Key takeaways
- Retain key talent: An employer of record (EOR) can help you retain employees and keep operations running during entity wind-down.
- Maintain workforce continuity: Transitioning eligible team members to an EOR can separate workforce needs from the longer entity wind-down process.
- Simplify payroll and compliance: With an EOR, you can ensure compliance with local authorities while improving operational efficiency.
Every new market expands your reach. But managing the financial records, workflows, and employment requirements of multiple subsidiaries can strain your internal teams. Small subsidiaries can be especially costly to maintain when they employ only a few people.
An employer of record (EOR) legally employs team members on your behalf and manages payroll, benefits, and local employment compliance. Transitioning eligible employees to an EOR can help you retain talent while winding down subsidiaries you no longer need.
Below, we'll dive into what an employer of record is, along with a variety of EOR benefits.
What are the benefits of an EOR?
1. Less maintenance and operational overhead
Opening a full subsidiary can be burdensome if you only have a small number of employees in that locale. Ongoing legal, compliance, accounting, and operational requirements consume capital and internal resources, regardless of the entity’s size.
Teaming up with an EOR consolidates local employment and payroll processes. This allows your accounting team to focus on core financial strategies rather than managing employment administration across multiple jurisdictions.
One example of how an EOR can support operational continuity, cost savings, and talent retention is Repsol’s wind-down of its Canada entity. Working with G-P, the company transitioned more than 50 positions to G-P EOR within three weeks and saved approximately USD 3.7 million in onboarding expenses.
G-P enabled us to retain key talent, oversee the closure of our Canada entity, and ensure compliance with all legal and financial obligations, allowing us to concentrate on business operations.
Through payroll, tax, and employment compliance management, G-P EOR helps companies improve operational efficiency without requiring separate employment infrastructure in every country.
2. Simpler employment tax and reporting requirements
Having a fully established entity in any given locale means that entity is subject to local labor laws and tax requirements. Managing these obligations can create tax, compliance, and operational risks for your global enterprise. Your accounting team must deal with unique forms, filing deadlines, and payment schedules for each subsidiary while keeping up with changing tax laws.
An EOR can support compliance with local tax laws by managing employment tax filings and required employment reports for the employees it hires on your behalf. This means your accounting team can spend less time managing country-specific payroll tax and employment reporting requirements. Your company remains responsible for assessing its own corporate tax obligations.
Aurora Expeditions, an award-winning expedition company, partnered with G-P to delegate the time-consuming process of understanding different countries’ taxation rules. Mick Mag, their Chief Financial Officer, highlighted how the compliance process has transformed since the partnership:
The time and effort involved in locating and employing team members in new jurisdictions has gone from being a complex burden to being a simple and efficient process.
3. Talent retention
Winding down a small subsidiary can trigger employee uncertainty, lead to higher attrition rates, and result in mass redundancy payouts or works council consultations. When you partner with an EOR to wind down a subsidiary, careful transition planning helps retain key talent and, where permitted, preserve or recognize existing seniority, employee benefits, and tenure.
This helps your company manage transition and severance costs while maintaining employee morale.
4. Decoupling workforce continuity from slow entity liquidation timelines
Liquidating a local entity takes a long time. A voluntary strike-off can take from 12 to 24 months, depending on the local jurisdiction. Keeping employees on the subsidiary's payroll can delay closing its bank accounts, tax registrations, and other local operations. While you can file the initial paperwork quickly, the legal wind-down process takes much longer because local tax authorities, stakeholders, and creditors need time to file objections.
Transitioning eligible team members to an EOR takes less time than completing the formal entity wind-down. This separates the workforce transition from the remaining liquidation process. Your legal team can then audit the subsidiary, settle creditor claims, and dissolve the corporate shell without disrupting your workforce.
5. Global payroll, HR, and invoicing unification
Operating subsidiaries throughout the world means each subsidiary may need to work with local payroll vendors, banking establishments, and local brokers. The more entities that come into play, the higher the chances of mistakes and miscommunications. This fracturing widens blind spots, exposing your organization to liability and tax noncompliance.
