The pros and cons of Employer of Record (EOR) hiring
An Employer of Record can help you with the basics of hiring, so the hiring process is less complicated for your company. However, since EORs work in a specific way, they may not be the perfect solution for all businesses. The challenges and advantages of Employer of Record services are critical aspects you must consider.
In this article, you will learn why looking for the best Employer of Record service in Dubai is a practical solution for international recruiting, while not for everyone. Read on to find out if this is the option you should take.
- What is an Employer of Record?
- What does an EOR really do for you?
- Employer of Record: Advantages for startups
- Employer of Record: Disadvantages for startups
- Benefits of contracting with EOR Middle East
- Challenges when hiring through an Employer of Record
- Final considerations
- How can we help you obtain more information about Employer of Record services in the Middle East?
1. What is an Employer of Record?
An Employer of Record is an external agency which is in charge of all the processes of hiring, recruitment, and human resources. They do not replace your own HR division, but augment it. Now the question is: why do you need to expand your HR management?
When you hire people from outside the country in which your company operates, you would have to open a branch in each of the countries in which you plan to hire. To simplify: if your company is based in the Middle East and you want to legally hire someone in France, you would have to register your company there as well.
Registering a business comes with a host of laws that you must comply with. However, there is an alternative so that you do not have to open a subsidiary: an EOR. Hiring people through the best Employer of Record services means you do not need to have a local business. Instead, your global employees are hired on behalf of your company. Sometimes this is exactly what your business needs.
2. What does an EOR really do for you?
- Handles all administrative tasks related to employment at a local level.
- Is responsible for hiring.
- Sets up the contract in accordance with local labor law.
- Manages payments and taxes on them.
- Provides administration of local benefits, such as health insurance.
- Manages most of the hiring expenses, including the employment agreement.
- Changes time sheets for multiple employees.
- Provides all work permits and visas for workers (if required).
3. Employer of Record: Advantages for startups
Some advantages of Employer of Record hiring are speed, reduced supervisory risks, and reduced bureaucracy.
When expanding globally, setting up an entity in each country where you want to be present may not be a viable option at first.
In some countries, setting up an entity may require you to also have an accountant, payroll, and legal representative. In addition, the time for this process can range from a few weeks to a few months.
The EOR model tries to offer a solution to that by allowing companies to expand rapidly. For this reason, speed is definitely one of the core values of this model.
3.2 Reduced legal risks
Another key element is the hidden legal risks in each country in which you expand. In fact, it is not only difficult to understand in hindsight what all the legal components are that could haunt you later on. However, the local regulatory environment changes from time to time, so staying up to date is time-consuming and unpredictable for startups.
Through an EOR, the third company, which specializes in this type of service, is in charge of navigating through the regulatory risks of each country, and they are responsible for these risks.
3.3 Less bureaucracy
Establishing an entity can be simple in certain countries. However, in others, especially when you have to hire new people in that country, it becomes much more complex.
4. Employer of Record: Disadvantages for startups
4.1 You do not own the work relationship
When an employee reaches to your company through your EOR service, from a formal point of view, the working relationship is in the hands of the EOR. This limits the possibility of organizational expansion.
For example, since the employee is hired through an EOR, the company using the employee will not be able to include them in that stock option contract. Instead, they will need a separate agreement.
4.2 Permanent establishment risk
It is essential to structure the EOR so there is no risk of permanent establishment.
In fact, a company (if considered permanent in a country) will owe taxes there, with all the other legal consequences of having a fixed organization in that country. It is essential to structure the EOR model in a way that makes it difficult to take the risk of permanent establishment.
5. Benefits of contracting with EOR Middle East
EOR Middle East allows companies to overcome distance and national borders when hiring new employees. As a growing trend in the world, especially due to the COVID-19 pandemic, this way of hiring employees has many advantages over in-house solutions.
5.1 Take your business to worldwide markets
With EOR Middle East, you can access other markets in different countries. By being able to instantly hire employees around the world without the need for a branch registration, you will accelerate the expansion of your business. For this reason, this is a great option for small businesses looking to cover multiple markets. It also works well with larger companies that want to find an experienced workforce which is already used to working in the local field.
Also, as a small business owner, you will want to avoid investing in a full-time HR division, at least before your business gets off the ground. One of the advantages of Employer of Record services is the use of their HR professionals at a lower cost. Therefore, this makes it a cost-effective way to hire new employees in other countries.
5.2 An Employer of Record takes care of everything
When you land a new hire through EOR Middle East, the new talent will be ready to work with you. An Employer of Record in Dubai will have already taken you through the onboarding process and prepared you for the job. In addition, we have our own payroll software and take care of the payments of all your employees.
