Understanding Employer of Record Services

Posted on  Jun 16, 22 by Dee Coakley
A Boundless Guide to using an Employer of Record to employ globally

In today’s world of officeless organisations and remote-working, there’s never been a better opportunity for businesses to expand globally – to reach new markets or access the best, brightest, and most diverse talent. 

There’s just one problem. 

People need to be employed where they live and local employment laws are complex.

Every country has different tax systems, benefit schemes, payroll cycles, and employee rights, and the penalties for getting them wrong can be pretty hefty. Most organisations don’t have the time or resources needed to become employment experts everywhere they have staff.  

That’s why more and more organisations are choosing an Employer of Record service to meet their global employment needs and legally employ local workers on their behalf. 

It’s a smart way to hire people globally that avoids local compliance problems without forgoing the benefits and protections that employees need and deserve.

Using an Employer of Record is far safer than using full-time contractors – which is illegal in most countries – and it’s far more time- and cost-effective than setting up a local entity. 

However, not all Employer of Record services are created equal. Organisations need to understand these differences before they take the plunge and make their first overseas hire.

In this guide, we’ll explain what an Employer of Record is, how the model works, how different providers operate, and how to avoid common stumbling blocks when using an Employer of Record service for the first time.

Every country has different tax systems, benefit schemes, payroll cycles, and employee rights, and the penalties for getting them wrong can be pretty hefty.

Contents

1) What is an Employer of Record?

2) How the Employer of Record model works

3) What is an Employer of Record Platform?

4) Working with Boundless

5) Frequently Asked Questions about EORs

What is an Employer of Record?

An Employer of Record (EOR) is an organisation that acts as the legal employer on behalf of a client and their people. 

This means that the EOR assumes legal responsibility for employing people – paying them, administering their benefits, filing their taxes – and ensuring that they’re compliantly employed in their country of residence. 

Organisations typically call upon EOR services when they’re looking to employ people in overseas markets where they don’t have an existing presence. It’s a simpler, more cost-effective way of employing people compared to setting up a legal entity for themselves, in a way that ensures compliance with the relevant employment laws in each local jurisdiction.

An EOR can be used to employ any number of employees. Some organisations will use EORs to manage 1,000-strong global workforces. Others will use EORs on a one-off or ad hoc basis – for example, to support individual relocation requests from existing team members.

An Employer of Record assumes legal responsibility for employing people – paying them, administering their benefits, filing their taxes – and for ensuring that they’re compliantly employed in their country of residence.

Alas, the world of overseas employment contains many acronyms, and in some quarters, you might hear EORs referred to as Professional Employer Organisations (PEO), which isn’t entirely accurate. But regardless, we’ll stick to calling them EORs, and we’ll do our best to keep this guide as straightforward and jargon-free as possible.

Why don’t organisations employ their own people overseas?

Employing people isn’t easy. Governments want to make sure that their citizens are fairly treated by employers. They also want to make sure everyone pays their taxes. So they create employment rules and regulations that must be upheld by every employer operating in their country. 

Making sure you comply with all of these rules (which frequently change as Governments introduce new policies and taxes) can be challenging and expensive – although not as expensive as the fines dished out to firms who fail to employ people legally.

Even once you’ve mastered employment in your home market, as you grow, you’ll have to learn about local employment practices in every country you wish to hire people. Most organisations don’t have enough time or enough internal legal eagles to figure out this stuff, particularly if they’re expanding quickly or trying to fill essential roles.

In the past, many organisations used contractors to bypass these complexities and get people on the ground and working quickly. But this isn’t an option anymore. Using full-time contractors instead of salaried employees is illegal in many countries, and it’s generally considered poor business practice because these contractors are giving you 100% of their time but receiving none of the protections and benefits that regular employees enjoy.

So you need to ask yourself, do you really want to set up and run a legal entity everywhere you’re looking to grow? Because that’s what it will take to employ everyone yourself directly. 

