What are the EOR Compliance Responsibilities?
All employers have certain compliance responsibilities they must adhere to that stem from specific laws and regulations within a given country where they hire workers. When employing locally, understanding or adhering to these obligations is not something companies and internal HR teams really struggle with, as it’s their domain expertise. However, employing people across borders and maintaining local legal compliance becomes more challenging when organisations choose to hire outside of their own country.
This is why many global companies choose to work with an Employer of Record (EOR), which acts as the legal employer of the workers and helps companies stay locally compliant when they choose to hire across borders.
What are the employment compliance responsibilities of an EOR?
An EOR's main function is to serve as the legal employer of a given company’s global workforce. As the legal employer, the EOR takes on the responsibility of anything compliance-related for the company.
This includes several areas, such as human resources compliance, payroll, and tax.
Local employment legislation
As the legal employer, an EOR is responsible for adhering to and guiding on local employment matters, staying on top of any changes in employment and tax laws and regulations, and then adjusting documentation as needed.
As the legal employer, the EOR provides workers with all the proper contract paperwork, including employment agreements and any other documentation necessary for their employment.
An EOR advises a given organisation about how individual workers should be classified. If a worker is a full-time employee, the EOR should never suggest they be classified as a contractor. This kind of employee misclassification could result in fines or other legal jeopardy.
On-time payroll and payslips
Paying employees in a consistently accurate and timely manner is paramount to remaining compliant. Employees must also be provided with regular payslips that give them information on salary payments, hours worked, additional compensation benefits, and so on at a glance. The EOR provides all of this.
Calculating and filing taxes
As the organisation responsible for salary payments and payroll, the EOR calculates the employment tax contributions and then files those records and pays the sums to appropriate local tax authorities.
Occupational medical checks
In certain countries, medical checks for employees are mandatory before they start employment with the company and then must take place on a yearly basis. In those countries, the employer is legally responsible for helping employees find health providers and schedule medical check-ups. When companies employ through an EOR, that responsibility falls on EOR.
An EOR helps ensure workers are provided with any employer-mandated benefits. Depending on the country, these could include things like healthcare, pensions, and other social contributions.
The above are the most important aspects of compliance you can expect an EOR to either do for you or, at a minimum, guide you on. Visit our ‘Everything’ page for a more extensive list of the compliance responsibilities Boundless handles for organisations like yours.
What responsibilities fall solely to an organisation?
Even when working with an EOR, a company still has employment responsibilities it needs to manage in-house. The most significant of these is time-tracking, including the hours an employee works, when they take breaks, and when they request and take leave.
TIP: A good EOR should very clearly explain what responsibilities fall under them and what obligations the company has. As part of the onboarding process at Boundless, we take you through a very clear and handy checklist that provides that information at a glance.
Breaks and the right to disconnect
The organisation is responsible for ensuring employees are given ample break times during the work day. They should also work to protect workers’ right to time ‘out of office’ as outlined in local regulations and refrain from contacting them in those times. A growing number of countries are establishing Right to Disconnect laws.
Leave and paid time off
Though an EOR may keep records of PTO and leave for payroll purposes, managing employees’ requests for time away from work falls to the employing company.
Building and distributing an employee handbook
An employee handbook may not be specifically part of any legal requirements, but having one helps a given organisation ensure it provides an open, productive, and happy workplace for its employees. Because it codifies how the organisation operates, it is best created by the company itself rather than an external partner.
On what compliance concerns might an EOR advise a company?
In a few cases, some responsibilities fall to the organisation and not to the Employer of Record. However, the EOR may be able to offer suggestions or point the company to another third-party source for additional assistance.
Occupational health and safety
While an EOR can advise on health and safety practices that adhere to guidelines and regulations stipulated by law regarding remote work environments, companies should also seek guidance from Health and Safety consultants who are experts on safe and ergonomic workspaces.
Though terminations need to be done by the company, an EOR should be able to provide guidance on how to lawfully terminate employees. That can include the most optimal termination option given the local law, guidance on documentation that is needed, any consultations with the employee necessary, and so on. A responsible EOR should insist that a company consults them before progressing with terminations.
When working with an Employer of Record, who is ultimately responsible for employment compliance – the EOR or in-house HR?
Generally speaking, an Employer of Record is the one responsible for most employment compliance-related things. The relationship between your organisation and the EOR and how responsibilities are divided should be clearly defined when you enter into an agreement and begin working together.
That said, there are times that the company will take care of some compliance issues in place of the EOR as it manages its workers' general day-to-day activities and employment. This might include time tracking or other things that are better managed in-house. The Employer of Record should provide that information and ensure the organisation is aware of its obligations in every country where it has employees. As the legal employer, the EOR should also consistently follow up to confirm those measures have been completed.
Because of this delicate balance, in-house HR teams and organisation leaders must consistently work closely with the EOR to ensure they remain compliant.
Manage your employment compliance responsibilities with Boundless
Compliance mistakes can not only be costly, but they can result in serious, long-lasting penalties and reputation damage for your organisation. These responsibilities are not to be taken lightly, especially when hiring a global workforce.
As an Employer of Record, it’s our business to take care of some local compliance responsibilities on your behalf and inform you of the ones you must handle on your own. Boundless can help manage your employment compliance responsibilities in each country across borders and remove the guesswork. Schedule a conversation with one of our experts to get started.