Are you considering expanding your workforce globally but feeling overwhelmed by the complexities of international hiring? 

Enter the employer of record (EOR) model, a game-changing solution that's reshaping how companies build their teams across borders. 

This innovative approach allows you to hire talent anywhere in the world without setting up a local entity, saving you time, money, and legal headaches.

For all the basics, check out our comprehensive guides on EOR meaning, employer of record benefits, and what EOR can do for you.

This article aims to outline practical use cases where it makes sense for companies to engage with EOR services. By the end of this article, you’ll have a clear understanding of when and how to leverage this global employment solution to build your global dream team.

10 Common Use Cases for Hiring Through EOR

1. Quick Talent Onboarding

Imagine you've found a highly skilled developer perfect for a critical project. However, traditional hiring methods, such as setting up a local entity or securing work visas, are slow and cumbersome. These delays could lead to missed opportunities and project setbacks.

How Does EOR Help?

An employer of record can expedite the onboarding process, helping you land your new hires in a matter of days rather than months as usual. This is thanks to their available legal presence and experiences in the target countries.

The EOR takes care of all employment aspects, including payroll, benefits, and compliance with local labor laws. This not only speeds up the integration of your new hire but also reduces administrative burdens.

2. Speed Market Entry

When you're looking to expand your business globally, time-to-market can make or break your success. The faster you can enter new markets, the better your chances of establishing a stable presence and securing top local talent before your competitors. This is where an EOR can be a game-changer for your global expansion strategy.

How Does EOR Help?

An EOR streamlines and simplifies the complex legal and compliance issues associated with assembling teams in different jurisdictions. This allows you to enter multiple markets simultaneously, saving you valuable time and resources.

Often, EORs allow you to hire both full-time employees and independent contractors for short-term and long-term assignments, with lower costs for contractor management software due to the reduced legal complexity.

Instead of waiting months or even years to establish legal entities in new countries to recruit a team, an EOR enables you to start operations within weeks. 

The parallel approach—building a team and establishing an entity simultaneously—gives you an edge over competitors who must wait for legal formalities before creating a local footprint. By the time they're set up, you might be making waves in the market.

3. Low-Risk Market Testing

Expanding into new territories is a big decision, and EOR can be an invaluable tool for low-risk market testing.

This approach allows you to explore potential markets without the hefty upfront costs and long-term commitments associated with traditional expansion methods.

How Does EOR Help?

By leveraging an EOR, you can:

• Quickly assemble a team to test your product or service’s potential in a new market.
• Leverage the unique competencies of local EOR hires to understand cultural nuances and market preferences there.
• Enter several markets concurrently, allowing for a more comprehensive evaluation of your expansion options. You’re not limited to testing one market at a time!
• Reduce workloads and burdens on administrative tasks related to global employment, such as paperwork, payroll, compliance issues, etc., to focus on your strategic initiatives.

4. Streamlining Globally Distributed Team

You may have a remote team spanning worldwide: one in Vietnam, another in Belgium, a few in the Netherlands, and others in Singapore.

Setting up a legal entity in each of these countries for just a handful of employees is not cost-effective. 

The costs of incorporation, ongoing legal compliance, and administrative management can be prohibitively high, especially for small teams in each location. 

This makes the traditional approach of setting up local entities impractical and inefficient.

Also, as each country has its own set of regulations regarding employment contracts, taxes, social security contributions, and employee benefits, navigating these complexities can be time-consuming and fraught with legal risks.

How Does EOR Help?

An EOR offers a centralized solution for managing globally distributed teams, streamlining all aspects of employment, from payroll to compliance with local labor laws. 

Deel, a leading EOR service, even goes one step further by developing its own HRIS software to help companies manage their entire global workforce in an all-in-one HR platform. 

(Check out our comprehensive review of Deel here.)

Also, managing everyone through a single platform means you can have consistent experiences for all employees, expect a uniform standard across regions, and have access to comprehensive insights into the entire workforce.

5. Converting Contractors to Full-Time Employees

A critical aspect of converting a contractor to a full-time employee is aligning their benefits and compensation with your company's standards and local preferences.

EORs, with their deep expertise, provide valuable insights into local salary ranges and benefit packages. This ensures that you offer an attractive compensation package to the employee while maintaining alignment with your company’s financial framework.

EOR services help manage a smooth transition from contractors to full-time employees by handling employment contracts, benefits enrollment, and payroll setup, making sure all required documentation is correctly completed and submitted. 

Hence, it removes the burden from your HR team and guarantees compliance with local labor laws and regulations.

Speaking of compliance matters, hiring contractors with EORs (using their payroll engine and contractor management software) is indeed critical if you're engaging with talents for critical projects. 

It depends on each regulation, but employee misclassification is likely to happen, which can cost you penalties and fines. For example, if your freelancers work for too many hours, or their role starts resembling that of a full-time team member, it might trigger an audit. 

EORs can mitigate these risks and support the transition to full-time employment when needed, sometimes even offering classification guarantees to ensure compliance.

6. Providing Top-Notch Employee Benefits

Offering attractive benefits packages is essential for drawing in high-caliber candidates. Benefits such as health insurance, retirement plans, and paid time off are often decisive factors for potential hires. However, the challenge lies in managing these benefits across different countries, each with its own set of regulations and mandatory benefits.

For example, see how things differ when hiring remotely in these sought-after countries: Poland, Germany, the Philippines, and Vietnam.