Remember, the business world moves quickly, and the world of company registration doesn’t. You don’t want to miss your growth opportunity because you’re head-down in compliance and legalese. 

Why use an Employer of Record?

An EOR service lets you hire people in places you might never have set foot in before (figuratively speaking) by taking on the legal relationship with the local authorities on your behalf. EORs can do this because, unlike your organisation, they’re already registered legal entities in these locations and they know all of the legal ins-and-outs and regulatory requirements of each jurisdiction. 

An EOR will work with the governmental, tax and employment authorities to ensure that every new hire you make is legally and compliantly employed – no matter how onerous and complex the local employment laws are. 

An Employer of Record lets you hire people in places you might never have set foot in before (figuratively speaking) by taking on the legal relationship with the local authorities on your behalf

It will also act as your local payroll and statutory benefits provider, so you don’t have to worry about things like setting up local bank accounts or currency exchange, and the many other recurring processes involved in calculating pay and filing the correct taxes each month.

Unlike outsourcing, you’re still hiring people to join your team. But you’re using an EOR to navigate the legal aspects of employing them and take the headache out of administering payroll and benefits in countries where you’re not an employment expert. 

Of course, the obvious question is: how does an EOR service actually work? 

How the Employer of Record model works

The Employer of Record model has been around in the United States for decades, but it’s a relatively new concept in other parts of the world. 

If you’re unfamiliar with how an EOR service works, you may be concerned that it sounds worryingly similar to outsourcing. This isn’t the case at all, but it’s a good reason for looking under the hood of the EOR model. 

You can use the EOR model to employ people anywhere your chosen EOR provider has a registered legal entity. In the case of Boundless, we’re active in 22 markets – from Brazil to Bulgaria, and Singapore to New Zealand. 

Separating legal and working responsibilities

Using an EOR involves creating a three-way relationship with your employees. In most jurisdictions, you sign a three-party employment agreement between the Employer of Record and your employee. The EOR will ensure that this agreement is locally compliant and includes all necessary terms.

Once the agreement is signed, your EOR will be the legal employer of the individual in the eyes of governmental, tax and employment authorities. The Employer of Record has to ensure that every new joiner’s employment is compliant with local employment laws. As part of this process, it will assume responsibility for processing local payroll (including statutory benefits), filing employment-related taxes and returns, issuing payslips to the employee and distributing salary payments. 

If one of your team is moving onto pastures new, it’s straightforward – you just need to pass on the letter of resignation your employee gave you to your EOR and they take care of the rest.

To facilitate this, you have a commercial relationship with the Employer of Record, whereby you pay a monthly figure covering the total cost of payroll – including the EOR’s fee – and the EOR takes care of the rest.

But here’s the crucial point. You’re still responsible for sourcing and recruiting employees, and once you’ve found the right talent, you’re still in charge of the non-legal side of the employment relationship with your people. That means you’re the boss when it comes to managing the ongoing working relationship, nurturing employees’ development, conducting performance reviews, or handling HR issues (although your EOR might advise on any local rules and customs to factor into your approach).

All responsibilities are enshrined in the three-party agreement (or combination of agreements in case a three-party one isn’t possible locally), which clarifies who is in charge of what. An EOR will never take over the day-to-day management of your employees. While the level of contact with your employee probably differs between different EORs, at Boundless we are always there for them in case they have any queries but never purposefully engage with them. 

Managing your EOR relationship

While you want your ongoing EOR relationship to be as light-touch as possible, you also need your EOR to be on hand whenever you or your employees have a question regarding the legal side of employment. Like any commercial partnership, these relationships need ongoing management and oversight to get the most out of them.  

In particular, you need to keep your EOR up to speed whenever employees’ circumstances change. Many different factors can impact payroll – sick leave, a pay rise, a change in family status or a new baby, to name but a few. Your EOR will handle the legal or tax implications of any changes, but only if you keep your payroll information accurate and updated.  

