5 questions to ask before choosing an Employer of Record company

When you are processing tax and ensuring the observance of rules and regulations for your company’s talent in another region, you are expected to hire the services of an employer of record. Employer of record masters and update itself on various guidelines that are available in the targeted country, saving you from the laborious task of mastering, maintaining, and complying with the labor laws in that country. You should conduct a background check in examining the professional background of the EOR company before work commences.

How does an Employer of Record work?

Before we launch into the pattern in which employer of record works, we need to establish the meaning of “employer of record”. EOR definition will give you a glimpse of who they are, their activities, and their benefits. Thus, what is an employer of record?

An employer of record is an external company/agency/organization that handles the international employment activities, international employment laws, and employment payroll functions of foreign talents on behalf of the employer’s company in another nation.

EOR is charged with the responsibility of taking on workers’ hiring tasks and obligations. They are known to be the lawful employers for your business abroad. Since they are a readymade company that has completed the expensive and time-consuming process of creating local subsidiaries globally. Thus, EOR has the required frameworks to execute international employment payroll in both a comprehensive and compliant manner. From the EOR definition, it’s easy to deduce that EOR grants your organization easy access to effectively and lawfully hire talents overseas without undergoing the creation of localized subsidiaries or violation of employment laws. In addition to the awesomeness of an employer of record service, the efficiency of compliance for international scenes is increased while potential risks are mitigated.

Having established an EOR definition, it’s imperative to outline how they discharge their duties. Knowing how an EOR works will help you in selecting/choosing one for your business. This is a brief outline of how EOR carry out its duties:

  • Play the role of international employer for talents in your organization
  • Provide your company with international compliant frameworks for smooth hiring, issuance of localized job contracts, and safe assignment of hired talents on the localized employment payroll.
  • Assume the responsibility of international hiring, tax and employee payroll compliance, and other international employment activities for your organization.
  • Keep a close watch on the organization’s employment records to ensure total compliance and lawful observations.

However, it’s important to emphasize that the employer of record services is only restricted to their activities as the employment experts in your business. They oversee workers’ day-to-day obligations and liabilities. Notwithstanding, you are responsible for your organizational growth, relationship, decision-making, job assignments, etc.

Who is responsible for compliance when I employ a worker abroad?

Globalization has set the tone for organizations to explore the international market space. When is organization is ready to start international/global expansion, hiring talents/employees from targeted countries should be your next concern. Talents from the country of interest will grant your business quick integration and adaptability to the country’s systems. It will avail you the opportunity to access skillful workers that will bring innovation and diversity onboard. Though it’s not easy to hire talents and establish them overseas, the process can be managed efficiently when you have the right knowledge and localized resources to aid you. Every country has its own statutory, it’s expedient that you comply with the regulations if you want to successfully carry out your business. If you decide to assume this hiring process yourself, you will have to develop a localized compliant employment payroll, master the employment laws, and ensure thorough compliance with the requirements.

Going through this process alone is very stressful and risky since you’re directly responsible for ensuring workers’ compliance. However, you don’t have to undergo this long and tiring process when you can just hire the best employer of record service.

When you partner with or hire an employer of record services, employing talents overseas will be easy and secure. The employer of record services will guarantee a compliant foreign talent hiring, legal and financial obligations for your organization. The EOR will be responsible for your foreign workers’ compliance during operation. Since EOR already has the legal framework and compliant unit in the targeted country, they will be in you of regulatory observations in that country.

Will I be responsible for Workers Compensation insurance?

The answer is in two phases. Yes, if you are handling the foreign process of hiring and setting up alone but the answer is no when you hire an employer of record. Nevertheless, we must define the term “workers compensation (WC) Insurance”. While carrying out a job for your company, workers are prone to experiencing little or fatal injuries. These injuries can result in temporal or permanent disability. Thus, as an employer, you are expected to uphold WC insurance in your organization. That said, workers’ compensation insurance is defined as a form of insurance that is formulated to provide full protection on workers when there is an instance of an employee’s injury during the execution of an industrial operation.

