Businesses today look for lucrative prospects to expand their business, streamline it, save on costs, and focus on their core competencies. Global companies are always looking forward to exploring new markets so they can present their innovations to the world. One of the ways in which they can easily expand without having to worry about things like onboarding, payroll, and other legalities is the EOR or Employer of Record.
EOR is a unique way to hire employees for your business, where they perform all designated tasks and chores for your company, but their responsibility in terms of hiring and paying salaries is taken care of by a third-party service provider. Let us look into some more details about EOR services in India and how global companies can use this service to expand their business.
What is Employer of Record Service?
Employer of Record or EOR is a service provided by a third-party that serves as the official employer for individuals hired by a company. When a company utilizes an EOR, the EOR takes on the legal and administrative responsibilities associated with employment while the company maintains operational control and direction over the daily tasks and work assignments of the employees hired under this service.
An EOR takes care of all employment-related tasks such as administration benefits, payroll processing, compliance with labor laws, tax withholding, and other HR-related functions. The EOR ensures that employees receive their salaries on time and their employment process is completed per the applicable laws and regulations.
Employer of Record benefits for companies includes – increased flexibility in their workforce management, hassle-free employee hiring, easy hire for short-term projects, no administrative burdens, and no legal complexities of direct employment. Moreover, EOR can also offer different comprehensive benefits packages, including health insurance, retirement plans, etc. These are important benefits that employees look forward to when seeking employment with an employer which the company may not be able to provide to them independently.
One of the major EOR advantages for employees is that getting hired through an EOR offers them job security.
I. How does being hired through an Employer of Record enhance job security for employees?
Job security is a major concern for all employees, especially when they join new companies. Here is how employees can experience enhanced security in several ways:
Compliance and Legal Protection – When an individual is employed through an EOR, the EOR takes care of the legal responsibilities and obligations connected to the employment of the employees. This includes compliance with labor laws, tax regulations, and social security contributions.
The labor laws and tax regulations are always changing, ensuring that the employment contracts and payroll processes adhere to the latest legal requirements. They also maintain accurate and transparent documentation related to employment contracts, tax filings, and other legal requirements.
By entrusting these legal obligations to the EOR, employees can have peace of mind knowing that their employment is conducted in a legally compliant manner. This helps to reduce the risk of employment-related disputes and safeguard their job security.
Continuous Employment – The EOR model allows employees to maintain continuous employment even when they are transitioning between different projects or assignments in a company. Instead of being victims of job gaps or unemployment periods, they stay on the EOR payroll. This helps them to generate a consistent income without disrupting their professional lives.
Access to Employee Benefits – Employer of Record Service mostly provides a comprehensive benefits package to their employees. Medical benefits, retirement plans, and other perks are given to them. By being part of an EOR’s employment structure, individuals can enjoy these benefits, which may not have been made available to them in a traditional independent contractor role.
II. How does an EOR streamline payroll processes and ensure timely payments?
A good payroll system is important not just for the employers but the employees too. It ensures timely and accurate payments, compliance with tax and labor regulations, and build trust between the employer and the employees. Here is how streamlined payroll with EOR is beneficial and ensures timely payment to the employees:
Centralized Payroll Management
As discussed above, the EOR is responsible for payroll management which includes all payroll-related tasks such as salary calculation, deductions, taxes, overtime, and more. A centralized approach to managing payroll ensures accuracy and consistency in payroll processing. It also reduces the administrative burden for both employers and employees.
Compliance with Tax and Labour Laws
Tax and Labour laws are connected to payroll, and they are not just complex but also tend to change frequently. Since EORs undertake the responsibility of payroll, they always ensure to stay updated with the rules and regulations related to them. This lowers the risk of errors, penalties and keeps the company away from legal issues too. Tax obligations are taken care of with ease, and employees too don’t have to worry about facing problems related to it.
Timely and Reliable Payments
One of the most important Employer of Record advantages is that the employees receive their salaries on time. The EORs have robust systems in place to ensure prompt and accurate payments. Any delays or discrepancies that may occur with traditional payroll processes do not happen with the EOR.
Transparent Financial Reporting
The employees receive relevant financial reports which offer them a detailed view of their tax deductions, deductions for benefits offered, overtime, and other relevant information that generally appears on their reports. This transparency allows the employees to have a clear understanding of their tax obligations and take-home wages.
III. How can employees make the most of the advantages offered by an EOR?
Onboarding their employees hiring process to an EOR can offer several benefits to the employees too. Some of these benefits of hiring an Employer of Record (EOR) in India include:
Foreign Subsidiary Not Needed
One significant advantage of utilizing Employer of Record services is eliminating the need to establish a foreign subsidiary. When hiring employees in a new location, companies can avoid the process of setting up and registering a subsidiary. Since EORs are already established legal entities in their respective countries, they are equipped with the necessary expertise to handle all the responsibilities of an employer on behalf of the company. This means that companies can quickly hire talent and begin their operations within a few days instead of undergoing the lengthy process of establishing a local entity.
Another benefit of working with an EOR is that legal compliance is taken care of easily. Operating a business in a foreign country requires knowledge of local rules and regulations, which is not an easy task. EORs possess the necessary expertise and understanding of the regulatory landscape of the respective country. This allows the companies associating with them to stay compliant and also minimize the risk of violating regulations. Working with an EOR service in India helps the business stay updated with legal obligations and minimize the chances of non-compliance.
Lower Cost of Operation
Utilizing the PEO services in India allows global businesses to save on their costs. EOR offers cost-effective solutions that save money in many ways – resources involved in expanding a business, establishing a local subsidiary, recruiting employees, onboarding them, and managing payroll. By employing EOR, global companies can reduce the financial burden associated with market entry and efficiently allocate their resources toward their core business activities.
As the legal employer of a given global company, the EOR helps mitigate risks like worker misclassification. Staying compliant with local employment classifications and payroll practices ensures these risks are mitigated effectively. EOR’s expertise also minimizes the risk of non-compliance with complex laws and regulations like tax and insurance requirements. It prevents the company from getting into legal disputes and troubles, which may otherwise lead to fines and penalties.
The employer of Record Service takes care of all employee-related tasks like hiring, onboarding, applying for work permits, visas, time sheets, creating employment contracts and terminations. Conducting background checks for all new employees is also the responsibility of the EOR. They also handle compensation and benefits according to local labor laws. This includes managing paid leave, insurance, pensions, vacations, sick leave, and maternity/paternity leave along with others.
Tax and Payroll
Tax and payroll administration is also the job of EOR once the company decides to hire them for the task. They ensure payroll compliance with local laws and regulations, deduct taxes from the employees’ salaries and make the proper payments to tax authorities. They are skilled and trained to take care of local payroll systems and leverage the latest technology to handle payroll administration effectively.
Hiring the Best EOR/PEO Services in India
As the leading provider of Employer of Record (EOR) services for global companies – Paysquare ensures to offer you the expertise and experience of our highly skilled EOR Team. We take care of all aspects of EOR so your company can expand its operations internationally without undergoing any problems. Our comprehensive services enable you to focus on your core operations while relying on our efficient and reliable EOR solutions to navigate the complexities of global employment and achieve seamless expansion for you.