In this way, every payment is processed correctly, and you do not have to manage pay period timesheets. Lastly, if the worker does not fit the position, the EOR will void the agreement. Of course, an Employer of Record in Dubai does not influence your business decisions and you, as the owner of the company, are in control of the employment relationship with your staff.
An EOR handles the administrative tasks around hiring, from the first to the last day of an employee’s contract.
5.3 Ideal work environment
EOR Middle East will provide a more convenient work environment for the local people you hire. While we fulfill your wishes and needs when hiring, we will also make the process easier for employees. Each EOR is used to work with potential candidates from their area. They know the work philosophy of the people they sign and how to correctly manage integration at a local level.
5.4 No worries about local compliance
One of the best things about relying on EOR services is that you do not have to worry about the employment laws or labor laws of the country you are hiring from. They will take care of everything for you, making sure that you comply with all of them. All you must do is choose whom you want to work with. In addition, they will take on the tasks of the contractor, such as:
- Employee benefits: It is responsible for the management of all remunerations required by law in the nation of processes. These can contain maternity leave, paid holidays, medical help, etc.
- Workers’ compensation: In the event of a workplace accident, workers’ compensation will be provided in accordance with local laws.
- Insurance: It provides its own insurance plans for employees, including health insurance.
In addition, the taxes that will have to be paid are already built into the price you pay when you hire through Employer of Record services. This can save countless hours of paperwork and tax filing in each specific country in which your business operates. Not to mention the fines and penalties caused by the lack or incorrect filing of a tax report.
5.5 No co-employment agreement
Although co-employment is not a bad thing, most business owners tend to avoid it as it creates unnecessary legal challenges. Unlike Professional Employer Organizations that offer to be co-employees with your business, an Employer of Record in the UAE keeps things simple. They are the entire legal employer (on your behalf) and -as we mentioned- take care of all legal compliance requirements.
6. Challenges when hiring through an Employer of Record
Although relying on the services of an Employer of Record has advantages, it is not for everyone. In some cases, it can even be detrimental to the daily activities of the company.
6.1 You may feel like you have less control
Hiring another entity to handle the hiring process will make you feel like you have less influence over the employee onboarding process. Although recruiting firms have their own HR specialists who are trained to equip their candidates for your business, some business owners like to get to know each potential candidate themselves.
6.2 Weaken HR
Using EOR services will ease the burden of your Human Resources department. This is not necessarily a bad thing, as it will take a lot of work away from your HR team. However, they can gradually be left behind by outsourcing too many jobs. If you plan to hire international employees, through the EOR, you will have to change your HR department and grow them together with the company.
6.3 Changes in company culture
The fact that someone else hires your employees can change the way you would like to develop your company. Even if the EOR is the legal employer, behavior towards employees will still reflect on you to some extent. Additionally, the use of EOR can add a little friction to your daily workflow. So, try to imagine where you see your business in a couple of years. In addition, ask yourself if internalizing your onboarding processes will change your vision.
7. Final considerations
The advantages of an Employer of Record (EOR) can be subjective. What seems like the best move for some companies, may backfire on others. One thing cannot be denied, with remote work opportunities and new markets enabled, this type of employment setup is becoming more and more common. Therefore, it seems that, in general terms, its use has more advantages than challenges.
The customer business or recruiting agency preserves control of business operations and is responsible for office compliance and safety.
A top Employer of Record service assumes the responsibilities and obligations of employee matters such as administration, payroll and benefits, taxes, and employee history. The Employer of Record is responsible for complying with tax laws, so the company can rest assured that its business is in the hands of qualified professionals.
Despite regularly working together, Employers of Record and recruitment agencies have different roles in the company.
8. How can we help you obtain more information about Employer of Record services in the Middle East?
We can provide you with comprehensive solutions to assist you with your changing business needs. Employer of Record services from EOR Middle East are carefully delivered through a structure that scales with you to transform and future-proof your company in:
- Saudi Arabia
- United Arab Emirates
We are your solution provider and supplier. In this way, we encourage you to entrust this process to our best experts. On EOR Middle East, we specialize in Employer of Record and other HR-related services; we are able to provide you and your business with a satisfactory experience regardless of your location.
You can get in touch with us and share all of your inquiries and concerns. Contact us at [email protected] and allow us to show you how our services can suit your small, medium or large company. Do it now and obtain the answers you were looking for!
If you wish to work side-by-side with the Middle East’s best experts, take a look at our job openings! Go to thetalentpoint.com, check if any of our offers suits your profile, and send us your application. You can also send your CV via email through [email protected] and we will receive it immediately.