One of the trickiest parts of an effective contingent workforce strategy is ensuring compliance. A common way to simplify worker classification and payrolling is by partnering with an employer of record (EOR). But what is an EOR and how do you know if you need one?
At People2.0, we understand the unique complexities of the staffing industry, and we’re here to make things more accessible. In this blog post, we introduce the concept of EOR. We distinguish it from an agent of record (AOR), explore its benefits, and identify when partnering with an EOR is a necessary part of your contingent workforce strategy.
Defining the Employer of Record
Global expansion is a high-risk, high-reward game. While talent platforms are becoming an increasingly popular way to directly source and manage workers, the legislative landscape of the global talent marketplace is getting more complicated every day. These factors combine to produce major risks of misclassification, which is not only harmful to workers but catastrophic for your clients and ultimately your business.
For talent suppliers looking to expand in this climate, employers of record (EOR) provide administrative support services and act as a vital barrier against the disastrous risks of misclassification. An EOR serves as the legal employer for administrative purposes while a worker carries out their duties for an end-hirer. They assume legal and financial liability for workers and handle back-office functions like payroll and compliance so you don’t have to.
Outsourcing to one of these partners allows your firm to maintain its focus on revenue-generating activities while expanding to new geographic markets.
Why an EOR Is Crucial to Contingent Workforce Engagement
If you’ve worked in the staffing industry for any amount of time, you probably have a basic understanding of the contingent workforce. In simple terms, a contingent worker is an individual engaged in temporary and non-permanent employment arrangements. This category may include but is not limited to freelancers, temporary workers, consultants, and gig economy workers.
The flexibility provided by a contingent workforce strategy can benefit both the business and the worker. Organizations can strategically use contingent workers to meet fluctuating workloads, access specialized skills, and minimize long-term labor commitments. Simultaneously, contingent workers can benefit from higher incomes and greater flexibility in their work schedules and location.
If managed incorrectly, however, these benefits can come at a great cost. In some countries, contingent workers can lose out on benefits like health insurance, retirement plans, and paid time off. Additionally, organizations that employ a contingent workforce strategy need to consider things like labor regulations, taxation, and worker rights. These items vary by jurisdiction, and challenges can become exponentially complicated when the talent supplier, the worker, and the end client are all operating from different locations.
Keeping track of all these variables can be a lot for one talent supplier, and taking on the risk of misclassification can be nerve racking. That’s why EORs assume legal and financial liability. Employers of record take on the risk so you don’t have to. People2.0’s EOR services even provide workers with portable benefits so they can maintain coverage between assignments.
Note that these services differ slightly from agents of record (AOR), so make sure you compare the two options before you decide.
Key Functions and Services Offered by EORs
Now that we’ve covered the basics of EOR services, let’s take a closer look at some of their specific offerings. Here are some vital EOR functions and services People2.0 can provide:
- Compliance management, ensuring adherence to labor laws and regulations
- Payroll funding and payroll processing
- Tax withholdings and reporting to relevant government agencies
- Benefits administration and enrollment to support workers between assignments
- Worker onboarding, offboarding, provisioning, time sheets
- Background checks and drug screening
- Subject matter expertise on employment laws in each geographic market
Benefits of Partnering with an EOR
The functions, services, and partnership with an EOR result in several benefits for talent suppliers. These include:
- Enhanced legal compliance, minimizing the risk of labor disputes and penalties
- Access to experienced HR professionals for efficient worker management
- Streamlined payroll processes, ensuring timely payments and accurate tax deductions
- Simplified benefits administration, promoting worker satisfaction and retention
- Scalability and flexibility to adapt to changing workforce needs
Scenarios for Hiring an EOR
Understanding the role and benefits of an EOR is important, but even more crucial is recognizing your business’s readiness to engage one. If any of the following align with your growth goals, you should consider partnering with an EOR:
- International expansion: If you’re ready to expand across borders and overseas, an EOR can provide compliance assurance, speedy market entry, and cost efficiency. People2.0’s EOR services include subject matter experts in countries around the world to help you navigate complex international labor and payroll regulations. We handle the liability. All you have to do is decide where you want to hire.
- Rapid scaling: Not only can EOR services support expansion, they can also scale with your business during periods of rapid growth. As you continue to take on more workers and clients in more places, People2.0 continues to facilitate seamless employee onboarding and other administrative functions. This frees you to focus on customer service and creating positive experiences for your workers.
- Risk mitigation: When you partner with People2.0, you’re not just gaining expertise in compliance. You’re insuring yourself against misclassification of workers. We take on all the risk to protect you from the potential financial and legal liabilities of expanding into new markets. Our track record speaks for itself. We’ve supported talent supply partners through 12 audits and over 60,000 independent contractor evaluations with zero fines paid and no classifications overturned, and we’re supporting more contingent workers every day.
Building Strategic Partnerships
The complexities and risks associated with global expansion, contingent workforce engagement, and employment regulations make the role of an EOR more critical than ever. EORs like People2.0 offer a suite of services designed to alleviate these burdens, allowing your business to focus on its core competencies and revenue-generating activities.
Whether you’re looking to expand internationally, rapidly scale your operations, or simply mitigate risk, partnering with an EOR can provide invaluable support. From compliance management and payroll administration to HR support and benefits administration, EORs handle the intricate details of employee management, offering peace of mind in an increasingly complex compliance landscape.
Remember, the decision to engage an EOR should be strategic and align with your business goals. If any of the scenarios we’ve discussed resonate with your current business situation, it might be time to consider partnering with an EOR. At People2.0, our expertise and global reach can help your business navigate these challenges and set the stage for sustainable growth and success. Reach out to us today to learn more about how we can support your business.