What is an Employer of Record (EOR)?

As the global employment market continues to thrive, companies are embracing a global growth mindset to achieve next-level success. Yet, it can be a challenge to compliantly hire, pay, and manage global workers.

You can partner with an Employer of Record, also known as an EOR, to overcome these obstacles and capitalize on global employment without setting up entities.

How does an Employer of Record work? Let’s explore the benefits of partnering with a global Employer of Record service — and how to choose the right one for you today.

What is an EOR?

An EOR is a solution that legally employs workers on behalf of another company, enabling global hiring without setting up a legal entity. A global EOR serves as the legal employer of individuals that a company wants to hire in a new country when that company does not have an entity in the country and can’t legally employ those individuals, regardless of their entity status. As the legal employer, an EOR manages all aspects of employment including payroll, taxes, benefits, human resources tasks, and compliance. Because an EOR assumes the responsibility of ensuring compliance with local labor and employment laws, it must stay up to date on local legal requirements relating to employment.

An EOR is not the same as a Professional Employer Organization (PEO), which operates under a co-employment model and works with companies that already have their own entities in-country. A PEO does not take on all employer responsibilities and generally only helps with certain HR functions, such as payroll or benefits administration. EORs also differ from staffing agencies in that staffing agencies are largely focused on recruiting and sourcing talent, not hiring. Although many EORs are global, some EORs can also function on a more regional level.

With an EOR in place, you can:

1. Begin hiring globally starting in minutes.

With a quality EOR, you can hire the best person for the job, anywhere in the world – regardless of entity status. Everything from automatic contract generation to global payroll setup and management reduces risk and allows your business to begin operations in your target country starting in minutes instead of months.

2. Simplify global payroll processing.

Do you manage team members in multiple countries? No problem. An EOR legally employs workers and puts them on its locally compliant payroll, eliminating the need to set up subsidiaries internationally. Team members are paid on time, in their local currency, and in compliance with local payroll and tax requirements.

More than ever, implementing a compliant, accurate payroll system is seen as a key driver to successful business operations. According to 2024 global talent trends, enhancing or modernizing pay practices is a top priority for 41% of HR professionals in 2024. In addition to providing compliant and accurate payroll, G-P’s Global Growth Platform™ offers equity-based compensation in supported countries as well as clear and simple invoicing with our premium EOR package. You can enjoy the peace of mind knowing that payroll reporting and tax withholdings stay compliant with local labor laws.

3. Automate contract generation.

A strong EOR partner generates locally compliant employment contracts. For example, G-P’s industry-leading Global Growth Platform allows companies to generate compliant contracts tailored to each individual with just a few clicks through its fully automated Employment Contract Generator.

4. Assure compliant tax withholding.

Legal responsibilities like employment-related taxes can be a major hassle for many companies. An EOR handles these complexities, including making the appropriate tax deductions and filings related to the employed individuals, including dealing with social security, unemployment taxes, and income taxes.

5. Streamline benefits enrollment for your team.

EORs handle benefits administration, including contributions to private health insurance and specific government programs like social security and workers compensation. The best EOR providers support companies in offering competitive benefits packages aligned with country-specific labor laws and employee expectations. G-P makes it easy to enroll your team in your benefits plan of choice in a matter of minutes.

The best EOR partners guide you every step of the way, with in-house legal and HR experts available for support and clear guardrails to help maintain compliance. A best-in-class Employer of Record like G-P is backed by a team of experienced HR and legal experts who will make sure all local employment compliance requirements are covered, so you can focus on the daily work of your new team members.

What are the benefits of an Employer of Record?

A global EOR offers companies the ability to hire internationally, reduces legal risk, making it the preferred choice for global workforce management. Regulations, employment norms, and even employee expectations vary around the world, and any missteps could significantly compromise your growth goals.

Moreover, an EOR can save you from costly and time-consuming tasks like setting up an entity, hiring legal and financial experts, and navigating the challenges of worker misclassification.

As 72% of global businesses support ambitious expansion plans, companies are turning to EORs for help building their workforce efficiently, managing compliance, reducing overhead costs, and ensuring on-time payroll.

From every corner of the globe, an EOR can help you:

1. Test new markets.

The Employer of Record market is expected to grow at a compound annual growth rate of 6.9% from 2022 to 2028. If you have global expansion goals, chances are you also want to explore new market entry. Reliable EOR services allow you to do so quickly and compliantly – without establishing your own entity in the new country – significantly reducing the commitment required.

Whether you’re forging AI and cloud-based hiring in the Asia-Pacific region or expanding across state lines in the U.S., you can seamlessly hire in multiple international markets simultaneously and build your global workforce. Plus, you don’t need to build the required knowledge in-house.

2. Access global talent.

Companies need to attract top talent to compete at an international level. With a USD 8.5 trillion talent shortage looming in 2030, global hiring will be more important than ever. The good news is that hiring international employees has never been easier — or more cost-effective — with G-P’s Global Growth Platform. An efficient EOR facilitates quick and seamless access to the best global talent by offering locally compliant contracts and attractive benefits packages.

3. Minimize risk and onboard talent at scale.

G-P’s HR experts have in-depth knowledge of local laws and regulations and can help simplify and streamline onboarding to bring new hires onto the team quickly, while handling all offboarding with sensitivity, care, and in compliance with local laws. Not sure where to start? With G-P Meridian Prime, companies can handle large onboardings of employees or easily mass convert contractors to full-time employees (FTE) with our new Bulk Onboarding feature.

Plus, the G-P Platform’s easy-to-use dashboard allows employees to see enrollment status, track performance against other plans, and even monitor top benefits costs across active countries.

What are the key considerations when choosing an EOR?

While a global EOR can help you expand, not all EORs are created equally.

Due to the complexity of local labor laws around the globe, the quality and capabilities of the technology and the expert teams behind it will drastically impact your global business success. When evaluating the right EOR for you, ask yourself a few key questions:

1. Does the EOR own entities in your priority countries?

Entity ownership is key. Some EORs rely on infrastructure from local third parties to deliver their services and support. Be sure the EOR you partner with has established legal entities within your target countries and a team of in-region HR and legal experts to provide direct support whenever required. For example, G-P can help companies swiftly and compliantly enter new markets in 180+ countries.

2. Does the EOR offer in-region HR and legal?

Pay close attention to the expertise you gain from the partnership. Avoid EOR providers that ask customers to rely on a middleman to handle legal queries and issues. Inefficient processes and communication can lead to poor experiences, barriers to mitigating risk, and slow response times. Instead, the right EOR platform will offer direct access to their own in-region HR and legal experts for reliable guidance on local labor laws and country-specific regulations.

3. Is the EOR technology automated, scalable, and secure?

From payroll to benefits regulation, you need a platform that automates time-consuming manual processes in one secure place.

4. Can the EOR show a proven track record?

Be sure to keep expansion factors in mind. The right EOR has done this before, and you should be confident in the experience the team brings to the table, so you can focus on what matters most — building your global teams. Consider any customer reviews to analyze the EOR’s strengths and weaknesses.

No entity? No problem. Hire globally with G-P.

Hire the best person for the job, anywhere in the world. G-P’s Global Growth Platform™ offers everything you need to find, hire, and manage global teams — without setting up new entities. Our dedicated team of in-region HR and legal experts have over a decade of experience supporting companies of all sizes and in all stages throughout their growth journey. Tell us where you want to hire. We’ll do the rest.