive business models helping you build a successful remote team in a foreign country.
Also, the blog has a detailed approach and study to showcase how India is a major destination for team building and operation expansion. It explains why EOR is essential in Indian expansion, the cost of using EOR services in India, and how to select the best Indian EOR service providers. Last but not least, the blog explains why Remunance can be your EOR partner in your Indian team-building journey. Let’s begin exploring EOR services and key aspects of EOR services.
Employer of Record (EOR) Meaning
An employer of record (EOR) is an organization that provides legal support and compliance assistance when a foreign company wants to employ a group of remote professionals internationally. Entering a new market, a foreign company often faces challenges in navigating a complex set of employment regulations. EOR makes it easy for foreign businesses.
In addition to compliance support, an EOR takes full responsibility for managing administrative services such as payroll, taxes, and benefits for your international employees. It means an employer of record provides an all-in-one service package that helps you hire international employees compliantly and get your human resource (HR) services done on your behalf.
In short, an employer of record (EOR) is an organization that legally employs a team of local professionals on behalf of foreign businesses. Thus, EOR acts as the local guardian of employees who work for a foreign company. On the record, it’s an employer of the local employees and handles all legal and administrative responsibilities related to the employees. Simply put, with EOR support, a foreign business can easily hire a team of remote talent in another country and employ them successfully.
Evolution of Employer of Record (EOR) as a Business Model
Employer of record (EOR) emerged as one of the most refined business models in the evolution of employment arrangements. Till today, EOR is the most economical employment arrangement model that has transformed the ideas and practices of international recruitment. The birth of EOR as a business model resulted from the interconnected world, characterized by a globalized economy and technological advancement.
The rise of staffing services in the 1960s drastically changed the traditional employment processes and became popular in the West. Hiring third-party agencies specialized in recruitment was a profound transformation. Businesses learned they could save time and energy by relying on an expert service.
In the early 1970s, the world witnessed a rapid proliferation of third-party expert agencies. A professional employer organization (PEO) emerged as a new business model in the United States that provided expertise in HR services. With the advent of PEO services, many small companies could easily manage their employees’ administrative functions without keeping an in-house HR team. Partnering with PEO services proved more cost-effective than keeping an in-house HR team.
With the wide prevalence of a globalized economy in the 2000s, global companies started looking for various opportunities beyond their home countries. Initially, many skilled professionals were brought back to the West from different parts of the world and were employed onsite. However, one major challenge of the onsite model was that, in the long run, it wouldn’t be cost-sustainable for businesses employing international workers in their home countries.
In search of cost-effective alternatives, businesses in the West now wanted talent who could work from their own countries rather than bringing them to the West. The rising demand for offsite or offshore business engagements has laid the foundation for outsourcing as a business model. With the increasing popularity of remote work setups, businesses started hiring contractors abroad for short-term projects.
However, hiring outsourcing services and contractors was associated with challenges such as the lack of flexibility and issues with legal compliance. These problems demanded a solution, resulting in the rise of employer of record (EOR) as a robust business model.
Employer of Record (EOR) Evolution: A Case Study of India
India presents a good example of how the globalized economy and the interconnected world have transformed international employment, leading to the wide acceptance of Employer of Record (EOR) services. With the rising popularity of the offshore model, developing economies such as India and China became key destinations for a range of outsourcing and contracting services.
Global businesses started outsourcing HR services in India mainly due to the availability of skilled talents and cost-efficiency services compared to the West. Due to certain challenges associated with outsourcing, many companies prefer hiring Indian contractors. Although hiring contractors has certain advantages such as better control for businesses, easy to downsize or upsize workforce, and cost-saving; it has several shortcomings too.
employer of record (EOR) services emerged as a solution to various problems associated with outsourcing and contracting. With EOR service support, a foreign company can easily navigate the legal complexities when entering the Indian market and operate compliantly, with better control over employees and reduced costs.
Benefits of an Employer of Record (EOR)
Employer of Record (EOR) services offer several benefits, including compliance support, risk mitigation, access to global talent, operational efficiency, and cost savings. As global businesses increasingly compete to tap skillful resources internationally, an EOR provides diverse benefits for small and large companies. Let’s explore the major benefits of using EOR services for businesses.
