[Guest blog written by Omnipresent]
There are many reasons to hire internationally. Maybe you are expanding into a new region, or want to access a wider talent pool, bring diversity into your company, or hire experts who live abroad.
But while hiring internationally can solve many problems, it can also lead to compliance issues; it’s easy to rush things and end up not following local laws, making a mistake like misclassifying workers or processing payroll incorrectly.
But using an EOR or PEO can help. So what are these services, and how do they benefit your business from a compliance standpoint?
What’s an EOR?
EOR stands for “Employer of Record.” Essentially, an Employer of Record is a company that becomes the legal employer of your international hires. For example, an EOR that operates in Sweden could employ your Swedish staff on your behalf, even if you don’t have a business presence in Sweden.
In general, the main benefit of hiring through an EOR rather than directly is that it helps keep your business compliant with local employment and tax regulations related to onboarding, payroll, and benefits without the need for your business to have a legal entity in the country you’re hiring in.
Benefits of using an EOR:
- Ensuring compliance with local laws: Each jurisdiction has different laws regarding compensation, taxation, and benefits. It’s a lot to keep track of, but an EOR can manage it for you.
- Saving your HR team’s time and resources: Learning about and applying all the unique compliance regulations in each new country is time and resource intensive. Using an EOR can free up your HR team to focus on people strategy and higher ROI activities.
- Leaving day-to-day management to you: While EORs take on the legal responsibility for employing people, your business remains in control of your staff’s day-to-day management.
What’s a PEO?
PEO stands for “Professional Employer Organisation”. PEOs operate similarly to EORs, but instead of employing people for you, they simply take care of payroll and other HR functions. Some people might refer to this as outsourced HR or global payroll.
The main benefit of using a PEO is that it can significantly reduce your HR overhead, but you do need to have a legal entity in the hiring country to use one.
Benefits of using a PEO:
- Lowering your HR overhead: A PEO can manage onboarding, payroll, benefits, and more, reducing the need for your own HR team to carry out these administrative tasks.
- Simplifying your payroll process and ensuring compliance with taxes: Payroll is a vital process for your business and your team. PEOs with local expertise can reduce the risk of getting local payroll, tax payments and filings wrong.
Differences between EORs and PEOs
EORs and PEOs might seem quite similar, and in some ways, they are:
- Both can help you manage key HR functions like payroll.
- Both can help keep you compliant with local laws.
However, there are differences.
An EOR is the legal entity that actually employs your international team members. But if you use a PEO you still need to establish a local entity to be their employer and comply with local laws and regulations, which can be time-consuming and costly if you’re only hiring a few people.
Should you use a PEO or an EOR?
Whether you should use a PEO or an EOR largely depends on if you have a local entity in the jurisdiction you’re hiring in. If you do have a local entity, you might simply want to use a PEO to lower your HR costs, free up resources, and help you stay compliant.
However, if you’re not in a position to establish a local entity, an EOR may be better.
Ultimately, both EORs and PEOs can improve employee experience by ensuring they’re paid properly, in a timely manner, and without legal hiccups, while also giving your business more time for higher ROI tasks.
By using a global employment partner with local expertise like Omnipresent, your business will be equipped with the knowledge, confidence, and resources you need to build your team internationally.
To learn more, contact Omnipresent today to book a free consultation.
