Employer of Record Compliance Global Expansion Employment EOR

Understanding EOR: Pros and Cons of Using Global Employment Outsourcing Solutions

Mark Robbins
Global Sales and Marketing Director
February 12, 2024

Global employment outsourcing (GEO) is the process of hiring employees from one or more foreign countries to optimise operations, save costs or gain access to some specialised skill or expertise. In this article, we explore the pros and cons of global employment solutions and their overall impact on the functioning and profitability of your business. 

According to 360 Research Reports, the Employer of Record (EOR) market is projected to see significant growth over the coming years. From a total market size of $1.27 billion in 2021, it’s expected to reach $2.95 billion by 2027 – a compound annual growth rate of over 15%. 

EOR companies can enable your business to expand its global workforce without setting up legal entities in multiple countries or worrying about local compliance requirements.

What is global employment outsourcing?

Think of global employment outsourcing as an easy, secure and seamless way of hiring international talent. It involves partnering with a third-party EOR provider to delegate responsibilities for managing global payroll, taxes, insurance and employee benefits.

A global EOR outsourcing company can help minimise risks and eliminate the need for setting up local entities in every country where your employees are based. Additionally, it’ll free up time and resources, as your in-house staff can offload the responsibilities of aligning with laws, regulations and compliance requirements in several countries – relying on their expertise and local knowledge. 

Global employment outsourcing includes the following steps:

  • Choosing a trusted and reputable global employment solutions provider
  • Communicating your plans for international expansion and your global payroll needs 
  • Researching the provider, including their history, client outcomes, etc
  • Finalising the terms of the partnership
  • Hiring your international employees with the support of GEO

Unlike traditional outsourcing options, where you might delegate specific tasks, an EOR provider takes legal responsibility for your business and its operations in different countries. This can provide an extra layer of security and allow you to scale your business faster. 

Key benefits of using global employment outsourcing

We outline the key benefits of using global employment outsourcing services for international business expansion.

1. Cost efficiency

There are various costs associated with hiring international staff, including onboarding new payroll administrators with experience in global payroll and establishing a legal entity in a foreign country, etc. Partnering with an EOR provider offers a more cost-effective alternative, allowing you to choose and only pay for the services you currently need.

As a result, you can scale your international operations up or down as needed while accessing the best global talent in your industry with minimal hassle. 

2. Global workforce access

One of the major benefits of global employment outsourcing is that it can give you quick, seamless access to an international talent pool. Hire the world’s leading experts in your industry, no matter where they’re based. You can also quickly access more cost-effective labour markets in the developing world, helping you scale faster and leverage an agile, dynamic and diverse workforce.

3. Compliance and risk management

A good GEO provider will stay abreast of the tax regulations, employment standards and labour laws of every country you want to operate in. They employ payroll experts specialising in compliance, ensuring your foreign business operations are legally sound. This expertise helps reduce risks so your business can avoid fines, penalties and reputational damage. 

Potential drawbacks to consider

If not handled properly, global employment outsourcing can also have certain drawbacks. Let’s look at a few things to consider and how to overcome barriers to outsourcing.

Lack of direct control

While a reputed EOR company will work with you to understand your needs and requirements, you’ll lose a certain amount of control. Additionally, there may be some language barriers to navigate and system/process learning to consider.

Time zone differences

Differences in time zones, cultural expectations and holiday timings between different countries can impact productivity, if not properly managed. However, a good EOR partner can help you mitigate these problems through flexible work arrangements, effective communication strategies and initiatives to foster cultural awareness. 

Perceived data security concerns

Many businesses are reluctant to share sensitive payroll information, such as employee bank details, overtime records, tax identification numbers, etc, leading to data security concerns when outsourcing duties.

To ease these fears, find a GEO provider that has implemented robust data security measures, including stringent access controls, multi-factor authentication, end-to-end encryption for data transmission and regular security audits. 

Top tips for choosing the right global employment solutions partner

Whether hiring international talent or expanding into a new market, navigating foreign labour laws and tax codes can be daunting. Building a global team will become much easier and less stressful if you have a reliable global employment service provider.

To help you make the right choice, we’ve outlined the key factors you should consider when exploring different GEO providers. 

