What is an Employer of Record Service? An Employer of Record Service (EOR) is a third-party company that legally employs staff on behalf of a client, typically in a country where the client doesn’t have a legal entity. In some countries, EOR providers are also known as a Global Employment Organisation (GEO). Increasingly, companies are using EOR services to expand their international operations. This enables them to access a wider pool of highly proficient professionals.

 Seven Key Advantages of an EOR service

1. Decreased expansion risk.
2. Reduced costs.
3. Increased rollout speed.
4. Streamlined payroll and benefits administration.
5. Insightful access to local talent.
6. Labour law compliance and risk mitigation.
7. Supports operational focus.

 This article outlines what an Employer of Record Service is, and how an EOR Service works. It unpacks the advantages of EOR and the alternative options available to companies expanding into international markets. It also outlines is a guide to finding a great EOR provider and why EOR in South Africa is a good option.

How does EOR Work?

An Employer of Record (EOR) service enables a company to either:

• Add to its operational staffing capacity, or
• Expand into new offshore markets without the need to establish a local legal entity.

Acting as the legal employer, the EOR manages key employment functions. This includes, but is not limited to, talent sourcing, initial screening, compliant contract execution, and ongoing payroll administration on behalf of the client.

While the EOR handles employment compliance and administration, the client retains full control over the day-to-day technical direction and supervision of the deployed team. This division of responsibility significantly reduces the legal, tax, and operational complexities and risks typically associated with international employment and labour law compliance.

Ultimately, an EOR service allows businesses to scale globally with greater speed and confidence, freeing internal teams to focus on core operations, strategic growth, and profitability.

Is an EOR Service Worth It?

An EOR service is definitely worth it, especially for companies looking to expand without the burden of setting up a local entity.

One of the key advantages of partnering with an EOR service is that the EOR provider assumes full legal responsibility associated with the employment of local staff. This includes, but is not limited to, recruitment coordination, compliance with local labour laws and tax regulations, payroll processing, and benefits administration.

Equally valuable is access to skilled local talent and a nuanced understanding of the local talent market, without the need to navigate the complexities of entity registration. This enables foreign companies to build high-performing teams in new markets while maintaining focus on core operations and strategic growth.

5 Benefits of an EOR Service

1. Decreased Costs: No need to incur local incorporation costs.
2. Local Compliance: Ensures adherence to mandatory and non-mandatory labour requirements and local payroll regulations.
3. Saves Time: Less time required to find and employ the correct employees.
4. Reduced Risk: All personnel are employed by the EOR provider, thereby decreasing the risks for EOR clients.
5. Availability of Skills: Access to high-calibre foreign workers.

Effectively, each of these five benefits of using an EOR service relates to saving time and money. By reducing startup time, improving access to top talent, and reducing overheads, a company has an immediate competitive advantage. Ensuring legal compliance and good staff management decreases long-run costs and the risk of legal complications. This is especially relevant when it comes to the nuances of tax compliance and local labour laws which can vary dramatically from a company’s home country laws.

Key Scenarios for Using an EOR Service

A big part of the purpose of EOR is to enable smooth expansion, and there are a number of scenarios where an EOR service is an ideal option. Here are eight scenarios where using an EOR service makes sense.

8 Key Scenarios for Using an EOR

1. Global expansion.
2. Need for rapid onboarding.
3. Access to top talent.
4. Efficient management of a local workforce.
5. Ensuring legal compliance.
6. Requiring scalability and flexibility for growth.
7. Relocation of employees.
8. Lack of international experience.

Who Should use an EOR Service

Companies of all sizes should look at partnering with an EOR provider, especially when expanding internationally. This is because the numerous advantages of EOR services are not dependent on company size.

3 Examples of Businesses that Use EOR Services

1. Start-ups and Small Businesses: EOR services enable companies to expand their operations in a cost-effective and efficient way. They are also able to scale up more quickly with high-calibre staff when they need to. This flexibility improves market competitiveness while they test new waters.
2. Global Companies: Even with an established presence in multiple countries, expansion into a new foreign country isn’t made easier. This is because every country’s requirements to set up a new business entity vary, and setting one up as a foreign company is often more complicated. Especially when it comes to the nuances of tax and labour law compliance.
3. Companies Expanding After a Merger or Acquisition: An EOR service can simplify the streamlining of company integrations, especially when there is a need to do so across multiple countries. An EOR partner is also able to provide in-country support for local HR processes. The result is a more stable workforce, as existing talent are often better supported and feel more secure during a change process or restructuring. Partnering with an EOR provider during this period also helps safeguard the company, as they are less likely to run into employee rights and obligations challenges.

