Employer of Record (EOR):
A Strategic Solution for Global Expansion

EOR is undoubtedly a fascinating industry to be a part of, especially following the Covid pandemic of 2021, which changed the landscape of the working world in many ways. 2024 is a very different place to work and employ in, compared to 2020; the debate rages on about whether the changes are all positive, or not.

With a huge rise in remote working, we have now seen an increase in digital nomads; international relocations; and employees returning to their home countries, under the same employment. As such, more employees and businesses are looking for ways in which to facilitate this shift, and ensure that workers can continue their employment compliantly and efficiently, wherever in the world they are based. This has inevitably led to an increased demand for EOR providers; a service which many individuals and businesses may not have been aware of until recently.

So, let’s delve a little deeper into this particular method of global employment, to establish if this solution is a good fit for you and your business.

It goes without saying that any business is going to be weighing up cost vs benefit. Understandably, there is a perception that utilising a third-party service provider is going to come at a premium. The reality? Yes… and no. How’s that for a straight answer? As you can expect, a number of factors will determine whether an EOR is a cost-effective option; let’s address some of them now:

• The cost of living will vary by country – in Saudi Arabia, for example, the cost of living in its capital, Riyadh, is less than half of the cost of living in London; it could be expected that the salary level may therefore be adjusted accordingly
• Employer costs – in Europe, employer costs can range between 6% in Romania, up to 36% in Spain for workers on $30,000, and this spectrum changes as annual salary amounts increase; therefore, depending on where you’re hiring from, and to, and what salary you’re paying, this may represent a saving – or not!
• Number of employees – EORs may offer a discount if you’re hiring multiple employees, which can prove a more cost-effective route than a single employee
• Length of engagement – An EOR is economically viable when compared to the costs, timeframes and legal intricacies required to a) set up a new entity, and b) hire HR and payroll personnel to manage your employees. However, when the engagement is ongoing and spans over a number of years, the ongoing monthly fees of an EOR may potentially outweigh the cost of setting up an entity internally

In relation to the last point, another factor, and certainly one that we have observed with many of our clients over the years, is that an EOR can be a great way for a business to ‘test the waters’ and expand quickly into a new market, before going to the time and expense of setting up a new entity. If the first year brings success, that may be a good checkpoint for reviewing the viability of establishing a long-term local presence. If the project does not go as well as expected, it is very easy to terminate within an agreed notice period, without incurring any further costs, therefore significantly reducing your financial risk.

Hiring in a different country may also raise concerns about compliancy within that country. This is another key benefit of working with an EOR, as compliance with local employment, tax, and social security laws is all part of the service. Relevant contractual agreements are in place to ensure that all parties are protected.

One final point to address is a company’s direct engagement with their employees, when they are based in different locations. The good news is that in today’s modern working world where video calls are the norm, working in different locations does not create the same level of separation as it once might have done.

Engaging with an EOR also creates a valuable touchpoint. Your EOR partner can be considered a trusted extension of your own HR department, so you know that your employees are being treated with the same level of care that your own business would extend, delivered in local language as required. Depending on the direct relationships you wish to maintain and how involved you would like to be in the day-to-day management of your employees, you can choose to hand all (or most) responsibilities over; or remain within the process. This is a great benefit of working with an EOR; it can be customisable according to your own requirements.

In summary, engaging with an EOR comes with numerous benefits, ensuring local compliancy, allowing businesses to test new markets with lower financial risk, and generally offering a cost-effective option for global expansion.

So, whether you’re expanding into one new country or twenty, Gibson Watts Global is here to make global payroll simple, reliable, and compliant. Let us turn your global goals into reality!