Tag: eor

What Can an Employer of Record Do for Your Business?

What if someone could help with the trickiest paperwork associated with your business?

Having an employer of record can be a real game-changer for businesses around the world. Unfortunately, most of the workers who would benefit from this the most don’t know anything about it.

So, what is an employer of record? What can it do for your business, and how can you get started? Keep reading to discover the answers!

What Is An Employer of Record?

Our guide is going to walk you through all the benefits of using an employer of record. First, though, we need to answer the obvious question: what is an employer of record?

Simply put, an EOR an employer for the tax purposes of different employees. Put another way, the EOR serves as an important intermediary between an employee and that employee’s client company.

An EOR is not right for every business. But in certain situations, it may be the best choice for the success of your career or organization.

An Alternative To Human Resources

Still unclear about what an employer of record does? A good way to think of an EOR is that it functions as an alternative to a traditional human resources department.

An EOR handles many of the things that HR would traditionally handle (more on this later). So, why would anyone rely on an EOR instead of their own HR department?

In some cases, this decision helps save money. Small businesses, and especially new businesses, may have an easier time paying for a third-party EOR rather than hiring a full HR staff and paying their full salaries and wages.

An EOR also makes sense for employers that wish to create a fully remote workspace. Since CEOs and managers will already be coordinating with employees remotely, coordinating traditional HR responsibilities remotely makes sense and, as we noted before, can save the organization money.

What Can An EOR Do?

We have noted how an employer of record offers an alternative to traditional human resources. But what, exactly, can an EOR do for you or your business?

Traditional, EORs process payroll, file taxes, deal with employee contracts, conduct background checks, and onboard new employees. Your EOR can also handle timesheets, unemployment compensation, certificates of insurance, employee benefits, and so much more.

Again, these are the kinds of responsibilities most businesses would use their internal Human Resources departments for. But in our dynamic and increasingly-global work environment, an EOR simply makes more sense for many businesses across the world.

Is This the Same As a Professional Employer Organization?

If you have previously explored alternatives to HR, then some of what an employer of record can do may sound very similar to what a professional employer organization can do. With that in mind, is an EOR the same thing as a PEO?

The short answer to this question is “no.” While a PEO also handles many of the responsibilities of an EOR, traditional PEOs are also responsible for managing employees. This has made PEOs a very popular choice within the United States for businesses who need assistance in helping and handling their workers on a day-to-day business.

An EOR can handle all of the responsibilities that we outlined before and so much more. But beyond that, an EOR will leave it up to the client company to manage their own employees. This relationship often works better for employees because it removes the perception that an outsider is telling them what they can and can’t do (which happens often with a PEO).

Promoting International Business

Earlier, we mentioned that EORs are a popular choice for entrepreneurs that want to either start a new international business or expand an existing business into a new country. But what makes EORs such a good choice for employers who want to go global?

When you use an EOR, it’s a lot easier to hire local talent in a new country. For that matter, a good EOR can help you find and recruit the best employees. This is a great option for small businesses that may lack the time or other resources necessary to research potential hires.

EORs are also experts in subjects like labor laws and other regulations in countries all around the world. When you rely on the services of an EOR, you greatly reduce the odds of committing any compliance violations.

Hitting the Ground Running In a New Country

Perhaps the biggest benefit of using an EOR is how much time they can save. And this is often very crucial to businesses hoping to hit the ground running in a new country.

For example, everything that we outlined before could be handled internally by your own company. You could conduct your own extensive research into labor laws and compliance regulations of various countries. Similarly, you could conduct your own in-depth research of potential employees to hire around the world.

Your business may very well have the financial resources and expert personnel necessary to get the job done. But ask yourself: how much time is this going to take? And how much better could that time be spent helping build your brand?

When it comes to business opportunities, there are few things quite as important as being able to strike while the iron is hot. And with an EOR handling much of the paperwork and legwork, your own business can get a jumpstart on the competition as you expand your business to its full potential.

Your Next Move

Now you know more about what an employer of record is and what it can do for your business. But do you know where you can find an EOR that you can trust with your business?

Here at Bradford Jacobs, we specialize in helping businesses just like yours achieve maximum success all around the world. To see what we can do for you and your business, all you have to do is contact us today!

International Subsidiary vs. Branch – What to Set Up

If you are looking to expand your company into foreign markets, one of the most important questions you have to ask yourself is whether you want to establish into the new territory as a subsidiary, or a branch? This is a crucial part of the planning process in business expansion.

Your answer to this question depends on a few factors, such as the opportunities you perceive in the new market, as well as any regulatory or cultural challenges you may want to tackle in your new territory or country. Other questions you may want to ask yourself during this decision time include:

  • What is the establishment process like – do you need a legal entity in the country first before setting up other processes, like payroll?
  • What is the process for acquiring work permits and residency permits for employees?
  • How long will it take for the company to be able to legally do business?

If your questions are more specific to the country you want to expand, check out our Country Guides. If you want to know more about the main differences of these entity types, you can read more about it below.

