Is Global Employment Best Handled by an EOR or Your In-House HR?

When it comes to international employment, you have two compliant options. Partner with an Employer of Record (EOR) and rely on their expertise and infrastructure OR set up and run your own local entities and take all responsibilities in-house.  

Employing abroad is hard. Doing it successfully requires a detailed understanding of local regulations and expectations. It also requires the creation of payroll and tax processing systems that can accommodate regional variations. And it needs to do all of that at scale. 

If you don't have the right local expertise, robust payroll processing, and reliable legal help, then you will find yourself in complex employment situations.

Here, we’ll explore why effectively managing your international employment in-house is easier said than done and dig into the value that the right EOR can provide to help.  

Why managing international employment in-house is prone to mistakes

We understand why you would want to take your global employee management in-house in the first place. You might believe that doing so will allow for:

• Greater control over employment and hiring processes
• Cost savings by keeping operations in-house
• Seamless integrations of processes within your HR team and ways of working

This perspective overlooks the intricate web of legal, tax, and operational challenges that come with employing staff across different jurisdictions. More specifically:

• Employment laws and tax regulations that vary across the multiple regions you’re employing in.
• The risk of not meeting those various regulations on time — including penalties.
• The operational burden of managing international payroll, benefits, and employee support (to name a few!) across multiple languages and regions. 
• Thorny legal questions for unique cases that will require a local expert to jump in to resolve (even if it’s just a conversation).

When the above aren’t addressed properly, you risk not solving important issues like different HR regulations in various localities, changes in local legislation, and forming contracts in local languages. These are scenarios that are complex and difficult to navigate without any external support — especially when you’re dealing with a large number of workers and regions.

Increasing your in-house workforce and expertise to adjust to demand isn’t the answer either. The number of both employees and complex international employment scenarios you’ll have to address will only grow — and at a rate that cannot be tracked easily or effectively. 

The best solution is to rely on an EOR that has a robust level of both expertise and experience to help you scale your employment needs. Let’s examine why.

EORs: Expertise and efficiency at scale

An EOR acts as the legal employer for workers in certain countries, owning the compliance with local employment laws, tax codes, and other regulatory requirements. An EOR will run your payroll, will provide the local employment contracts, and wil file the taxes at the end of the month.

Beyond that, the EOR will bring a level of expertise and resources that, in the long run, are truly invaluable. The right EOR will bring the experience required to address complex international employment issues and offer support when you need it.

The central challenge that businesses face with in-house international employment is regional variation and how that impacts the scale of the team required to manage that. To compliantly employ abroad, you need local experts in local employment law, taxes, and payroll regulations, and support teams available to handle any challenges. At a minimum, that’s three or four specialists per region.

If you’re only employing a handful of individuals in a region, the costs of employing them plus investing in local legal help just don’t add up. Our clients have found that it’s not until you have 100+ people employed in a region that the investment may start to make sense. And what happens when you want to expand to another region?  

What value do EORs bring in managing international employment?

Truly great EORs act as real partners to your business, providing support for unique situations that arise and going above and beyond to offer you personalised guidance.

Let’s look at one of our clients, Next 15, as an example of a business that needed a detailed understanding of the various regional requirements where they employ people.

Like any EOR, we provide in-depth country guides for on-demand regional guidance. However, there have been a few unique and complex challenges Next 15 have faced that our country guides alone wouldn’t have been able to solve.

Our team was on-call to provide detailed advice to Next 15 for unique and complex challenges. Here are two specific scenarios:  

1. Internal structures: Next 15 had multiple employees working across different brands in Portugal. We were able to help them create a parent-child model that gave Next 15 centralised control over their agencies’ payroll policies, standards and processes while also breaking out these different employees’ pay in a way that worked effectively. 
2. Bonus schemes: Regional regulations around bonuses present gnarly details you might not expect. Next 15 needed to overhaul their bonus system across a range of counties. We were able to help them maintain legal and financial compliance while streamlining the process to significantly ease the burden on their payroll team.

Now, picture facing these sorts of problems in your own business. Would you likely have the resources to manage these issues internally?

The answer is probably not. Access to experts not only minimises these risks but also provides a level of support and guidance that ensures your international expansion is both smooth and efficient.

With that said, remember that not all EORs are made alike. You want to ensure you’re choosing one that is both reputable and truly works with your business, knowing when to guide you towards another option and/or develop a custom solution to fit your needs.

Comparing the costs and benefits

Here, we’ve outlined the differences in costs and ROI you receive from managing your international employment in-house versus when partnering with an EOR.

The cost of going in-house

Leaving global employment management to your HR team (or a newly created internal function) involves several direct and indirect costs:

• Additional resources: Additional HR, Payroll, and Legal resources will be required to take on the extra load of work required for international employment management. That includes time spent in meetings between these various teams as well as money invested to manage tasks around legal, compliance, and mobility. Often, you will need local legal help, which doesn’t come cheap.
• Potential legal risks and fines: Failure to comply with employment laws, tax regulations, and financial reporting requirements across different countries runs the risk of additional spending on fines, as well as legal fees for local HR and legal counselling.

The cost of working with an EOR

There are going to be upfront as well as long-term costs you’ll have to pay for when partnering with an EOR. And these can vary, depending on the provider you choose. Some EORs may charge a flat fee, a percentage of the salaries of each employee they’re managing, or a combination of both.

In addition, there may be some hidden fees that only appear once you are working with the EOR. It can take time to fully quantify the kind of support you need from an EOR, and unexpected costs can arise.

With that said, if you partner with an EOR that offers clear-cut pricing and can reliably deliver you the expert guidance you need, then all the above costs become well worth the investment. The right EOR understands and compliantly addresses international employment every day, providing you access to an economy of scale that delivers:

• Compliance assurance: An EOR significantly reduces the risk of non-compliance by providing local legal and regulatory experts who will oversee operations, saving costs associated with violations.
• Operational efficiency: EORs streamline global employment processes, from payroll to benefits administration, allowing companies to focus on their core business activities. And through it all, the right EOR will prioritise doing everything on time and keeping you in the loop where needed. 
• Employee satisfaction: Mistakes in payroll and inadequate local benefits can lead to employee dissatisfaction. An EOR ensures employees are paid accurately, on time, including benefits packages — enhancing overall employee experience and loyalty.
• Cost savings: While there's an upfront cost to using an EOR, the long-term savings from avoiding legal penalties, operational inefficiencies, and the potential cost of HR focusing on compliance rather than strategic initiatives present a compelling ROI case.

Get the support you need for confident international employment 

Compliance and efficiency are crucial to granting you success in your global employee management. With the right EOR, international employment doesn’t have to be hard — it can simply help your business grow. 

If you have any questions about what partnering with an EOR looks like (or would just like a chat), feel free to book a call with us!