This process can be arduous if you've ever hired a freelancer or independent contractor. Whether it's because of the mountains of paperwork and tax forms to be filed or managed on your end — or the struggle to find someone who is the best fit for your company, either way, it can be a hassle.

That's where an Employer of Record (EoR) comes in. An EoR is an entity that hires independent contractors and can help streamline this process.

Let's look at the benefits of an EoR when hiring contractors and how to choose one for your company.

What Is an Employer of Record?

An employer of record (EOR) is a third-party employment platform that hires and pays employees or contractors on behalf of an organisation. It assumes administrative tasks and legal obligations, including payroll processing and distributing employment benefits.

Understanding the Challenges Faced By Independent Contractors

Independent contractors face various challenges that differ from those of traditional employees. Knowing these challenges can help your organisation design strategies to address these needs and provide contract workers with a better work environment.

According to a study by McKinsey, healthcare is the biggest challenge for contract workers. Only 32 per cent of independent workers get healthcare benefits from their employers. Independent workers don't receive other employment benefits, such as retirement savings, which impacts their overall well-being and financial security.  

Independent contractors must also handle administrative tasks like filing invoices and contract management. This takes away time from the core work they're required to perform. Another prominent challenge contractors face constant income fluctuations.

Most employers provide irregular work to contractors, making financial planning more challenging. Lastly, independent contractors must ensure compliance with tax laws and regulations and navigate legal complexities that can be time-consuming.

Employer of record vs Professional Employer Organisation

A Professional Employer Organisation is more of a partner to the client company. It shares co-employment and legal employer responsibilities. On the other hand, an EOR entirely takes up the role of a legal employer for a company and shoulders a range of HR responsibilities.

Employer of record vs staffing agency

A staffing agency specialises in sourcing workers and matching them with the right companies. They take care of the entire recruitment process, from posting notices to negotiating and hiring.

An EOR has a role beyond employing. They have primary employer control and take in a broader range of HR responsibilities such as compliance, payroll management, and benefits administration.

All these terms can be used interchangeably. So make sure you clarify services when engaging.

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"Our need to convert two contractors to full-time employees in Spain was managed effortlessly through the Teamed platform and their accompanying services." - Rachel Blezard, SpotQA

Key responsibilities of an EOR

Here are the primary roles of an EOR:

• Onboarding and Off-boarding: EORs assist in the onboarding process for new hires, verify employment eligibility, conduct background checks, and set up employee profiles. They also manage the off-boarding process when employees leave.
• Analyses the labour laws regarding local contracts, worker protection, and permits, making it easier for the client company to adhere to these rules.
• Benefits Administration: EORs provide benefits packages to employees and contractors. The benefits can include health insurance, retirement plans, disability insurance, and other employee benefits. Read insights on global employee benefits for more information.
• HR Administration: EORs take care of a range of HR administrative tasks, such as maintaining employee records, managing attendance, handling employee inquiries, and managing personnel profiles.‍
• Tax Compliance: The EOR takes tax-related responsibilities, such as withholding and remitting payroll taxes and preparing and filing tax forms (e.g., W-2, form 1040- es).

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Benefits of Using an Employer of Record for Independent Contractor

Access to employment benefits

Using an EOR for independent contractors can provide access to employment benefits that are typically unavailable. By working with an EOR, contractors may be eligible to participate in group health insurance plans and gain access to retirement savings. Some other benefits contract workers can avail of through EOR include paid time off and workers' compensation.

Administrative support and payroll services

Initiating and managing HR tasks for multiple independent contractors in an organisation can be time-consuming. With an EOR, your organisation can streamline administrative services and get contractors onboarded hassle-free. They also ensure accurate compensation on time and reduce the risk of errors.

EORs are also responsible for tax withholdings and filings, including forms such as W-9 and 1099-MISC. Overall, this would give the contract workers and other employees more time to concentrate on their work.

In short, EORs bring a systematic approach to administrative support, payroll services, and compliance, allowing independent contractors to focus on their work and enjoy the benefits of efficient and reliable management.

Enhanced compliance and risk management

EORs have expertise in managing the risks of hiring multiple independent contractors from different locations and potential penalties. These include legal and compliance risks, tax risks, language differences, data privacy and security, and communication challenges.  EORs also handle unemployment claims and disputes, navigating the complexities of the process on behalf of contractors. You don't have to be concerned about the legal as an organisation.

Improved professional reputation and credibility

Partnering with EORs brings the benefit of improved professional reputation and credibility for organisations.

Organisations demonstrate their commitment to worker well-being through access to employee benefits and a smooth hiring process. This commitment helps attract top independent contractor talent. Over time, this builds trust and fosters long-term relationships with contractors, which are essential for a company's success.    

How to Choose an Employer of Record

Let us check out how you can choose the right Employer of Record for your organisation:

Factors to consider when choosing an EOR for independent contractors

Here are vital factors to consider when selecting an EOR provider for your organisation:

Expertise and Experience:

Look for an EOR provider with a proven track record and extensive experience managing employment-related services.

Geographic Coverage:

Choose an EOR that operates in the countries/locations that your company plans to work in. It's best to consider one with a broad geographic coverage.

Technology and Integration:

Seamless data transfer and reporting are essential to run your HR functions smoothly. So, check if the EOR has technological capabilities and determine if their systems can integrate smoothly with your existing HR and payroll systems.

Client Support and Communication:  

Evaluate their responsiveness, accessibility, and ability to address your specific needs efficiently and on time.

Teamed checks all these boxes as an EOR. We enable companies to embrace the benefits and opportunities of working with independent contractors worldwide.

Evaluate services, pricing, and contract terms.

There are many pricing structures that EORs follow, the most common being monthly subscriptions. Ensure that the pricing aligns with your budget. To give you a ballpark number, the pricing of EOR can range from £199 to £1500 per month.  

As we mentioned above, different EORs have varied functions. So, evaluate the suite of services offered by EOR you choose. Finally, review the contract terms of your EOR, including service-level agreements, termination clauses, and any additional fees or charges.

Seek recommendations and conduct due diligence.

The best way to know about an EOR is from previous customers. Research their reputation through client testimonials, case studies, and online reviews on G2 and Software Suggest platforms. You can also contact industry peers and professionals in your network to learn about their experience working with EORs.

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Unlock the Potential of Independent Contractors with an Employer of Record

Choosing an EOR puts you in the best position to deal with independent contractors and lets you get the most out of this relationship. So don't wait any longer. Explore EOR services for your business and improve contractor engagement.

Discover the untapped potential of independent contractors with Teamed. Contact us now to experience firsthand how we enable you to harness the capabilities of contract workers and make it easier than ever to hire, pay and manage them remotely.

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