If a company wants to expand internationally, the process of setting up its own subsidiary or entity overseas can be a costly, complicated and time consuming project. This can be done but many Payroll and Legal advisors will tell you that the process could take months and the need for local resources (People, systems,…) can be very costly.

The use of Employer of Record for your international expansion and local Hiring plans

In order to penetrate the targeted market more quickly or when trying to use Outsourcing for your business (for example Consumer Care, Operations, HR, Tech or Digital/Product Teams), startups and large companies usually use an Employer of Record, also called EOR or sometimes International PEO. 

An Employer of Record will partner with you to hire employees locally under its name and responsibility. The EOR does not do the recruitment part, but the hiring and payroll part.

The process means that you can have the EOR hire someone locally who will de facto work for you but with the benefit of a local employment contract and all tax and compliance covered, ensuring no risk for the company or startup.

The use of Employer of Record to support Global Mobility for your workforce

An Employer of Record is also a great partner to support the Global Mobility of your existing employees. 

Let’s say an employee based in the US asks to relocate to Romania and work remotely from there. The employee and the employer (the company or startup) would only be compliant for a short period of time. In order to be compliant, the employee would need to be hired legally and contractually with a local employer, so to pay taxes locally in Romania and this would also make sure the company is compliant as well. The Employer of Record is the solution for those Global Mobility challenges. 

The employee relocating would just need to end its contractual relationship with the company in the US, relocate to Romania and be hired through the EOR locally, with a local Romanian employment contract with the EOR Company, paying its taxes in Romania.

How much does an Employer of Record service costs

The Employer of Record would usually then invoice monthly the payroll costs (Salary + Labour Taxes + Other benefits etc…) to the Company (which is now the client) through:

• A Fixed monthly fee which usually goes from 200 to 800 USD a month 
• A % of the total monthly costs of the employee

Extra costs incurred are usually the result of Termination of employment (severance costs for the employee,…) when the company decides to terminate the working relationship with the employee. Those costs are still under the responsibility of the client (Company, Start-up…).

How to make sure you choose the right Employer of Record for you?

It’s important to understand how much help you need, which locations need to be covered and how much you would need to look at your budget.

Make sure you cross check Employer of Record partners and platforms:

• Some have 3x fees than others (see some example below)
• Some EOR Platforms usually offer some kind of digital web portal for payroll and onboarding (contract, equipment, benefits) input, but in reality all is actually done manually in the background (everyone who has terminated an employee with the big players in the EOR market will know that you’ll end up exchanging 50 emails for weeks to sort it out… far from the smooth tech experience promised! )
• So this won’t exactly save you time versus an EOR Partner who doesn’t have that latest HRTech smoke screen.
• Some provide HR support, others provide Consumer Support. There is a big difference between the two!

Nomad Global Hire – The Start-up’s favourite Employer of Record Solution