What are the main differences between a subsidiary and branch?

When deciding on whether you want to open a branch office versus opening a subsidiary company in a new territory, you will need to consider three points:

  1. What your primary business interest(s) will be
  2. What your goals are for the entity you choose
  3. How you will handle taxation and liability

The requirements for the incorporation of a branch and subsidiary will vary according to the country, but the main requirements include: a local address, incorporation documentation, and representatives of the parent company. The requirement for a local bank account also varies according to the payroll laws of the country you are expanding to. Share capital is only required for subsidiaries, but not for branches.

The characteristics of both entities are in the table below:

Understanding what makes both the branch and subsidiary distinct from the other makes a huge difference in making the decision for your business’ expansion.

However, one also needs to know the benefits and drawbacks of each entity type, before deciding which one is the best choice for you.

What are the pros and cons of a branch?

Pros:

  1. Parent organization maintains a greater level of control: A branch office receives all instructions from the parent company, as well as reports to it in all its decision-making processes, providing the parent company with greater control.

  2. Easier to integrate due to the same the laws and policies of the parent company/head office: Since a branch must be incorporated under the documentation of the parent company, the policies and culture of the parent company are easier to implement into the branch’s operations.

  3. It costs less to establish: Branches to not require any share capital to be provided beforehand, and the set-up costs to set up are considerably less than those of a subsidiary company.

  4. Offers the parent company greater tax benefits: In a majority of cases, any revenue that is earned by a branch office are handled by tax treaties signed between the country of the parent organization, and the country of the branch (eliminating double taxation). So, any taxes that the branch office has to pay are handled by the parent company, who can benefit from the taxation laws and benefits of the branch office’s location.

  5. It is the simplest form that a business may take for business expansion: A branch is often the simplest and safest way for a company to expand its brand into a foreign country and explore new markets. Other company types require more regulation, documentation, and compliance measures.

Cons:

  1. More difficult to explore new business opportunities for parent organizations: A branch is restricted in its business activities, so the lack of independence creates more difficulty in market exploration.

  2. If branch has legal problems or debts, a parent organization is liable: Parent companies are completely liable for any of the branch’s debts, fines, or legal settlements, which also increases the risk of the expansion.

  3. Finding employees for the branch: This depends on the country’s labor and migration laws, but finding employees is a lengthy and demanding process, especially if you are transferring employees to the new branch.

What are the pros and cons of a subsidiary?

Pros:

  1. Subsidiaries are independent of their parent company: A subsidiary is a separate legal entity, so it may conduct business more flexibly and easily, form partnerships, and explore new markets with little to no restrictions from the parent company.

  2. A subsidiary adds more accessibility and greater credibility to the parent organization: In most cases, foreign clients, service providers, and banks prefer doing business with a subsidiary for both legal and financial reasons, creating better accessibility to your business and sector.

  3. A subsidiary is more flexible than a branch: Subsidiaries enjoy a greater degree of flexibility in the issuing of transferring of shares to third parties (such as investors, partners, employees etc.), as well as the public stock exchange.

  4. Can explore more economic opportunities in a foreign country: A subsidiary can explore new markets in a foreign and need not necessarily stick to the same market as the parent company.

  5. May take advantage of cost efficiencies in a foreign country: Parent companies that open foreign subsidiaries can often take advantage of the country’s manufacturing and labor costs.

  6. A subsidiary offers greater liability protection for the parent organization: Since a subsidiary’s legal identity is separate from the parent company, that offer the shareholders of the parent company greater legal protection. They have no liability in the case of legal problems or debt of the subsidiary.

Cons:

  1. Subsidiaries cost more to establish and open: Subsidiary incorporation procedures are significantly higher than those of branches. Subsidiaries must have their own documents (including translations and legal advice), business or trade licenses, bank account, office space, payroll system, and more – which accumulate in costs.

  2. Face regulatory and cultural challenges: If you want to open a subsidiary in a new territory, you must carefully study the cultural, political, and regulatory environments of that country – as they will all have a significant effect on how the subsidiary will work. Shareholders or directors who live in the country can help the parent organization better understand how things work.

  3. Costs can be high in case of regulatory and legal problems: If a subsidiary falls into certain issues in terms of profit or revenue, there are more intricate legal and financial questions involved, especially when the legal system or language is not one you or your company are familiar with.

Contact us today to learn more!

Choosing between a branch and a subsidiary office in a foreign territory can be a difficult and complex issue – particularly if you are invested in expanding into new markets as quickly as possible.

It not only takes time to decide on the course of establishment and type of operation, but it also takes time to do the research and understand the different laws, rules, and customs of the country and how they do business.

However, there is a faster and simpler way to sort this out. Through Bradford Jacobs’ Global PEO and EOR models, we combine legal expertise and high-quality international HR.

We use our global infrastructure to help companies onboard teams in over 100 countries, without the need to set up a subsidiary or a branch office.

For more information about what we can do for your company’s expansion, contact one of our consultants today.