Choosing The Right EOR Partner: 17 Questions to Ask Before Signing a Contract

Choosing the right Employer of Record (EOR) can be a game-changer for your business, especially when it comes to global expansion.

Assembling remote teams spanning across the globe means you have to navigate complex international labor laws, ensure compliance in local areas, and manage payroll across multiple countries.

The good news: You don’t have to do this alone. 

An EOR can simplify this process and be your trusted companion, but choosing the right partner is essential because no platform is perfect, and none of them has it all.

In this guide, I cover 17 crucial questions and tips to help you make an informed decision to unlock your global success after dedicatedly studying and observing these solutions for a considerable while. Here are the summary of key considerations you shouldn’t ignore:

• Assessing Global Reach and Experience
• Evaluating Compliance and Legal Expertise
• Investigating Service and Support
• Exploring Technology and Reporting
• Considering Cost and Transparency

Feel free to jump into the first evaluation question (I know you’re busy!), or else, let’s… 

Understanding the Basics

What is an EOR?

An Employer of Record is a third-party organization that takes on the legal responsibilities of employing talents in a different country on behalf of your company. It's simplest way to handle legal employment aspects of global hiring among many options to hire foreign employees.

For a flat-month fee or percentage-based package, they will assist you in:

• Handling employment contracts with employees in out-of-home locations, with no legal establishment required (which differentiates EOR vs PEO);
• Automating payroll, distributing payment to employees in their preferred method and currency of payments, and handling tax requirements and withholdings;
• Preparing and opting for statutory benefits (and additional competitive employee benefits) that make sense in the location of hires;
• Keeping your company on the right side of the law by staying updated and compliant with local labor laws.

For a deep-dive, check out my other guides on EOR meaning and how it works.

Why Do You Need an EOR for Global Hiring?

Remote work is the present and the future. Given its many benefits for both employers and employees, it’s the 2024 (and likely beyond) way to win talent, eliminating geographical barriers in the labor market and allowing companies to gain access to expansive talent pools, including those from the other side of the global and those in the gig economy.

But as you know so well, hiring is not without its legal aspects, and so is remote hiring with its legal considerations.

I believe that EOR is a facilitator companies need to enable quick global expansion, especially startups and those with a lean HR team. 

Because firstly, it’s a challenging (and dull) job to navigate all the regulations and nuances in different regions that might be totally different from your home country.

Secondly, even if you research and take notes on all the employment law compliance guidelines for all regions of target hires, you may not implement them as effectively as the well-versed experts who have been doing it for years with hands-on experience and a deep understanding of their localized areas.

“You need REAL experts on the ground—people who live in the country and have an insider’s understanding. They know all of the country's fine details and unique demands. Think of it like people who speak a native language compared to people who learned the language later in life.” - Eynat Guez, Co-founder and CEO of Papaya Global

Lastly, even if you manage to keep up with these complexities, it takes time and huge efforts from your HR team which are better spent on strategic recruiting initiatives, talent development, and cultural aspects. 

An EOR service provides numerous benefits, with the main ones being:

• Compliance: Ensures adherence to local labor laws and regulations.
• Cost Savings: Reduces the need for setting up a legal entity in each country and avoids unwelcomed legal consequences. 
• Streamlined Processes: Simplifies payroll, benefits administration, and tax filings for global hires.

For more details, check out my guide on Employer of Record Benefits.

Some EOR companies, like Deel and some others, due to their proprietary infrastructure and embracement of remote work, also have contract management software (or agent of record services). These platforms handle worker classification, contracts, invoicing, payroll, and continued compliance for project-based employees, contractors, and freelancers in a single place.

Okay, it’s enough for the basic things, here is the real meat of this article:

17 Questions to Ask Your EOR Vendors

Assessing Global Reach and Experience

It's the end of the discussion if the EOR vendor doesn't service the country where you want to hire. Hence, the most important thing is to check if those countries are included in their service areas. 

Most EOR companies have a directory for your quick assessment, for example:

Question 1: In how many countries do you operate?

Global reach is a clear indicator of an EOR’s capability to handle the complexities of international employment. A wider reach suggests that the EOR has established an extensive network, processes, and local expertise in various regions.

This can be particularly beneficial if your expansion plans change or grow. 

Consider you’re a tech company that wants to expand into South America, but soon after that, you want to enter the Asian market as well. If an EOR has a strong and wide global footprint, it’s easier for you to pivot your strategy without the need to find a new EOR, saving time and ensuring consistency in your operations.

Question 2: What is your experience in our target countries?

