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Does Your Business Need Employer of Record Services (EOR)?

COO Alcor
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Experienced operational manager with strong legal background. Focus on launching back-office processes for foreign software R&D centers in Ukraine.
19 May 2021
7 min

What is an employer of record? Basically, it’s a part of business process outsourcing (BPO) services that significantly simplifies global expansion. It’s a great solution for both big enterprises interested in covering new markets, or smaller companies looking for a skillful workforce overseas.

 

Here we will discuss the differences between EOR, PEO, GEO, and a Staffing Agency: which solution is the most comprehensive and why building a cooperative relationship with an employer of record company is a beneficial option. Let’s start!

 

PEO-GEO-EOR

 

What is an Employer of Record?

 

An employer of record is an external organization that is responsible for payroll, tax calculation, benefits, and mundane documentation, while remote employees are performing work via a different company. In essence, it’s the part of BPO services which deals with transactions concerning human resources, and eases many related complications.

 

Benefits of Engaging an Employer of Record Company

 

There is a wide range of advantages for a tech company to use employer of record services. Let’s dig a little deeper and clarify which businesses can benefit the most from such a partnership.

No Obstacles to Hiring IT Talents Overseas

An employer of record company is considered to be a pain-relieving solution for businesses that are going to expand globally or already have their representative units overseas. From my experience, many software development enterprises and startups face difficulties trying to navigate in an unknown legal environment. Picture this: with an employer of record, there is no need to set up a local entity or worry about violating foreign labor laws, as all the liabilities of having offshore developers on staff are managed instead of you.

Immigration Compliance

It’s a common practice for IT companies to engage rare specialists from different states to assemble their professional teams. Let’s imagine that you want to launch an offshore development center in Ukraine and need to hire some more specialists from nearby countries like Belarus, Russia, Georgia, Moldova, or Bulgaria. With a provider of employer of record services, you don’t have to deal with immigration authorities and their ever-shifting policies. Usually, a vendor can arrange all visas, work permits, and legalize your foreign employees.

 

That’s exactly what we did for Grammarly – an IT product company, which aims at improving written communication with the help of an AI-powered platform. Ukrainian immigration law appeared to be way too confusing, so they reached out to Alcor for outsourcing assistance. Our leading lawyers took complete responsibility for the legal processes and arranged residence permits for Grammarly’s employees and their families.

Less Paperwork & Saved Hours

Last but not least, the delegation of HR-related operations to an external firm gives many opportunities for business growth and development. For instance, due to reduced operational concerns, software development companies can focus on the improvement of their products to generate more revenue, as there is no need to worry about routine paperwork and back-office support.

 

 

Employer of Record Services: How Does it Work?

 

Before the final decision to outsource operational business tasks is made, it’s vital to figure out who is responsible for what to avoid possible miscommunication in the future. To make everything clear, let’s define the scope of liabilities of the EOR company:

  • Ensuring the legal rights of the employees to work in the state where the EOR is located. It includes arranging visas and work permits, avoiding delays and refusals;
  • Keeping the client updated in terms of local labor laws and organizing all the working processes in compliance with them;
  • Managing all payroll-related matters inside the offshoring country;
  • Bookkeeping and accounting administration;
  • Tax planning and consultation;
  • Administration of employee benefits, such as medical insurance, day-offs, sick leaves, and more;
  • Operating as a shelter for a client during the interaction with authorities of the host country.

At the same time, the EOR company is not responsible for:

  • Curating employees’ career development and position duties;
  • Making decisions as regards contract termination, compensations, etc.;
  • Projects supervision.