Boundless is an operating system for your international team, enabled by amazing technology and delivered by seasoned employment, HR, payroll, benefits and compliance professionals.

Behaving legally and compliantly at all times

Another aspect of the EOR model to consider is ending employment relationships. If one of your team is moving onto pastures new, it’s straightforward – you just need to pass on the letter of resignation your employee gave you to your EOR and they take care of the rest. 

If you’re looking to terminate an employee’s contract, things get more complicated. Most countries have strict regulations to stop employers from unlawfully ending working relationships. Your EOR will know these details and can advise you on the legal procedure you’ll need to follow to terminate a relationship. This is why it’s essential that you notify the EOR before instigating proceedings with the employee in question.

In these sensitive situations, using the EOR model is a way for you to behave legally and compliantly throughout. A good EOR should make ending working relationships more straightforward and less painless than having to pursue the process on your own. 

So that’s the EOR model in a nutshell. You can use it to hire as many or as few employees as needed in as many different markets as you like – providing that the EOR has a legal presence in each country. Some organisations even opt to bring their existing teams over to the EOR model, using an EOR to deliver the whole of their global payroll and ensure full compliance with employment laws everywhere they operate. The choice is yours!

What is an Employer of Record platform?

Many of the above-mentioned activities require a digital technology platform. It’s where all aspects of the EOR relationship exist - onboarding new hires, updating payroll, or enhancing benefits provision. It’s also via the platform that employees receive their payslips.

Digitising the EOR experience through platforms is the telltale sign of the new generation of Employers of Record that have sprung up in recent years to address problems with the traditional EOR approach. Namely, the legacy providers responsible for delivering EOR services are very costly and often rely on cumbersome manual processes to achieve compliance.

‘Slow and expensive’ is not an attractive proposition for agile, fast-growing organisations rising through the ranks of the global business community today. Businesses like yours require a better approach to accessing the EOR model, which is precisely what an EOR platform provides. 

A best-of-breed EOR platform combines human expertise with winning technology so that you get the answers you need as quickly as possible – with digital guides and FAQs supported by fast access to local employment and compliance experts.

Tech smarts and smart humans

Rather than relying on paper forms and filing cabinets, Employer of Record platforms digitise the employment process. They’re able to use automation and self-serve tools to make it quicker, easier and more cost-effective to hire compliantly overseas and manage global payroll as your workforce expands.

Of course, a neat tech interface is no substitute for human expertise when it comes to global employment. You can have the best-looking, niftiest EOR platform out there, but delivering an excellent EOR service still relies upon humans who know their stuff regarding the local laws, regulations and customs in the countries you’re employing people. 

Local expertise matters because, at some point, you’ll be confronted with a question or an issue that you can’t answer. Perhaps one of your employees has a query about a specific tax nuance or has a medical emergency after hours. Or perhaps you’re struggling to hire in a market because, unbeknownst to you, your employment package isn’t tailored to local cultural norms. 

A best-of-breed EOR platform combines human expertise with winning technology so that you get the answers you need as quickly as possible – with digital guides and FAQs supported by fast access to local employment and compliance experts.  

Total compliance needs to mean total compliance 

Finally, an EOR platform should make it easier to achieve full employment compliance. It is about helping you to go faster and experiencing fewer traffic jams en route. But it isn’t about taking shortcuts. 

Too much automation can lead to errors or risks going unnoticed. Be aware that although you can now access EOR services through slick technology, behind the scenes, there’s still a lot of complexity for your EOR to wade through, particularly when dealing with local tax and employment authorities.

Some EOR platforms will give you the option of continuing to use full-time contractors, regardless of whether this is legal in the country in question. You should take any statements suggesting that this is compliant or not risky with a big pinch of salt. Most governments are very clear on the illegality of classifying fult time staff as contractors and you should avoid doing this at all cost. Here is why. 

Not all EOR services are created equal, and you can’t afford to risk non-compliance as you’re growing your business into new markets. So make sure you do your due diligence before selecting an EOR platform. You’re choosing a partner that could be with you for many years into the future – it’s worth taking the time to get this right. 

