You’re thinking of expanding your business internationally because you see a great opportunity in a foreign country, but where to start? Many organisations hesitate to expand across the borders because it’s thought that they immediately have to set up a local entity in the country they wish to operate in. However, when considering going international, there are faster and more cost-effective ways to trial your business abroad. Using an Employer of Record can offer the solution that you’re looking for. Let us explain the pros and cons.
What is an Employer of Record?
An Employer of Record (EoR) is a third-party local entity that acts as an intermediary between employer and employee. An EoR takes responsibility for all formal employment tasks and liabilities in the designated country. An EoR basically hires your employees on your behalf and is legally responsible for paying them, including taxes, benefits and insurances, whilst you can keep managing the daily responsibilities that belong to your business.
An organisation that provides employer of record services is fully aware of all labour laws in your country of choice which means that you can instantly start your business operation compliant to legislation. Apart from that, an EoR has local HR experts running the payroll that have knowledge of the business culture and speak the local language.
An employer of record takes care of all administrative tasks for your staff, amongst others:
- Employment contract setup
- Payroll management
- Work permits and visas
- Local insurances
- Handling expenses and timesheets
- Termination and dismissal
Setting up your own entity
If you already have long term plans, setting up your own entity might be the best solution to go for. There is no monthly fee to a third party involved and you can keep all the HR processes under your own roof. However, the risks are high and there are still costs involved.
The costs of setting up a local entity in a foreign country can vary a lot. You have to register your company to the local tax and labour authorities and meet capital requirements. You must set up your payroll, find specialist tax accountants and experienced labour lawyers to have all processes of hiring staff and managing your business compliant to local legislations. And even getting a bank account abroad, can be a difficult, time-consuming process.
Furthermore, you need to recruit HR staff to run your payroll. For some types of businesses, you will need to obtain certain certifications, which can be costly and slow down the processes. Eventually, when things are not working out, shutting down the business is very costly and time-consuming as well.
The benefits of partnering with an Employer of Record
- Fast way to expand across the borders
- Avoid risk to be non-compliant to local labour law
- Easy hiring of local employees that know the market you operate in best
- Long term expertise in the local countries legislations
- Gives you a low-risk opportunity to explore business abroad, without setting up a subsidiary
- Local HR experts running the payroll
- Knowledge of the business culture in a country
- Opportunity to expand to multiple countries at the same time
- Cost-saving, no need to set up a costly entity
- No capital requirements for starting businesses
- Help with the transition in case of a merger where the new local entity has not been set up properly
- A partner that keeps up to date with constantly changing legislation so that you don’t need to
How can we help you?
Are you looking for a compliant solution to expand your business abroad, but you don’t know where to start? Let Parakar guide you! With over 20 years of experience as an Employer of Record, Parakar can fully advise you on the best solution for your business. Get in contact with our HR specialists!
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