When discussing Employer or Record (EOR,) there is a lot of confusion as to what it means exactly. This is particularly true when the topic is global growth or expansion. Here, in a nutshell, is what an EOR is, does and both its scope and why this type of arrangement makes sense for some companies.
What Is EOR
EOR simply is the entity that assumes responsibility for all employment-related administrative duties. The full scope is defined by the employer or the EOR provider. It can include everything from helping manage a human resources department to simply overseeing tax and benefits administration. In most cases, EOR is the actual employer, but a growing trend is EOR providers assuming the mundane and costly responsibility of helping manage the administrative aspects of employment.
What Is an EOR Provider
For the purpose of this article, the “provider” is the company that serves as the employer for a company for tax purposes. The employee works at a different company and their payroll, taxes and benefits management is done by the EOR provider. These include traditional employment tasks and liabilities.
Scope of Work
The EOR at a minimum oversees processing and funding of payroll, depositing and filing of taxes, administrating unemployment and workers’ compensation. They also will issue work-related tax forms like W-2’s and 1099’s, collect and process time sheets.
Additionally, they can oversee the creation and management of employment contracts and contract negotiations in coordination with the company they are working for. They will also oversee any onboarding and training of new hires. They can manage certificates of insurance, completing Forms I-9 and E-Verify processes as well as completing background checks and drug screenings.
Finally, depending on their contract, EOR’s administrate benefits, including review, offering and administering. In some cases, they can also be responsible for disciplining and terminating employees. Legally, they assume the liability of employee administration, including representing their company and their client in court, mediation and remediation processes.
Why a Company Would Choose an EOR Arrangement
At the heart of it, a company will opt to go with an EOR because of the cost savings and the savings as it pertains to the administration of HR, payroll, benefits and tax management. With many companies, those costs in time and money can quickly eat into a bottom line. Relieving the business of those responsibilities also frees up workers to pursue other, profit creating activities.
In a nutshell, that is what an EOR is and why for some companies they are a bottom-line saving arrangement. They do not fit all business models, but for those that they do, they are huge savings and the alleviation of a major headache.