Pros and Cons of Hiring with an Employer of Record (EOR)

This article explores the role of an employer of record (EOR) and its value to your global organization's expansion and talent acquisition. It outlines the business functions an EOR can streamline and support, unpacks the the benefits of partnering with an EOR, and challenges the perceived disadvantages.

What is an employer of record?

An employer of record (EOR) is a third-party entity that acts as the legal employer for its clients' international employees. The EOR assumes full legal responsibility for hiring, onboarding, and managing your workforce compliantly and supports your HR, Legal, and Finance departments.

To hire overseas, employers must navigate complex industry-specific and local legal and regulatory requirements. An EOR allows you to employ global talent in strict compliance with local labor and tax laws, without the need to set up a local entity in every country you’re hiring from.

No EOR? You’ll need a local entity

To hire overseas employees without partnering with an employer of record, you’ll need to set up a subsidiary of your organization in the country where the employee is based. If you want to hire talent from multiple countries, you’ll need to set up a legal entity in each location.

Speed to hire is paramount to securing top talent, and the process of setting up a local entity can be lengthy. As an organization, you’ll need to factor in the cost of hiring Compliance, Legal, Finance, and HR professionals with in-depth regional expertise. You’ll also incur significant setup and registration fees. Deel’s entity setup calculator can help your organization anticipate associated costs.

The cost-effective and time-efficient alternative is partnering with a comprehensive EOR such as Deel. Deel's secure solution offers the most extensive market coverage across 150+ countries. This gives you the flexibility to test and enter multiple new locations simultaneously, hire, onboard, and pay employees without setting up a subsidiary or triggering a permanent establishment.

How can an EOR support my organization?

An employer of record supports the expansion of organizations’ talent pools across geographical borders and ensures your compliance with local and global regulations. It streamlines Talent Acquisition, HR, Legal, Compliance, and Finance processes for your global organization, and assumes legal responsibility across these functions. This dramatically reduces your compliance scope and the financial and reputational risks associated with non-compliance.

A comprehensive EOR solution such as Deel supports your full employee lifecycle in a single platform, including:

• Salary benchmarking to make competitive offers and attract and secure the best talent for your budget
• Navigating localized contracts and documents for quick and compliant hiring
• Carrying out background checks and securing any necessary work permits or visas with Deel Immigration
• Procuring, delivering, and managing the equipment your employee needs to succeed with Deel IT
• Onboarding support with automated workflows, customized training, and on-demand, in-language support for employees
• Assigning employee benefits in line with local requirements
• Administering global payroll, including withholding and remitting taxes, paying wages in local currencies, and distributing payslips
• Managing compliant contract renewals, employment classification changes, and offboarding processes

Key benefits of partnering with an EOR

Hire the best global talent for your budget

EOR services allow you to tap into other markets in different countries. Being able to instantly hire employees all over the world without a subsidiary registration simplifies your business’s expansion, letting you hire in days, not weeks or months.

An EOR grants you access to a highly-skilled global workforce to fill the lo competency gaps your business faces with employees who are aligned with its values and committed to its mission. Simultaneously, you boost your organization’s diversity and break down regional discrepancies in access to employment. Many regions have a lower cost of living and salaries than major cities in North America and Western Europe, which allows you to acquire the talent you require, within budget.

You can discover key considerations to shape your global hiring strategy in these handy guides about entering top talent hubs in EMEA, APAC, and LATAM.

Streamline HR and payroll processes

There’s no need for hiring, onboarding, and paying international employees to cause headaches for your HR, Legal, and Finance teams. An EOR streamlines HR and global payroll processes with automation, which reduces the capacity for human error. It can save your teams countless hours of administration spent processing and submitting taxes in multiple countries and currencies. This gives your team time back to focus on driving growth and connection through strategic and employee-centric interactions.

Some EORs such as Deel provide access to accurate, real-time data about your global team members, departments, and organizations. This gives all employees equitable visibility within the organization and reduces unconscious bias related to employee performance. The tool allows HR to evaluate progress and support professional development, enhancing employee satisfaction.