As I mentioned earlier, an EOR's expertise in the country of hire is what makes their service invaluable. And it’s how familiar they are with the local labor market, legal requirements, and cultural nuances.

Ask for case studies or examples of how they've successfully managed employment in these regions. 

Question 3: Can you provide references from clients in our industry?

References from similar businesses can offer insights into the EOR's capability to address industry-specific challenges, which require tailored solutions. 

For instance, the financial services industry often requires stringent data protection and compliance with financial laws, while the healthcare industry might focus more on patient confidentiality and regulatory compliance related to medical practices. 

An EOR experienced in your industry is more likely to understand your unique needs and provide relevant solutions. References from clients in your industry can offer firsthand accounts of the EOR’s performance, reliability, and ability to address these specific issues.

Question 4: What is your track record with businesses of our size and scope?

The size and scope of your business determine the complexity of your needs. A provider accustomed to working with small startups may not be suitable for a large enterprise, and vice versa. 

An EOR experienced with companies similar in size to yours will be better equipped to handle your requirements, including the volume of remote employees and the complexity of your operations. If you’re a scaleup or mid-to-large enterprise, you might seek a scalable solution, robust support, and personalized services to ensure the company’s growth is smooth and manageable.

Evaluating Compliance and Legal Expertise

Question 5: How do you stay updated with changing labor laws?

Laws and regulations change all the time, resulting in unexpected cases of non-compliance. An effective EOR should have a dedicated team or system in place to stay current with these changes.

And the most important thing is how they communicate these changes to clients (you) and what processes to ensure you can act on legal changes promptly. It could be a compliance audit timeline, update notifications on the EOR platform, or a letter of advice. But ensure that your future partner is held accountable for that and you have a good collaboration practice.

Question 6: Can you provide examples of how you've handled compliance challenges?

Don’t get me wrong, I don’t suggest you ask exactly this question on the call!

Real-world examples prove their experience and give you confidence in their problem-solving abilities, and that’s the purpose of this evaluation.

Maybe there are specific circumstances that concern you. Perhaps there are unique compliance issues you have faced in your home country, and you wonder about potential ones in target locations. Bring them all into the discussion and assess how they navigated such challenges, ensuring continuous compliance without disruption to their clients’ operations.

Investigating Service and Support

Question 7: What is your onboarding process for new employees?

A smooth onboarding process is vital for employee satisfaction and productivity.

Although an EOR company only handles the legal employment aspects, you better help your new hires be ready to integrate into your team without any hiccups and frustrations. 

Ask how they facilitate the onboarding flow, including document collection, compliance checks, any initial training provided, and so on. Clarifying these details helps you collaborate effectively for a seamless onboarding experience for your employees.

Question 8: How do you handle payroll and tax filings?

Efficient payroll and tax management are among an EOR's core functions. Ensure they have robust (and flexible) systems to manage these tasks accurately and on time. Some aspects to discuss with EOR vendors are:

• How can you adjust payroll and what are the requirements of payroll cycles?
• What are payment options and methods?
• The responsibilities and requirements regarding tax filing and withholding.
• The level of support for year-end fillings, tax refunds, and returns. 

Knowing how they handle these tasks will ensure you have a reliable partner who can manage your payroll and tax obligations efficiently, assist your employees when needed, and reduce the risk of errors and compliance issues.

Question 9: How do you manage employee benefits and compensation?

A comprehensive benefits package is crucial for attracting and retaining top talent. Ensure the EOR can offer competitive and compliant benefits. This might include health insurance, retirement plans, and other perks that are standard in the target country.

There are also some under-the-radar benefits that really sweeten the deal for building solid remote teams, like remote work stipends and equity incentives for your star performers. And since you're reading this, you already know what to keep an eye out for!

Question 10: What kind of support do you offer for HR and legal issues?

The level of support an EOR provides for HR and legal issues can significantly impact your operations. Some EORs (ex: Papaya Global) offer dedicated account managers for each client, while others don’t or keep it for their higher tiers.

It's important to understand their support structure, including the methods and turnaround times for resolving issues and handling emergencies. 24/7 support and direct access to experts can be a lifesaver, but sadly, it’s not a standard. 

Hence, determine the level of support available and whether it meets your needs. Ask about their ticket resolution process and how they manage urgent requests. 

Additionally, inquire about extra services such as visa and work permit assistance, intellectual property (IP) protection, and other legal matters. Understanding the full range of support services they offer will help you gauge their ability to address your HR and legal needs comprehensively and promptly.

Exploring Technology and Reporting

Question 11: How does your technology platform support the HR processes? 