 

Defining Differences between EOR, PEO, GEO, and a Staffing Agency

 

There are a few HR outsourcing solutions that may seem very similar at first glance. However, it’s crucial to know the key differences between such terms as “EOR”, “PEO”, “GEO” and “Staffing Agency” to mitigate possible legal risks. Let’s have a closer look at these models to decide which one suits your IT business the most. In essence, the main distinctions lie in the areas of:

 

✓ Scope of services

✓ Employee Contracts 

✓ Business Registration

✓ Insurance Coverage and Benefits

 

Professional Employment Organisation (PEO) is a third-party company that works under the co-employment model. Put simply, you hold the employee contracts and remain the legal employer, while working with a PEO that provides the outsourcing services of local payroll and compliance. Due to this, some people argue that this partnership doesn’t allow you to operate under the PEO company, which means that you will still have to set up your own legal entity in a foreign location. As a result, this model offers more control to business owners because the ultimate decisions are always up to you. The PEO model is especially popular in the USA where employment requirements differ across the states and regions, so tech companies need additional consultations.

 

Employer of Record (EOR) performs a more comprehensive role. They hire tech specialists, manage and keep their contacts, plus work on benefits and insurance. In other words, they are the legal employer for the software developers who actually work for your company. Another vital point is business registration. No need to open your own legal entity in an offshoring location! Your EOR partner will take over all legal & accounting hurdles of the employment procedure in a foreign country.

 

Global Employment Outsourcing or GEO is pretty much the same thing as an employer of record service. It implies having a service agreement with a provider who is responsible for managing all your HR-related operations while holding the employee contracts. Cooperation with a GEO gives an opportunity to hire foreign contractors without the need for establishing legal entities in those countries abroad. Partnering up with GEO enables you to hire developers from many different countries where your partner firm is registered. We would agree that it’s a perfect chance to cover new markets and expand your business.

 

PEO-vs-EOR-difference

 

While EOR and GEO assume the roles of legal employers for tax and administrative purposes, a staffing agency only hunts software developers for IT companies. Such firms are focused on searching candidates, screening their CVs, conducting job interviews, and matching the applicants with employers. Companies often turn to staffing agencies in cases of special projects, sudden seasonal spikes, or skill shortages.

 

Do you Need an Employer of Record Agency? Consider the Alcor Solution

 

No need to panic if you feel confused due to the great variety of available EOR models. Just imagine having an all-in-one place for back-office support. We have some good news: that’s exactly what Alcor has to offer.

 

Our financial team can provide you with payroll, accounting administration, tax planning, and calculation services. Apart from that, we offer audit services combined with financial modeling and analysis. Our accounting experts work closely with the legal department that handles Ukrainian labor law compliance, employment contract reviews, as well as provides visa support and gets work/residence permits for your employees. As a result, you get fully transparent and fast accounting and payroll with a full pack of additional services

 

Sitecore is an IT industry-leading platform that manages content, supplies contextual intelligence, automates communication, and praises Alcor accounting services. The company was looking for optimization of the accounting processes for its development center in Ukraine. Therefore, we drafted a new operational structure and handled all the documentation to comply with both Ukrainian and International standards. Today, Sitecore enjoys operational comfort, cheaper accounting services, and 100% transparency with the Alcor Model.

 

If you are on the stage of looking for Ukrainian IT talents, our recruiters can use the best practices to attract local tech specialists to your company. Moreover, they will keep you up-to-date through the entire hiring process by providing weekly reports as regards processed CVs, conducted job interviews, and pay scales. With our end-to-end recruitment solution, we can assemble your own development team in Ukraine in just one month! 

 

 

Final Thoughts

 

All in all, Alcor is the BPO company that provides full operational support for tech businesses. Apart from employer of record services, we also handle legal compliance, recruitment, real estate, and additional services. Compared to many other vendors, we have a “pay-per-service” option, so you can choose only the services you need. That’s an efficient way of optimizing expenses. 

 

Alternatively, if you are interested in rapid business expansion, we can offer the most comprehensive solution – your own R&D office in Ukraine.

 

Focus on your core tasks while we take care of everything else!

 

software-R&D-Ukraine

Contact Us

We will provide you with statistical data regarding the number of developers in Ukraine and their average salaries. The discussion will proceed with the expected hiring deadlines and our recommendations on managing payroll, equipment procurement, and compliance matters.

We respect your privacy and will never share your data with any third party or spam you

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