Following on from a recent blog, which covered what you need to know about hiring overseas, this blog will delve into the complicated topic of Employer of Records.
What is an Employer of Record (EoR)?
An EoR would be useful to you if you were seeking to employ a remote worker from overseas.
You may heard of employee leasing companies before, which is another term for an EoR. Essentially, you pay a fee to a ‘leasing company’ who will then be the legal employer of the employee. They will be experts on the legal framework in the country where your newest recruit is located and can take away the stresses such as complying with local law, compliance, and tax administration.
Why use an EoR?
Cost-effective ways to outsource payroll and HR functions
- The EoR can process payroll and deal with payroll taxes. The price you may for the EoR will include the taxes needed to be paid when hiring remote employees.
- The EoR can also deal with HR functions
- Most EoR’s deal with matters such as producing the employment agreement, processing payroll, dealing with payroll taxes and HR activities.
Takes paperwork out of your hands
Using an EoR takes a great deal of paperwork out of your hands ensuring you can focus more on the day-to-day.
Allows you to focus more on the day-to-day relationship with your employee
The day-to-day relationship generally depends on the arrangement with the EoR, but you will remain in control of the daily activities and responsibilities of the employee and the EoR handles the other aspects for you.
What are the potential risks with an EoR?
As stress-free as EoR’s might seem, you could run into many legal obstacles. Across the board, they are a new concept and how the responsibilities are allocated between the business and the EoR has not yet been established.
There may be separate agreements or employment contracts required such as:
- an agreement between you and the EoR; or
- an agreement between the EoR and your new hire; or
- a trio-party contract.
Whilst an EoR takes payroll processing out of your hands, this does not mean you should take a back seat and not oversee the payroll system.
You should oversee that the EoR:
- sets up the payroll system compliantly;
- submits wage tax returns;
- completes relevant national insurance forms;
- stays up to date with any changes in regulations;
- informs you of any changes;
Breach of Local Law
The contract between you and EoR normally protects you if there is a breach of local law or tax requirements. You should always get a legal advisor to read through any contract between you and an EoR to ensure that this factor is covered to avoid any complications down the line.
The EoR should be aware of the law such as in Germany, there are restrictions around how long you may engage an employee by using an EoR before it is a legal requirement for that employee to move onto the payroll of the Company.
You should ensure you are informed about tax requirements. What you need to consider will be different depending on the terms you have with the parties, so seeking legal advice will ensure you are complying with the relevant tax requirements.
Licences and Insurance
You must ensure that the EoR has the correct licences and insurances to act. You should ask for copies.
What we can do to help
As you can see EoR’s can be complicated and our legal advice, can help to limit issues.
Employment retainer: Our employment retainer can help navigate you through the process of hiring abroad and dealing with EoR’s, along with any other ad-hoc that arises.
Help you to consider your options: If you’re looking into hiring your newest recruit from overseas, there may be different options available on how you can proceed, we can help you to make these decisions.
If you seeking to use an Employer of Record when hiring your newest recruit from overseas or wish to discuss any of the issues raised in this article, click here.