An Employer of Record should help you to go faster and experiencing fewer traffic jams en route employment compliance. But that doesn’t and shouldn’t mean taking shortcuts.

Working with Boundless

Boundless is not just another automated employment tech platform. It’s an operating system for your international team, enabled by amazing technology and delivered by seasoned employment, HR, payroll, benefits and compliance professionals.

At Boundless, our goal is to empower you to confidently employ anyone globally, in the way that’s best for your people and best for your business. 

We take on all of your local employment responsibilities – providing support to your overseas workers, taking the stress out of the employment process and giving them the job protection, benefits and employment rights they are owed. We also give you an easy way to offer flexible benefits to your employees, wherever in the world they are.

In doing so, we let you double down on team performance and growth, safe in the knowledge that, through our EOR service, you’re acting as a trusted, responsible employer at all times. 

Taking the pain out of compliance

We’ve been guiding customers along the road to best-practice international employment since 2019. Everywhere we operate, we know exactly what we’re doing. As a result we have constantly been awarded a 70+ NPS by our customers.

We assume as much of the legal risk of employing people as possible so that you don’t have to, and we always operate with a 100% compliance mindset because that’s what you need to be a lawful, responsible global employer. 

We’re active in some of the world’s most tightly regulated markets, and we pride ourselves on our deep local market and operational expertise to ensure that you get error-free, transparent employment wherever you’re hiring people. It doesn’t matter whether you’re making your first hire or your 500th; we always dot every i and cross every t – no shortcuts or compliance compromises.

We’re always transparent about how much it will cost to employ a worker, and we won’t lock you into lengthy and punitive agreements because we know how quickly employment circumstances can alter. We aim to flex our EOR service according to your immediate business needs, so that as you grow and the nature of your global operations changes, we’re always by your side, making the adaptation process fast and pain-free. 

The team and tech you can trust to deliver

Through our combination of self-service technology and human expertise, we make each phase of the employment lifecycle painless, from providing dual-language, compliant employment agreements, to guiding customers through employee disciplinary challenges.

Our EOR platform translates the nuances of local market legislation into a common language that everyone can follow, making the implications of each relocation/hire clear from the outset. We also provide in-depth country guides, infographics and explainers to help you research a specific market and instantly understand the local compliance requirements. 

Alongside this, we’ve hired experts across every area of our business to provide hands-on, personal support to employees – from experienced payroll and HR specialists to legal experts. It means we can swiftly tackle the toughest employment and local compliance issues, acting as an extension of your HR department so that employees see no difference in service quality.

Even with the trickiest issues, such as redundancy and termination, we can advise you how to handle these processes fairly and compliantly according to local practices. 

Ultimately, we give you the best of both worlds – an intuitive, easy-to-use EOR platform underpinned by the sort of in-depth guidance and support you’d typically only get with a large professional services firm (at a fraction of the price). Speak to an expert today to learn more.

The business world moves quickly, the world of company registration doesn’t.

A word from a customer…

“We are delighted to have moved our staff from our previous provider over to Boundless very seamlessly.

The platform is easy to navigate giving us all the necessary information, and reducing a lot of admin because all costs are in one invoice.

The feedback from employees has been excellent!”

- Darren Forsyth, Finance Manager at Code Institute

Read how two of our customers, Airbotics and Cloudsoft, use Boundless to solve their international employment challenges.

Frequently Asked Questions about EORs

What does “Employer of Record” mean?

An Employer of record such as Boundless is the legal employer of the individual, as far as their government, tax, and employment authorities are concerned. We are responsible for:

  • ensuring their employment is compliant with local employment laws
  • processing local payroll
  • filing employment-related tax returns
  • issuing payslips to the employee
  • distributing salary payments
  • payments to the local tax authorities

Our customers are responsible for:

  • sourcing and recruiting their own workers
  • managing the employee’s day-to-day workload
  • contributing to the personal/professional development of the employee through their work
  • following any guidance we give on employment and HR best practices or legal obligations in the employee’s home country
  • ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Boundless is a legal employer of record for growing companies with international workers in many countries.