In South Africa, it’s proven to be of great value for a company expanding operations to use the services of a reputable EOR. Then, after a twelve- to eighteen-month settling-in period, the entire team can be transferred into direct employment by the client company. This is accomplished through the provisions of Section 197 of South Africa’s Labour Relations Act.

Alternative Options to an Employer of Record Service

There are alternatives to using an EOR service when expanding operations into a foreign country. Once a local entity has been established, a company can choose to recruit their own talent, outsource, or use contractors. The main reason for not using an EOR service provider is to retain absolute control while integrating into a local market. However, this requires significant investment of both resources and time. It also carries tax and legal compliance risks, as ensuring compliance is usually arduous and continuous due to changing local laws.

Recruitment vs EOR Service

There are differences between simple recruitment and placement and an EOR Service. The primary difference is in who officially employs staff. When a company procures the services of a recruitment and placement consultancy, they are employing the personnel referred to them directly, thereby assuming all the responsibilities of labour compliance and its risks. In contrast, EOR providers employ highly qualified staff and then deploy them to a client. Accordingly, labour risk and compliance, as well as benefit management, are the EOR provider’s concern.

Outsourcing vs EOR Service

Outsourcing is a cost reduction and control strategy. It’s effective, as it can enable competitive market growth. However, unlike an EOR service, it does not facilitate the establishment of a permanent entity or guarantee a dedicated workforce. Instead, it relies on external contract workers who are usually employed on a need-to basis. This creates risks for a company, for example, becoming increasingly dependent on an entity that is free to pursue its own interests.

Contractor vs EOR Service

Access to a dedicated workforce has been shown to improve a company’s competitiveness, effectiveness, and efficiencies. It also enables a healthy work-culture to be built with trusted and loyal staff. Thereby, increasing staff retention, which results in company savings and fosters the reputation of the company as an ideal employer. All of these are key factors to build a successful company in a foreign country. Employing contractors gives a company access to professionals, however, it can come at a cost to bottom-line profits, workforce integration challenges, and consistency issues. This makes contractors ideal as a stop-gap or for temporary projects, but not necessarily for the successful and long-term expansion of a company.

What is the Best EOR?

The best EOR service provider is one that understands your unique needs and provides a tailored service to meet them. Ideally, you want a comprehensive EOR service with a local presence. Accordingly, it’s best to choose an EOR provider that has a long-standing in-country record of success. For example, the Key Recruitment Group has more than 45 years of experience in delivering recruitment and EOR services in South Africa. These EOR services are highly efficient, effective, and well-managed from first engagement to continued partnership. This is because each step is continually managed through the expertise of our insightful and experienced team. And because services are tailor-made and represent the Gold Standard of EOR provision. The Key Recruitment Group’s EOR services are offered to both local and internationally based businesses.

10 Important Service Features of EOR with the Key Recruitment Group

1. Legal Compliance.
2. Comprehensive Recruitment Processes.
3. Access to Top Talent.
4. Payroll Management.
5. Benefits Administration.
6. Onboarding and Offboarding.
7. Hands-on Employee Relations Management and Support.
8. Risk Management.
9. Global Hiring Solutions.
10. Reporting and Analytics.

 Why Use a South African EOR Service?

According to the latest Ryan Strategic Advisory Review, South Africa is one of the most favoured offshore delivery points worldwide. Practically, this means that Employer of Record Services in South Africa have proven to be efficient and effective.

7 Reasons to use a South African EOR Service

1. Significant cost savings (30 – 60%) based on favourable exchange rates and lower employment costs.
2. Access to highly qualified and skilled talent.
3. Ability to establish a workforce proficient in English.
4. Access to multiple linguistic capabilities such as French, German, Spanish, Dutch, and Portuguese.
5. Employment of enthusiastic staff with a low employee turnover.
6. Access to first-world infrastructure and management skills.
7. Ideal geographical location for operations in multiple time-zones.

Contact Us today to discuss how the Key Recruitment Group can support your company’s expansion plans through our Expert EOR Services