EMPLOYER OF RECORD – FREQUENTLY ASKED QUESTIONS

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third-party organization that takes on the legal responsibilities of employing staff on behalf of another company. This means that the EOR handles all formal employment tasks, including payroll, taxes, and compliance with local labor laws, while the client company maintains control over the daily tasks, responsibilities, and management of the employees.

This service is especially beneficial for companies looking to expand internationally without setting up a local entity in a new market. The EOR acts as the legal employer, allowing businesses to quickly and efficiently hire employees in different countries while remaining compliant with the local regulations.

How does the EOR model work?

The EOR model involves three parties: the client company, the employee, and the EOR provider. Here is how it works:
The Client Company: Manages the employee’s day-to-day activities, assigns tasks, and evaluates performance. The client decides whom to hire, the job description, and the terms of employment.
The Employee: Works directly under the guidance of the client company, following their tasks and schedules.
The EOR Provider: Legally employs the worker on paper. The EOR handles the administrative, legal, and compliance aspects, including issuing employment contracts, managing payroll, paying taxes, and ensuring compliance with local labor laws.
The EOR model ensures that the client can focus on core business activities while leaving the complex employment requirements to the EOR.

Why use an Employer of Record?

Companies use an Employer of Record for various reasons, including:
International Expansion: An EOR enables companies to hire employees in different countries without needing to establish a local entity. This speeds up the expansion process and significantly reduces costs.
Compliance with Local Labor Laws: Labor regulations vary greatly across countries, and non-compliance can lead to severe legal consequences. The EOR ensures that all employment practices adhere to local laws, including minimum wage requirements, benefits, taxes, and worker rights.
Administrative Efficiency: The EOR handles all payroll, benefits, and legal aspects, freeing up time and resources for the client company to focus on growth.
Cost-Effective Solution: Setting up a legal entity in a foreign country can be expensive and time-consuming. An EOR provides a cost-effective way to hire employees in new markets without these burdens.

Who is the legal employer in an EOR arrangement?

In an EOR arrangement, the Employer of Record is the legal employer of the workers. The EOR issues the employment contracts, pays the employees, and handles taxes and other statutory contributions. However, the client company directs the employees’ daily tasks, projects, and responsibilities.
This arrangement allows the client company to maintain operational control over the employees while the EOR manages the legal and administrative aspects of employment.

How does an EOR differ from a Professional Employer Organization (PEO)?

While both EOR and PEO services offer employment solutions, there are critical differences:
EOR (Employer of Record): The EOR is the legal employer and assumes all employer responsibilities, including payroll, tax filing, and compliance. This model is especially suitable for companies expanding to foreign markets where they do not have a legal entity.
PEO (Professional Employer Organization): The PEO co-employs the workforce with the client company. This means that both the PEO and the client are jointly responsible for employment aspects. However, to use a PEO, the client company must have a legal entity in the country. PEOs are mainly used domestically rather than internationally.
In summary, an EOR is ideal for companies that want to employ workers in a different country without creating a local entity, while a PEO is suitable for domestic employment arrangements where co-employment is possible.

What are the key benefits of using an EOR? (PEO)?

The main benefits of using an Employer of Record include:
Faster Hiring: Quickly hire employees in new markets without waiting to set up a legal entity.
Legal Compliance: The EOR ensures compliance with all local labor laws, minimizing the risk of legal issues.
Cost Savings: Avoid the expenses associated with establishing a legal entity in a new country.
Administrative Relief: The EOR handles all payroll, benefits, and administrative tasks, allowing the client company to focus on core business activities.
Global Mobility: An EOR can facilitate international projects by making it easier to hire remote or in-country workers for short-term or long-term assignments.

Is using an EOR a long-term solution?

Employer of Record can be both a short-term and long-term solution, depending on the client’s needs. Some companies use EOR services to quickly enter a new market and hire a few employees while they explore the potential for business growth. Others may use EOR services long-term to manage an entire team of employees without the need to establish a local entity.

How does payroll work with an EOR?

Payroll under an EOR arrangement is managed entirely by the EOR provider. The process typically includes:
Salary Payments: The EOR ensures timely salary payments to employees, including processing all deductions and statutory contributions.
Tax Filing: The EOR calculates and files taxes according to local regulations, ensuring compliance with tax laws.
Expense Reimbursement: Any expenses incurred by employees can be processed and reimbursed by the EOR.
Payslips and Reporting: The EOR issues payslips to employees and provides detailed payroll reports to the client company.

Can an EOR help with employee benefits?

Employer of Record can manage employee benefits, such as:
Health Insurance: EORs can offer health insurance packages that comply with local regulations and provide options that match employee expectations.
Retirement Plans: Where applicable, the EOR can facilitate contributions to retirement plans or pensions.
Bonuses and Incentives: The EOR can process and distribute bonuses, incentives, or commissions.
Other Benefits: The EOR can offer a range of other benefits, such as transportation allowances, meal vouchers, and flexible work arrangements, depending on local practices.

What should I consider when choosing an EOR provider?

When choosing an EOR provider, consider the following factors:
Expertise in Local Labor Laws: Ensure the EOR provider has extensive knowledge of the labor regulations in the target country.
Experience with International Clients: Look for an EOR that has a proven track record of working with international companies.
Range of Services: Check that the EOR can offer comprehensive services, including payroll, compliance, benefits management, and more.
Reputation and Reliability: Research client testimonials and reviews to gauge the provider’s reliability and customer service quality.
Cost and Transparency: Understand the cost structure and ensure there are no hidden fees. The EOR should provide clear, transparent pricing.

Can an EOR help with termination and offboarding?

Employer of Record handles all aspects of termination and offboarding, ensuring compliance with local laws regarding severance pay, notice periods, and documentation. The EOR ensures that the process is legally compliant, efficient, and respectful, minimizing risks for the client company.

Is an EOR suitable for hiring contractors?

While EOR services are designed primarily for hiring employees, some EOR providers may also assist with contractor management. However, contractor arrangements might require a different set of services, such as a contractor management organization (CMO). Always confirm with your EOR provider if they can handle contractors and understand the legal implications of hiring contractors versus full-time employees.

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EOR-Related HR Services Offered by Horizons Bulgaria

Horizons Bulgaria provides a range of HR services that complement our Employer of Record (EOR) solutions, ensuring that your business can manage employees seamlessly and effectively in new markets. Our comprehensive HR services are designed to support businesses at every stage of the employment cycle, from recruitment and onboarding to training and retention. Here’s how we can help:

Why Choose Horizons Bulgaria for EOR-Related HR Services?

When expanding into new markets, finding and managing the right talent can be challenging. Our EOR-related HR services provide end-to-end support for companies looking to grow their workforce without the need to establish a local entity. With a deep understanding of local markets and extensive HR expertise, we ensure seamless employee onboarding, compliance, and management, so you can focus on your core business activities.