Employer of Record is a valuable service that can benefit companies seeking to hire overseas employees or avoid the complications of complex international employment. The myths associated with EOR can cause businesses to avoid engaging in an EOR when, in fact, it could be helpful to their business and help them with compliance issues they may face. Below are 7 important misconceptions about the Employer of Record service that we will discuss in this post to clear up what an EOR can and cannot do for your business.
Myth 1: An Employer of Record Takes Away Your Control Over Employees
The most popular myth is that an EOR removes your control over your employees and organizational culture or lack thereof. This isn’t true.
Reality: The EOR is also in charge of personnel administration, such as payment, taxation, and conformity to the labor laws of a certain region. However, your company is solely responsible for managing the employees, including their position, duties, performance, and integration into your company’s organizational environment.
Myth 2: An Employer of Record Is Only Useful for Large Companies
Small to medium-sized firms pursue the idea that EOR services were created for bigger organizations with wide-ranging international operations.
Reality: EOR services would prove useful in diverse situations. You could be a small company that wants to employ your first overseas employee or multiple companies that must open operations in different countries. For SMBs, an EOR can streamline how they enter new markets, deal with complex pay operations, and adhere to foreign legislation.
Myth 3: Employer of Record Services Are Too Expensive
Some companies cannot engage the services of an EOR due to a belief that it has very high costs that are not worth the expenses.
Reality: EOR services are significantly cheaper than opening a company in a new country, hiring professionals to work locally, or facing non-compliance penalties. Moreover, if one takes the time required in payroll processing, preparing legal documents, and recruiting employees, an EOR is more valuable in these areas.
Myth 4: Using an EOR Means More Legal and Compliance Risks
Some companies believe using an EOR opens them up to legal or compliance risks, particularly regarding foreign labor laws and regulations.
Reality: In fact, the opposite is true. One of the main advantages of an EOR is that it helps you reduce legal risks by ensuring your business stays compliant with the local labor laws of the countries where you hire employees. The EOR deeply understands employment laws, tax regulations, and benefits requirements, ensuring your company is fully compliant.
Myth 5: An EOR Is the Same as a Staffing Agency
There’s a common misconception that an EOR is just another term for a staffing agency.
Reality: While EORs and staffing agencies help businesses find and manage workers, they operate differently. A staffing agency typically recruits and provides temporary employees or contractors to your company. An EOR, on the other hand, acts as the legal employer for your existing employees. The EOR handles employment contracts, payroll, taxes, and compliance, but the workers are still under your direct supervision and perform tasks for your company.
Why Understanding the Truth About EOR Services Matters?
Here’s a quick summary of why understanding the truth about EOR services matters:
- Maintain control over employees: You still manage your team’s work while the EOR handles administrative tasks.
- Cost-effective solution: EORs are often more affordable than setting up a legal entity abroad or managing complex compliance in-house.
- Improved compliance: EORs reduce legal risks by ensuring compliance with local labor laws, tax regulations, and employment standards.
- Faster hiring process: EORs streamline the hiring and onboarding process, helping you quickly get your employees up and running.
Conclusion
Misconceptions about EOR services stem from a need for knowledge about the function of an EOR and how such a company can help businesses of any scale. If you are thinking about new opportunities to hire employees abroad or need to optimize your Human Resources department, cooperating with an experienced company like Solvecube can be the right decision for your company. Get started with their platform and mark a revolution in your talent acquisition process.
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