In-depth reporting allows you to observe behavioral trends and identify areas or functions requiring additional support or investment, which powers your team’s informed, strategic decision-making.

A consolidated employee experience

With localized benefits, in-house expertise, and easy-to-use, self-service platforms, an EOR can help you create an inclusive, consolidated employee experience for all your workers, regardless contract type or location.

Globally dispersed employees can become frustrated with a fragmented workplace experience when inconsistencies in processes negatively affect their productivity and communication. In turn, frustration harms employee engagement and morale. Deel EOR’s single tech stack standardizes processes across all locations and gives globally distributed employees equitable access to the information and documentation they need to communicate and collaborate asynchronously. This increases productivity and supports employee satisfaction.

Deel’s dedicated in-house employee experience teams support your team members and resolve any queries in their respective time zones and languages.

Expand your options for hiring overseas talent

Without an EOR (or local entity), your options for hiring talent overseas are limited:

• Hiring independent contractors, who fix their own schedule and whose scope of work is limited. The benefits, leave entitlement, and protections which apply to independent contractors are usually far less favorable than those for employees, so top talent may not be satisfied with this contract type. Severe penalties apply in the case of misclassification, when a worker serving in the capacity of an employee is registered incorrectly as an independent contractor.
• Relocating a full-time employee to your headquarters by sponsoring their visa. This limits your talent pool to candidates who are willing and able to relocate, and is a costly and time-consuming process.

An EOR allows you to act fast and remove the risk of slow and inefficient processes losing you your top candidate.

By leveraging Deel EOR, App Bar streamlined its hiring and onboarding, eliminating the need for local entities and expensive consultants, enabling them to hire and retain talent based on capability, not location.

No co-employment arrangement

An employer of record serves as the full legal employer on your behalf and assumes responsibility for meeting all legal compliance requirements. This sets EORs apart from US Professional Employer Organizations who act as a co-employer and share legal liability with your business.

From startups and scaleups to enterprises, an EOR gives businesses of all sizes the flexibility to access affordable talent and test new markets without the commitment, complexities, and upfront costs associated with establishing overseas entities.

Debunking the perceived disadvantages of hiring with an EOR

Some employers worry they'll lose a sense of control over their organization, that their company culture will shift, or that their expansion will be limited if they partner with an EOR. Here, we unpack and debunk these employer concerns and perceived disadvantages:

Losing control

Hiring another organization to take care of your payroll and HR processes can make you feel as if you have less influence over your workforce management. However, your business will continue to call the shots and manage the day-to-day operations.

Working with an EOR is a partnership that gives your organization the tools you need to succeed. A solution like Deel EOR with in-house regional experts and a single, secure tech stack gives you better visibility over your organization and its performance. It automates tasks to improve accuracy and allow your teams to focus on strategic tasks and those which require human interaction. By knowing more, you can do better, and gain greater control over your global business and its expansion.

A changing company culture

Hiring globally can positively impact your company culture with access to diverse talent with a range of cultures, languages, and ways of working. However, the challenges of operating, communicating, and collaborating across time zones and geographies can negatively impact your employee experience. The frustration caused by fragmented and inconsistent processes, rather than partnering with an EOR, may shift your company culture.

Instead, an EOR can bridge the communication gap, offer in-language support and region-specific expertise, unify siloed systems to enable effective asynchronous collaboration, standardize performance evaluation, and improve the efficiency and reliability of payroll and HR processes.

Coverage limitations

An EOR should give you more hiring flexibility, not less! The country coverage and level of data security that an employer of record offers varies between providers. Deel offers the greatest market coverage, giving you the freedom to hire at speed across 150+ countries, in strict compliance with local and global regulations.

When choosing an EOR provider, you must ensure that it meets the legal and security requirements of every country you operate and hire in, as well as those you’re interested in expanding into. You should review what level of support you’ll receive and which additional services the EOR provides.

Book a demo to learn why over 35,000 global businesses choose Deel for an industry-leading experience.