Frequently Asked Questions About Employer of Record (EOR)

Have questions regarding Employer of Record (EOR) services? Check out our Employer of Record FAQs to find the answers you need. 

What services does an EOR typically provide?

Employer of Record (EOR) can simplify international employment by handling the following key tasks: 

• Consultation: Initial discussion to understand your needs and requirements. ‍
• Contract Creation: EOR drafts compliant contracts while educating clients on best practices for the specific jurisdiction. They conduct thorough research and provide consultation on local employment regulations. 
• Employee Benefits: Tailored employee benefits packages are offered based on local requirements, ensuring both legal compliance and competitive offerings for attracting talent. 
• Background Checks: Conducts thorough checks, including criminal, education, and employment verifications. 
• Work Permits and Visas: Handles the application and management of work permits and visas. 
• Onboarding: Managing contract reviews and completing required government forms. 
• Payroll Processing: Oversees accurate and timely payroll management. 
• Tax and Insurance Responsibilities: Manages tax filings and insurance requirements. 
• Unemployment Claims and Workers' Compensation: Processes unemployment claims and manages workers' compensation. 
• Termination Process: Manages the termination process, ensuring compliance with legal requirements. 
• Compliance with Local Laws: Ensures adherence to local regulations and labor laws.

EORs streamline these tasks, reducing legal and regulatory risks and making global employment more efficient. 

What industries commonly use EOR services? 

Industries across the board, from tech and healthcare to marketing, finance, and education, are embracing Employer of Record (EOR) services. Companies looking to expand their sales force into new markets often use EOR to test the waters before fully committing. By leveraging EOR, businesses can adapt to new work models for global teams, making it easier to fulfill core strategies.  

How does an EOR differ from a Professional Employer Organization (PEO)? 

Both EOR and PEO services manage HR and payroll tasks, but their roles and responsibilities differ. A Professional Employer Organization (PEO) provides HR, payroll, and benefits consulting for companies that already have their own legal entity in the country where they are hiring. Partnering with a PEO is like having an in-house team of payroll, HR, and compensation and benefits experts to help you. Your company retains employment liability and compliance responsibilities, while the PEO helps streamline these processes. 

An Employer of Record (EOR), on the other hand, handles employment overseas by assuming full legal responsibility for foreign employees, including payroll, benefits, and compliance with local labor laws. This makes EORs ideal for businesses expanding globally without establishing a local entity. At its core, EORs take on employment liability and simplify global expansion, while PEOs support HR functions with the client retaining legal responsibilities. 

What are the cost benefits of using an EOR?

• Eliminate Upfront Costs: Avoid substantial investments in setting up a local entity, such as:
  • Incorporation fees 
  • Office setup costs 
• Administrative Task Management: Save on costs by having the EOR handle:
  • Payroll processing
  • Tax compliance
  • Employee benefits administration 
• Ongoing Operational Expenses: Reduce expenses related to:
  • Corporate secretary fees 
  • Regulatory filings 
• Resource Allocation: Use your resources more efficiently by:
  • Avoiding the need for local specialists 
  • Minimizing financial burdens typically associated with global growth 
• Minimize Legal Risks: EORs help ensure compliance with local laws and regulations, reducing legal risks. 

How does an EOR ensure compliance with local labor laws? 

Most EOR providers work with trusted local experts or have their own in-house experts in the country, ensuring that everything from employment contracts to termination procedures aligns with local requirements. In many countries, companies that provide EOR or PEO services must be licensed by the relevant local authority, which further ensures compliance with local laws. This helps mitigate legal risks and allows your business to focus on core operations while expanding into new markets. EOR providers stay up to date with the ever-changing regulations in each country and handle all aspects of employment, including payroll, benefits, taxes, and other administrative tasks according to local standards. 

How does an EOR handle payroll and tax compliance? 

An Employer of Record (EOR) handles payroll and tax compliance by taking full responsibility for managing these functions according to local regulations. A good EOR provider ensures accurate and timely payroll processing, including salary calculations, deductions, and disbursements, with complete transparency. They also manage tax compliance by staying updated on the latest tax laws and regulations in each country, ensuring that all required taxes are correctly calculated, withheld, and remitted to the appropriate authorities.  