Usually, EOR company will inform you of compulsory employee benefits by laws that you must adhere to. They also have a menu of premium packages (for example, supplemental health insurance, dental and vision coverage, wellness programs, and/or flexible working arrangements) that you can select depending on which aligns with your culture and budget to remain competitive in the global job market. 

Equity Compensation

Beyond that, equity grants are pivotal in retaining high-performing employees and fostering long-term commitment to the company. 

However, offering equity is complex, involving different types of equity (such as stock options and restricted stock units), agreements, disclosure requirements, and governance standards.

EOR facilitates this by helping you with all the administrative aspects of equity plans, including issuing options, tracking vesting schedules, and handling taxes. They also provide guidance on local tax obligations to avoid unexpected liabilities.

7. Relocating Team Members

Personal and Company-Initiated Relocation

What if a key team member needs to move to another country for personal reasons, or you want to send a manager to a new region or country to lead marketing research there? 

An EOR can employ the relocating team members in their new country, ensuring compliance with local laws and maintaining their employment status.

This method empowers the company to preserve valuable talent without having to create a new legal entity, guaranteeing continuity and stability for both the employee and the company.

Hiring Non-National Employees

Another scenario is that you find a shining talent who is not a resident and needs (and wants) to relocate to your country to work officially. 

This becomes a dilemma if the talent is a great cultural fit and demonstrates strong, valuable skills and expertise critical to your success. What then? 

You need to support work visas and permits for them to ensure they can legally work in the country. 

And this requires understanding immigration laws, securing the right documentation, and ensuring compliance with all legal requirements, which can be a daunting and time-consuming process.

Luckily, many EORs come with visa sponsorship services. They can help you prepare the necessary documentation and work with the government agencies on your behalf until they’re authorized to work legally in the country.

8. M&A Workforce Transitioning

Mergers and acquisitions (M&A) involve the consolidation of companies, often resulting in significant workforce changes. 

During this process, employees from the acquired company must adapt to the new organizational structure. This transition can be complex and challenging due to differences in company cultures, policies, and operational procedures. 

The challenge lies in ensuring a smooth transition, maintaining compliance, and providing stability for those employees, especially if they are located in countries where your company does not have an existing legal entity.

How Does EOR Help?

Leading EOR companies like Globalization Partners and others are built to be ready to support this with top-notch compliance services.

Depending on your specific challenges with the M&A situation, an EOR can help with:

• EORs can quickly transfer employees from the acquired company to your company and manage them while you determine a permanent structure.
• When you acquire a company with employees in a country where you don’t have a legal entity, an EOR can immediately take on the legal employment of these employees. This avoids any disruption in their employment status and provides them with continuity and stability while you decide on your long-term plans.
• Even though the employees are now part of your company, they still need to be employed in compliance with local labor laws. An EOR ensures that all employment contracts, benefits, and tax withholdings meet the local legal requirements, reducing your risk of non-compliance.
• An EOR can standardize payroll, benefits, and HR support across all regions where your new employees are based. This ensures that all employees, regardless of their location, receive a consistent and positive experience.

When Should You Not Use EOR Hiring?

EOR services offer numerous benefits for international employment and global expansion. Yet, there are still scenarios in which they might not be the best fit for your business. Let’s explore three cases where you should consider other options for hiring employees from another country:

1. High permanent establishment risk roles

When you’re dealing with roles with a high risk of creating a permanent establishment (PE), EOR hiring might not be the most suitable option. 

PE refers to a fixed place of business that can trigger tax obligations in a foreign country. 

Some high-risk PE triggers include:

1. Having an office or other fixed place of business
2. Employing someone locally who has the authority to sign contracts on your behalf
3. Having an employee in an executive or senior management role
4. Engaging in significant sales activities in the local market

In these cases, you might need to establish a local legal entity to comply with tax regulations and minimize risks.

2. Long-term structural needs

If you have long-term structural needs in a specific country, setting up your own legal entity might be more beneficial. While an EOR is excellent for testing new markets or recruiting talent quickly, it's not always the best solution for permanent, large-scale operations. 

Consider establishing your own entity (and possibly partnering with an EOR as a temporary solution) when:

1. You plan to have a significant, long-term presence in a country
2. You need more control over HR and workforce management processes
3. You want to build a strong local brand presence

3. High control and flexibility preference

Using an EOR means delegating some authority over HR processes and employee management to your partner. While this is a lifesaver for many, it may not suit everyone's preferences. 

While the client company (you) can influence employment terms, benefits, and work conditions, EORs have predefined processes and compliance requirements that may limit the extent of customization.

Additionally, the EOR's operational systems and HR processes may not be as adaptable as an in-house HR team, potentially hindering your ability to implement changes or customized management practices quickly.

If your business values a high degree of customization and responsiveness in employment management, this lack of flexibility can be an upset. 

To Conclude

Overall, an employer of record serves as a true enabler for remote work, breaking down physical boundaries to allow people from anywhere to work together seamlessly. 

Firstly simplifying legal and compliance hurdles, EOR solutions then unlock immense potential in various ways.

Which use cases resonate with you? Ready for the next steps with this global employment solution? Dive deeper with these articles:

• 9 Best Employers of Record Services in 2024
• How to Choose Your Right EOR Partner (The 17-Question Guide)
• How EORs Help You Hire International Employees