Using employer of record solutions eliminates fragmentation and reduces risks. G-P’s Global Employment Platform integrates directly with your core systems, such as Workday, SAP, and ADP. This unifies your global workforce and compensation data into a single dashboard.
Managing payroll for multiple subsidiaries can also be challenging. Every location has different labor, tax, and reporting laws.
One major EOR benefit is that it unifies payroll processing and handles multiple currencies and exchange rate fluctuations.
G-P supported global peptide contract development and manufacturing organization AmbioPharm's payroll in different currencies. Teresa Cheek, Director of HR, IT, and Administration at AmbioPharm, spoke to how the partnership streamlined key aspects of the company’s growth journey:
G-P’s straightforward payroll management adds a layer of simplicity to handling global operations. Putting my trust in G-P means navigating the international business landscape with confidence and ease.
6. Accelerated post-M&A integration and carve-out speed
While some subsidiaries operate under a unified corporate umbrella, your company may have acquired other entities while expanding. These acquired entities may fall under a different corporate structure. Separating an entity from its parent company comes with its own share of headaches. Transferring its workforce quickly can be challenging if the buyer lacks local entities to employ those team members. An EOR eliminates protracted Transition Service Agreements (TSAs), allowing you to onboard acquired talent immediately without incorporation delays.
For example, the team that became Strada began expanding its payroll operations into new markets in 2023 while still part of Alight Solutions. Establishing local entities would have slowed the expansion's momentum. After Alight announced the carve-out in mid-2024, Strada continued working with G-P EOR to deploy operations across 13 markets in less than one week.
7. Long-term prevention of future entity sprawl
One of the main benefits of an EOR is flexibility. You can test new markets and scale up or down without the steep costs associated with entity management. This allows you to stay agile as business opportunities arise. Other benefits of an EOR include:
- Unified payroll processing
- Local tax compliance
- Streamlined annual reporting
- Reduced local accounting efforts
- Decreased audit risks
- Operational efficiency
- Timely financial reporting
How G-P can help
Operational gaps show up fast when you’re managing subsidiaries across multiple countries. With G-P EOR, you can transition eligible employees to our local entities while retaining day-to-day management of their work. Vetted legal and HR expertise powers our platform, supporting compliant employment in 180+ countries. G-P EOR creates compliant employment contracts in minutes, helping you keep workforce transitions moving while your company completes the entity wind-down process.
Book a demo to see how G-P EOR can streamline your entity rationalization strategy.
FAQs
Does consolidating subsidiaries with an EOR simplify HR work?
An EOR handles HR and payroll tasks for your international team members. This means you no longer have to manage multiple country-specific systems and can instead rely on a single, unified process.
What is the main compliance benefit of using an EOR for subsidiary consolidation?
An EOR helps manage compliance with local tax and labor laws in every country you operate in. This frees your HR team from tracking ever-changing regulations and reduces the risk of costly mistakes and audits.
Does partnering with an EOR benefit my finance team?
Yes. Consolidating with an EOR reduces the workload for local accounting teams and streamlines annual reporting. Your finance team receives regular, standardized reports on employee costs and deals with a single invoice, simplifying financial management.
Can an EOR integrate with my existing financial software?
Yes. G-P EOR is designed to integrate seamlessly with your existing tools to create a connected tech stack. For example, G-P's partnership with Sage Intacct reduces manual data entry and minimizes the risk of errors, creating more operational efficiency.
How does an EOR help with payroll during subsidiary consolidation?
An EOR manages the entire payroll process for global employees and ensures that payments comply with each country’s labor laws, tax regulations, and reporting requirements. This unified approach streamlines payroll administration, reduces the risk of errors, and ensures accuracy and consistency during subsidiary consolidation. By centralizing payroll through an EOR, your organization can avoid the complexities of managing multiple local payroll systems and maintain compliance across all jurisdictions.