To hire talents abroad, the employer company is expected to secure WC insurance for its employees. Your organization needs to secure the insurance policy in that region and ensure proper and optimum observation. Taking up the responsibility yourself will expose your company to legal risks and other liabilities. Engaging the service of an employer of the record, however, will grant your talents complete coverage for the WC Insurance. The EOR will assume the WC insurance responsibilities for your company and thus, save you from the potential risks and obligations.

What is my role when it comes to taxes and regulatory compliance?

Although tax obligations vary from country to country, the requirements expected from employer companies are similar in most nations. As an employer, you must be aware of the mandatory and statutory nature of taxes around the world. As names are compulsory for organizations, tax compliance is also compulsory. Since taxes are statutory, the knowledge and compliance of its obligation are important to your organization. Failure to comply with the guidelines will bring heavy risks and penalties to your organization. Vast knowledge of tax obligations/liabilities as an employer will save your company from potential legal penalties. However, to attain maximum compliance, you need to employ the best employer of record services like WeHG in the targeted country for the right support. As an employer company, the following are some of your roles with regard to tax compliance:

  • You must register with all statutory agencies that regulate tax compliance
  • You are required to execute and complete all tax processing and filing within the given time.
  • You are responsible to file tax returns for your business
  • You are expected to withhold/deduct federal income taxes from your workers’ wages
  • You are charged with the sole responsibility of reporting and remitting the company’s federal unemployment tax act (FUTA) tax to the receiving agency
  • You are not allowed to deduct FUTA tax from your workers’ wages
  • You are expected to remit all withheld/ deducted taxes to the relevant statutory agencies
  • You are responsible for remitting some tax obligations (e.g. social security tax) that are shared by your and your employees to the tax agencies.
  • The employer records the amount of federal income tax withheld from employees as
  • The employer records the amount of federal income tax withheld as a liability
  • You are not required to withhold workers’ taxes from independent contractors’ wages.

With this in mind, you may want to ask how long should an employer retain records of employment taxes? As an employer, you are expected to retain records of employment taxes for a minimum of four years. It is important to note that by keeping employees’ personal records confidential, an employer respects their right to privacy. Thus, you might want to ask the following questions too; how many years must employers keep accurate records of MDA monitoring measurements, and how many years must employers keep accurate records of asbestos monitoring measurements? As an employer, you can keep accurate records of both MDA monitoring measurements and asbestos monitoring measurements for 30 years each.

How has WeHireGlobally helped?

When you hire WeHireGlobally as an employer, you don’t need a local setup/subsidiary/entity when scaling your business overseas. You’re not required to master the host country’s legal attachments and tax obligations when WeHG is there for you. WeHG provides your organization with the best EOR services that are very compliant. We offer real and technological solutions in mitigating risks, and relieving you of all statutory burdens while you maintain total organizational control. WeHG avails you of the single international agreement on point of contact, unified invoice for IPEO services in 150+ countries. WeHG ensures compliant onboarding and localized hiring contracts that are tailored to your interests. We add your talents to the employee payroll record and get them registered with the government and her agencies. We reward workers with benefits and other reimbursements via our single invoice. With WeHireGlobally, you can launch your foreign adventure within few days.


5 questions to ask before choosing an employer of record company

  • How does employer of record work?

    Employers of record ensure that they have a legal presence in foreign nations, and they use that in partnering with organizations that want to carry out business and employment operations abroad. They oversee talent hiring, tax compliance, and other lawful obligations. They utilize top technologies in carrying out their operations for client organizations they ensure that your business is compliant, and they handle all obligations.

  • Is it compliant to work with an independent contractor?

    Well, it depends on the location you are hiring from. Working with independent contractors is forbidden in some countries, e.g. China, but it is possible in other countries such as Germany. Nonetheless, you are setting your company on a risky journey if you decide to hire independent contractors. Several consequences are associated with the whole process.

  • Who is responsible for workers' statutory benefits when using EOR or Global PEO?

    An Employer or Record company or Global PEO is responsible for statutory benefits of your workers.

  • Hannah Kohl
    Hannah Kohl. Head of Customer Success. Has extensive experience in the HR and IT industries. Helped 100+ international clients to achieve their global goals.

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