A robust technology platform is essential for managing global employees efficiently and securely. It’s also a communication tool for all parties involved in employment-related matters. Ask the EOR about the features of their platform and how it supports both your HR team and employees. Consider the following aspects:

• User-Friendliness: Is the platform intuitive and easy to use for all parties involved?
• Level of Automation: Does the platform automate repetitive tasks, reducing manual work and the risk of errors?
• Mobile Optimization: Is the platform optimized for mobile use, allowing access on the go?
• Self-Service Tools: Does it offer self-service portals where employees can manage their own information and requests?
• Dedicated Portals: Are there dedicated portals for EOR representatives, HR, and managers to streamline processes and ensure alignment?

Question 12: How do you ensure data security and privacy?

Data security is non-negotiable. Ensure the EOR complies with international standards and can protect sensitive information. 

Check if your vendor has international data protection certification, like GDPR. Ask about their data encryption methods, access controls, and security protocols to protect against data breaches. Additionally, inquire about their policies for data privacy and how they handle data subject requests. 

It’s complicated, but it’s the way to ensure that your company’s and employees' data is handled with the highest level of protection and confidentiality.

Question 13: How do your reports and integration capabilities support our HR management?

Very few EORs can also serve as your HRIS (Deel and Rippling are examples of such platforms). Hence, you need integration options to seamlessly transfer global employee data to your existing HRIS software or employee management software.

An EOR’s reports can provide insights into global hiring metrics such as employee headcount, turnover rates, payroll expenses, and compliance statuses. 

Both are necessary for maintaining a holistic view of HR operations and making informed decisions based on comprehensive data.

Considering Cost and Transparency

Question 14: What is your pricing structure?

Understanding the EOR's pricing structure is crucial for budgeting and monitoring the cost of hire metrics. Transparency in pricing is key to avoiding unexpected costs.

Ask whether they charge a flat fee, a percentage of payroll, or use another pricing model. Ensure you have a clear understanding of their fee structure and any additional charges that may apply (minimum requirements, setup costs, etc). 

Question 15: Are there any hidden fees or additional costs?

Hidden fees can quickly add up and affect your budget. 

Ask the EOR to provide a detailed breakdown of all potential costs, including setup fees, monthly fees, and any additional charges for extra services. 

Understanding the full cost structure will help you avoid surprises later, compare vendor options accurately, and ensure that you have a comprehensive view of the financial commitment involved in partnering with the EOR.

Question 16: How do you handle currency exchange rates and payment terms?

Global operations often involve multiple currencies, and managing exchange rates can be complex. 

Ask the EOR how they handle currency conversions and payment terms. Ensure they offer competitive exchange rates and transparent policies for currency fluctuations. Additionally, discuss their payment terms, including invoicing frequency and payment methods.

Question 17: How flexible are your contracts in terms of scaling up or down?

Your business needs may change over time (and sooner than you expected), that’s why it’s worth discussing the flexibility in contract terms before signing a contract. 

Ask the EOR about their policies for scaling services up or down. Make sure you understand and take into consideration their offers for adjustments in the number of employees, services required, and geographic coverage. 

Flexibility in contract terms will provide you with the agility to adapt to changing business conditions without being locked into rigid agreements.

Tips for Success with EOR Services

1: Do Your Research

As you can see, many factors impact your decision and position a vendor as a good global employment partner for your company. 

Understand your requirements first, then narrow down some potential options and research them deeply for their strengths and weaknesses. Look beyond their marketing materials to find unbiased reviews, case studies, and testimonials from real users. 

For a head start, check out our detailed article on the top 9 EOR services to consider in 2024.

2: Ask for Demos

Request demonstrations of their technology platforms to ensure they meet your needs. Don’t be afraid to ask too many on your vendor discussions about the services you look for and all of your concerns.

Employer of record adds a layer of employment and employee management, so it's crucial to be clear point-by-point to know how to collaborate effectively and integrate their systems with your existing processes.

3: Get Everything in Writing

Ensure all promises and terms are clearly outlined in your contract to avoid misunderstandings. Make sure to review the contract carefully and negotiate terms to protect your company from unexpected issues.

Wrapping it Up

Choosing the right EOR partner is a critical decision that can impact your company's success in global expansion. 

A well-chosen EOR can simplify compliance, streamline the global employment process, and help your business thrive in new markets. And I hope these 17 questions help in your vendor selection journey. 

Take the time to vet potential partners thoroughly, and don't hesitate to ask for references and case studies. Your future global workforce will thank you!