Opportunity or Risk? Navigating the Risks of Employer of Record Services:

May 16

Employer of Record (EoR) services are popular in today’s global work area. The main reason is that businesses outsourcing administrative and legal responsibilities can focus on core tasks and growth.

That’s awesome!

Sounds great, right?!

Wait a minute. You might be thinking…

Well… What’s the catch?

What are the risks of employer of record?

You’re 100% right.

While EOR services are a great opportunity, they come with risks.

You might already have concerns regarding the employer of record risks, how to minimize them, the alternative options, and how to choose the right EoR provider for your company.

We’re here to help you ensure you’re on the right track.

Handling the risk of EoR services, you can consider two main alternatives. One of them is giving up the idea of hiring globally. In today’s workforce standards, this is almost not an option. It limits your talent pool and prevents you from expanding to new markets. The other alternative is to set up your own entity and handle the legalities and compliance in-house. Unless you plan to have a big team of workers in the same place, this is probably not the best option since it wouldn’t be cost-effective and good use of resources.

After all, using an EoR provider has some significant advantages, so let’s explore some potential risks and go over ways of minimizing them.

Employment of record risk #1: Compliance Challenges

Although employers of record services should be fully aware of the ins and outs of local labor laws, there is always the possibility that such a business might not fully understand the local laws and regulations. And issues might arise.

While most EoR providers should be compliant, organizations must be aware of the complexities of employment legislation operating in various jurisdictions in different countries. That’s why they should ensure that their chosen EOR provider has a strong track record in compliance management.

The ability to handle complex situations and mistakes should be a factor in this decision, as this matter is very sensitive and complex.

Employment of record risk #2: Data Security and Confidentiality

When partnering with an EOR service, organizations must share sensitive employee information with the provider. Without proper safeguards, there is a risk of data breaches, identity theft, or unauthorized access to confidential information. Employers should evaluate the data protection measures employed by the EOR provider and choose a trusted partner.

Employment of record risk #3: Employee Relations and Communication

Maintaining positive employee relations is crucial for any organization. When using EOR services, there is a risk of communication gaps and misalignment between the employer, employees, and the EOR provider. This can lead to misunderstandings and decreased employee satisfaction, ultimately affecting productivity.

To minimize risks, you should ensure your provider has customer support to handle sensitive matters like these.

Employment of record risk #4: Financial Transparency and Risk Management

When choosing an EoR provider, you should consider many “hidden” costs. That’s why financial transparency is vital when dealing with EOR services. Organizations must clearly understand deposits, monthly fees, extra charges, salary differences, tax obligations, and payment schedules.

Employment of record risk #5: Scalability and Flexibility

Businesses aiming to expand globally require an EOR provider capable of accommodating growth and adaptability. Choosing an EOR service that lacks scalability or struggles to meet evolving business needs can hinder expansion plans and increase risks.