How Does an EOR Service Work

Career Advice, Offshore

Employer of Record (EOR) services enable smoother more efficient and cost-effective business operations for a company expanding into new countries. An EOR can also be known as an International Professional Employer Organisation (PEO) or a Global Employment Organisation (GEO). So how does an EOR service work? And how can you take advantage of their services?

What does Employer of Record service mean?

EOR services enable a company wanting to expand into a new overseas location to hire proficient local employees. At its essence, it is a labour outsourcing service. Accordingly, an EOR handles the hiring requirements and oversees the subsequent payroll processes. This means that the company expanding their domain can decrease their expansion risk profile as well as overheads. It also allows them to expedite what would otherwise be a tricky and time-consuming progression.

Why use an Employer of Record?

One of the primary reasons to use an EOR company is to make working across multiple countries easier. This is because starting a-new with setting up an in-country entity, comes with many challenges. It is often an expensive and lengthy process. Working alongside an EOR enables companies to access and employ reliable employees, at a reasonable rate.

Furthermore, legal compliance in an unknown environment can be complicated. Utilising the services of an EOR better ensures compliance with, for example, local tax requirements and labour laws. Thus, an EOR can assist in preventing future legal challenges for a company establishing itself in a new context.

4 Benefits of EOR Services:

  1. Decreased Costs: No need to set up a local permanent business entity.
  2. Local Compliance: Ensures adherence to mandatory and non-mandatory labour requirements and local payroll regulations.
  3. Save Time: Less time to find and employ the correct employees.
  4. Ensure Skills: Access to high-calibre foreign workers.

Why not hire contractors?

It used to be commonplace to hire contractors to either work full-time or be a stopgap when a company expanded. However, there are several reasons why this is no longer an ideal approach when looking at out-of-home-country employment.

A primary reason to not work through contractors is contractor misclassification. For example, in some countries employing a contractor full-time is regarded in the same light as having a full-time company employee. Thus, they are legally eligible to claim full labour benefits, such as severance and compensation pay-outs. Which unnecessarily complicates employment matters and can result in unforeseen additional expenses.

Proposals from the South Africa National Treasury show that it intends to align the obligations on South African and Foreign employers from a tax perspective. If this is passed it will have implications for those foreign companies hiring contractors. Foreign companies may be forced to register in South Africa or to use a South African EOR.

A Tax specialist from Webber and Wentztel who recently published an article on the implications of this new proposal made the following comments related to EOR’s.  The EOR arrangement is useful for multinationals to contract and deploy individuals wherever necessary in a matter of days. This is specifically because there is no need to go through the process of registering a subsidiary or branch in the country of deployment. Nor any need for related registrations with revenue authorities in those countries. Thus, this arrangement is likely to provide an efficient solution, considering the proposed amendments affecting foreign employers in the Budget.

How do Employer of Record Services work?

EOR services allow a company that does not have a local legal entity to legitimately employ locals. Notable is that EOR services do not extend to co-employment options. Thus, an employee is technically only employed by the EOR. However, the day-to-day job and functions of employees are overseen by the company employing the EOR services. Therefore, the EOR’s client company is usually responsible for employee training, technical direction, and on-site supervision.

What kinds of Services do Employer of Records Perform?

EOR services are primarily administrative. Therefore, they typically include a range of services within the Human Resources (HR) and legal areas of a business. For example, if a French company wishes to expand their business operations into South Africa, it could use an EOR to set up and oversee the processes of hiring South African-based employees. And thereafter, the high-level oversight of their employment.

EOR Services Include:

  • Advisory services.
  • Tax compliance.
  • Human Resource Management and all related employee relations management.
  • Access to local legal teams.
  • Administration of Payrolls.
  • Overseeing benefits.
  • Assist in setting up or providing work centres with all the required infrastructure.

What to look for in an EOR

The starting point of a successful new country expansion lies in the calibre of the EOR services employed. Thus, there is a need to do some groundwork before enlisting the services of an EOR.

Questions to ask when Choosing an EOR

  1. Do they have a local presence? There are two ways that an EOR can have a local presence. One is by having a base in the country and the other is through a partnership with a locally based entity. An EOR which has neither will not be able to provide effective and efficient services. For example, being on hand during employment processes.
  2. How a company’s sensitive employee information such as payroll, is collected, stored, and protected matters. Thus, knowing and agreeing with an EORs data privacy and security protocols and protections is important.
  3. What payment model is used? What services cost and how this is calculated differs between EOR companies. For example, some offer fixed price models, whereas others a percentage of an employee’s salary. Some EORs also have hidden costs.
  4. How flexible and comparable are employment contracts? Each EOR has its own terms and conditions of employment. These may align well with the company seeking services or need to be negotiated around. For example, EOR standards or benefits and not in-country labour requirements. In this case, a company needs to decide if they are willing to agree to them.

Key Recruitment EOR Services

Key Recruitment provides reputable EOR services. This essential service is further supported by Legal and Financial consulting experts as needed.

4 Essentials of the Key Recruitment EOR Services:

  1. Procurement of skilled personnel needed by clients for varying roles. Primarily (IT Support, Test Teams, Developers, Project Management, Infrastructure Engineers etc.), Back-office admin (Financial, Sales/Logistics, Legal, Creative teams etc.).
  2. Securing of premises, setting up work centres with full technical infrastructure and on-site management presence.
  3. Employment contracting, including upfront knowledge of client and associated strict confidentiality with regard to client business.
  4. HR administration services. Such as employee onboarding in service to the client, probation period monitoring, participation in the monthly performance management reviews, ongoing employee relations, payroll & leave administration. As well as Employee dispute resolution and attendance to employee disciplinary issues.


Our employees are deployed exclusively to the services of the specific client. Thereafter, with our support, clients are responsible for the technical direction, training, and on-site supervisory management of these personnel resources.

Contact us today to find out how we can help you to expand your business horizons.