How much does an Employer of Record cost?

Different Employers of Record will cost differently - they will either charge a monthly fee or a per cent of the salary. However often time there might be hidden fees beyond those initially showcased. Look in the commercial agreement carefully to understand the full extend of the cost for using an Employer of Record.

In our case, Boundless charges 8% of the total monthly processed payroll. That is:

  • gross salary payment
  • employer taxes (depending on the jurisdiction)
  • pension contributions
  • Any other benefits payments or additional payments/contributions processed through payroll

Learn how Boundless can help you employ compliantly.

Does Boundless have its own corporate and employment infrastructure?

Boundless owns and manages its infrastructure everywhere it is possible to do so. It aims to assume the legal burden of risk for its customers, or if this is prohibited within a particular territory, to adopt a closely managed partnership model based upon transparency and accountability.

How do invoicing and billing work for an Employer of Record?

Each pay period, after you make any necessary adjustments and processing is completed, we issue you with an invoice bill, for one amount, in your home currency. A full breakdown of the payroll cost is available, including our fee of 8% of the total monthly processed payroll. You pay us, and we pay your team in their currency. We also file and pay their taxes compliantly in their home country.

How do I get started with an Employer of Record?

Before you can start using an Employer of Record, you will probably want to understand the employment costs in the country you are employing in. Have a look at the calculators we have built for Ireland, the UKGermanyPortugal, and France to get a detailed breakdown of the salary you plan to offer. Then you can get in touch with us. Let us know the countries you need support in, and we'll follow up with a short consultation call, where we can answer any technical questions you have about:

  • local payroll
  • local employment compliance
  • benefits / pension / insurance
  • stock options

We'll share with you a detailed salary and tax breakdown of each employee in each country, and make you aware of any specific requirements relating to compliant employment, employment agreements, handling disputes, and terminating agreements in each country.

What are the legal responsibilities of a company when they use an Employer of Record like Boundless?

The company remains responsible for the day-to-day management of the people and teams that are employed through Boundless, including any disciplinary or performance issues.

Boundless ensures compliance with local specific procedures, practices and laws while employing people and teams on behalf of the company.

How responsive are Employers of Record once I become a customer?

While a lot of the work that an Employer of Record will do for you is set at the start of the relationship, some things will inevitably come up further down the line. Employment is not a straightforward process, and the Employer of Record should ensure a smooth experience for all. Even the most modern EORs, built using software development best practices and providing streamlined/automated workflows, should include a human support offering. At Boundless, we provide in-app messaging, which you and your employees can always use for any queries you may have. We are always here for customers and strive to answer queries very speedily. It's one of many reasons customers are always happy to recommend us, giving us NPS scores of 70+.

Employ Staff Abroad with Boundless

Talk to us about compliant employment for your remote / international workers.
The making available of information to you on this site by Boundless shall not create a legal, confidential or other relationship between you and Boundless and does not constitute the provision of legal, tax, commercial or other professional advice by Boundless. You acknowledge and agree that any information on this site has not been prepared with your specific circumstances in mind, may not be suitable for use in your business, and does not constitute advice intended for reliance. You assume all risk and liability that may result from any such reliance on the information and you should seek independent advice from a lawyer or tax professional in the relevant jurisdiction(s) before doing so.

Written by Dee Coakley

Before founding international employment platform, Boundless, Dee Coakley was a three-time COO, having spent 10 years with B2B SaaS businesses (Masabi, Bizimply & Axonista). In her COO roles, she experienced first-hand the operational challenges of setting up employees in new countries, and so set about building a solution. Boundless handles cross-border HR compliance and payroll for small and mid-size businesses, removing the barriers to growing teams internationally.

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