1. Country coverage

The most important question you’ll need to ask when outsourcing EOR is how many countries providers cover. Country coverage can vary significantly between providers, with some covering specific regions such as EMEA or APAC, and others emerging economies or OPEC nations.

If you need to expand rapidly over the next few years, choose a provider with extensive coverage. At TopSource Worldwide, we provide EOR solutions for over 180 countries and operate in every corner of the world. Make sure your chosen provider covers all the countries and regions in your expansion plans.

2. Reputation and track record

Check prospective EOR providers’ reputations and track records before you decide to work with them. They should have a thorough understanding of the regulatory environment and HR landscape in the target country where you want to hire workers and expand your business.

Choose a provider with a proven track record of working with businesses similar to yours in terms of size, industry and target regions. Even within the same country, different industries can have their own practices, work culture and regulations. Ask for client testimonials and case studies and, if possible, talk directly with some of their past or current clients.

Asking questions about niche topics (like labour leasing laws, bonus requirements, expatriate taxation, remote work regulations and severance payment laws in your target country) will also help you find providers with the right experience and expertise. 

3. Flexibility and scalability

The process of international business expansion can be complex and unpredictable. So, you need a GEO provider that can adapt to the evolving needs of your business, allowing for flexibility and scalability. Here are some aspects to consider:

  • The rapid onboarding of new international employees is essential for swift market entry and expansion. However, how fast you can move and how much you can reduce the time needed for legally onboarding new employees can vary widely between jurisdictions. So, verify the promised timelines and validate the provider’s experience.

  • The gig economy is growing every day and most companies work with freelancers to support their in-house teams. However, hiring a contractor or freelancer in a foreign country may pose employee misclassification risks and other compliance-related challenges. Your chosen global employment solutions provider should help you hire and manage international contractors with no compliance threats. 

  • Check the provider’s operating model. Do they work with in-country partners or through direct, owned entities? Those that work with in-country partners often have a higher level of local expertise and knowledge.

  • Choose a provider that offers a comprehensive range of services, from recruiting and multi-country payroll management to global benefits administration and employee assistance programs. This way, you won’t have to partner with multiple agencies for the services you need for smooth international expansion.

4. Compliance expertise

A business with globally distributed teams will face all the same hiring and payroll challenges as one with a local workforce but with some additional complexities.

With every new geography or jurisdiction, there are new labour and tax laws to be aware of to stay compliant. So, you need your chosen provider should have comprehensive expertise in the following areas:

  • Local employment and labour laws
  • Employment contracts
  • Tax requirements and withholding rules
  • Rules about work visas and permits
  • Local regulations surrounding data protection

Choosing a global employment outsourcing provider with expertise in these areas will help you avoid fines and legal issues when expanding into a new country. 

Summary

Finding the right partner for global employment outsourcing could provide your company with numerous benefits, including global talent access, streamlined international compliance and cost efficiency in payroll operations.

Do your due diligence while assessing their reputation, geographic coverage, expertise and flexibility. Carefully weighing up the pros and cons of each provider will help you minimise the risk of errors and ensure successful international expansion. 

Explore TopSource’s EOR and global employment outsourcing solutions

TopSource Worldwide is one of the leading GEO/EOR solution providers. Having served more than 1600 clients across 180 countries, we offer unique benefits that make us one of the most trusted providers in the sector.

Here’s what to expect from TopSource’s global employment outsourcing services:

  • Hassle-free payroll – we ensure all your international employees and contractors are always paid accurately and on time so your in-house staff can focus on core business operations.
  • Entity-free employment – our comprehensive global EOR solutions let you hire employees across the planet without being weighed down by international payroll responsibilities. No need to set up legal entities or recruit hiring and HR teams in several different countries. Save time and money and reduce compliance risks.
  • Extensive global expertise – TopSource employs more than 400 global payroll and employment experts who provide you with accurate and up-to-date information about employment laws and labour regulations across the globe.

By partnering with us you’ll enjoy error-free compliance with all local regulations. Our experts can also offer cultural insights to help your business navigate diverse work environments.

To learn more about how TopSource Worldwide can help streamline the process of international business expansion, check out our Global Employer of Record Services (EOR) here

See how TopSource can empower your global expansion

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Mark Robbins
Global Sales and Marketing Director
Global Sales and Marketing Director at TopSource Worldwide

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