If you are planning to expand your business globally, or if you need to conduct business in another country, using an Employer of Record, or EOR, is a good approach. Instead of going through the bureaucracy of creating your own business entity in a foreign market, you can establish an international presence by using a partner that is already established in the local market. This allows you to retain control of your business in the other country.
For organisations that want global expansion quickly, this option is very attractive. However, among the advantages, there are things to watch out for. To help you make an informed decision, here is a list of pros and cons in working with an Employer Of Record.
Advantages of Working with an EOR:
– Quick access to the global market: You do not have to go through subsidiary registration in order to hire employees for the local market. Most small businesses do not have the funds to set up a separate entity in another country. However, using an Employer of Record allows them to hire employees anywhere in the world. This enables the business to get established and grow quickly.
– You have access to local established experts: EORs are based fully in the country in which you want to operate. They understand business and employment laws and regulation for that country. They speak the language. They can support their partner organisation in maximising opportunities and dealing with challenges that come with the local market. Some countries have complex and bureaucratic business regulations and a tough employment environment. A US EOR can help you plan and strategise on the best approach to success.
– Registering a company is not necessary
A lot of countries require foreign companies or investors to register their business locally for tax and administrative reasons. With an EOR, this is done already because the EOR serves as the local entity that is registered.
This means there is no need for you to navigate the company registration process yourself in the other country or pay the related fees. The other big advantage is that the registered EOR is responsible for legal matters and regulations relating to the registration, as well as being accountable for the administrative responsibilities. That allows you the freedom and time to concentrate on your business expansion and not on governmental bureaucracy.
– You are not connected to the EOR
You will work with your appointed EOR closely, but you can also discontinue the relationship whenever you want, and quickly. This allows you to exit the country quickly if you are presented with a new opportunity elsewhere and you want to change your focus right away. The EOR will take care of administrative matters, finances, and other procedures if you want to withdraw from doing business in this country.
Disadvantages of Working with an EOR
– You need time to incorporate your business goals and culture: Even though the Employer of Record partner will align themselves completely with your organisation’s identity, values, structure, and other aspects, you still have to incorporate these into your EOR. This might take a lot of time. Despite the time required, you will see that the EOR will make sure that they align with your objectives, and not the other way around.
– It is an ideal solution for the short-term, but not appropriate for the long-term
An EOR is a good solution if you just want to do business in another country for a short time, or if you just want to use them to launch your global expansion. However, if you plan to stay in the country and continue operations over the long-term, or if you anticipate rapid growth in this new territory, then setting up your own business entity would be the better approach.
The reason is that using EORs does incur expenses, and the money you spend is not really an investment into your company. Also, you will always have a level of separation from a part of your business operations.