How does an EOR handle employee benefits and insurance? 

An EOR manages employee benefits and insurance by making sure that all programs comply with local regulations. They select and provide health insurance plans, retirement benefits, and other perks tailored to local requirements. From enrolling employees and processing claims to ensuring compliance with local laws, the EOR handles the entire process. 

One of the key advantages of using an EOR is the ability to offer group benefit insurance, even if you have just one employee. EOR providers can do this by pooling employees from multiple clients, which not only bypasses the usual requirement for a minimum number of employees but also allows them to secure better insurance rates. This means smaller teams can access comprehensive benefits that would otherwise be out of reach. 

Beyond just providing insurance, experienced EOR providers will also consult on benefit strategies, such as co-pay structures, tax-advantaged savings plans, and flexible benefits options like health savings accounts (HSAs) or flexible spending accounts (FSAs). Additionally, EORs may offer services like employee assistance programs (EAPs) and wellness initiatives to further support your team. While these accounts are common in some regions, such as the U.S., their availability and structure vary by country. EOR can recommend the best plans based on local market standards and ensure your benefits are competitive within your industry. 

What is the process for onboarding employees through an EOR? 

Onboarding employees through an Employer of Record (EOR) is designed to give you a seamless experience. Here’s how it works: 

1. Initial Consultation: Start with a detailed consultation to discuss your hiring needs, business goals, and expansion plans. Your EOR provider will tailor their services to align with your specific requirements. ‍
2. Documentation: The EOR takes care of gathering and reviewing all essential documents, such as employment contracts and tax forms. They draft employment contracts that comply with local laws and regulations and manage the intricate process of obtaining necessary work permits and visas. They ensure everything is compliant with local regulations and handle all administrative details, so you don’t have to worry about a thing. ‍
3. Administrative Tasks: The EOR takes charge of setting up payroll, enrolling employees in benefits, and managing other administrative duties. They also handle any employee-related concerns or issues that may arise during their employment, guaranteeing everything is handled accurately and on schedule. ‍
4. Ongoing Compliance: The EOR monitors compliance with local labor laws, conducts regular audits, and stays updated on legal changes. They use advanced tools to track and resolve any compliance issues promptly, ensuring your business remains in good standing. 

Can an EOR assist with employee relocation and visas?

Yes, EOR takes the hassle out of the process by managing visa sponsorship and work permits for you. With their expertise, they handle the complex immigration rules and quotas, making sure everything is sorted so your employees can move and work legally without complications. They also coordinate the logistics of relocation, ensuring a smooth transition for your team. EOR takes care of bringing global talent into your fold, whether you're expanding into new markets or relocating staff closer to your office. 

Is it possible to transition from an EOR to a direct employment model later on?

Yes, moving from an EOR to direct employment is quite common and entirely feasible. Many companies start with an EOR for ease and flexibility, then switch to direct hiring as they expand. Just be sure to weigh the costs of setting up direct employment against the benefits to ensure it makes sense for your business. 

What is the typical duration of a contract with an EOR? 

The duration of a contract with an Employer of Record (EOR) is highly flexible and depends on your business needs. With Knit, there is no fixed term. Instead, the length of service is determined by your company’s goals and strategies. Many businesses use EOR services while exploring new markets or until they decide to establish a permanent entity in the country. The key consideration is whether the long-term benefits and costs of direct hiring outweigh those of continuing with EOR services. 

What are the risks of not using an EOR when expanding internationally? 

Managing payroll, taxes, and employee benefits in-house requires a deep understanding of local laws and regulations, increasing the risk of errors and penalties. Non-compliance with local employment laws can result in fines, legal disputes, and reputational damage.  

Moreover, without an EOR, you miss out on the expertise and local knowledge needed to navigate cultural nuances and effectively manage a global workforce. EORs’ expertise not only mitigates legal and financial risks but also fosters a smoother and more culturally sensitive management of global teams. 

Knit offers tailored EOR and PEO services to support your global growth. Whether expanding globally or optimizing your existing team, Knit has the expertise to meet your needs. 

Have questions? Contact us today to see how we can help your business succeed internationally.