Your business growth due to expansion to new international markets used to take several months—or even years. Generally, recruitment in a foreign country entailed setting up a legal entity abroad, creating foreign bank accounts and cooperating with local lawyers. But today, the whole world talent pool is available for any company that wants to hire qualified developers, marketers, and operation managers.
However, there are some risks related to such international recruitment. Every country has its own employment laws, its own requirements in terms of benefit packages, withholding taxes and termination procedures. Failure to meet local employment laws leads to legal sanctions and a negative reputation of your business.
This is why many companies turn to global Employer of Record providers. The Employer of Record acts as your local employer from the point of view of local law, paying salaries of your foreign employees and performing all other legal procedures related to your employees.
Choosing the right partner who will be your Employer of Record is an important decision. If you choose the wrong EOR provider, this can cost you more than money and cause legal problems.
Question 1: Is It a Direct-Owned Company or Third-Party Vendor?
In the case of evaluating any global employer of record provider, this is the very first thing that needs to be considered.
EOR uses two basic business models, which include:
- The Direct-Owned Entity Model. It implies that the EOR company owns and controls registered legal entities in the targeted markets.
- The Aggregator/Partner Model. The EOR subcontracts local employment services to independent third-party HR vendors or local recruiting companies in each market.
Why It Matters:
- In case you plan to hire employees in some specific market—for example, in case of working with an eor partner in India—it will be better to work with such provider who owns its local legal entity.
- The use of third-party vendors in terms of EOR involves passing each and every request from your employee through many intermediaries.
Question 2: How Do You Protect Our Intellectual Property (IP) and Data Privacy?
While hiring remote workers around the world, the protection of your intellectual property (IP), trade secrets, and proprietary code is crucial.
At a conventional workplace, employees sign the IP assignments between them and your firm. In an EOR model, the contractual relationship will be three-sided: the employee signs with the EOR, while the EOR is providing your business.
Questions to Be Asked:
- How do you handle the legal transfer of the IP from the employee to the EOR, and then from the EOR to us directly?
- Is the agreement valid under the local IP assignment regulations of the worker’s state?
- Do you have systems that comply with global data privacy regulations like the GDPR or any local data protection legislation?
Why This Matters:
There are significant differences between IP laws around the world. Some states have the rule that the IP created by an employee automatically goes to the employer of record unless specific transfer provisions are mentioned explicitly. Make sure your global employer of record vendor offers tight IP assignment terms within both the employee agreement and the master service agreement (MSA).
Question 3: What Is Your Exact Pricing Structure and Are There Any Hidden Fees?
Knowing what will be the actual price of an EOR service helps keep your expansion budget intact. An EOR usually charges you either through:
- Flat Monthly Fee Per Employee: A flat fee, such as $400 to $600 per employee per month, irrespective of how much that employee earns.
- Percentage Fee: A fee charged as a percentage of the total gross salary package of that employee, such as 8% to 15%.
Why It Is Important:
- A percentage pricing scheme penalizes you for paying market-rate wages to your top performers. A flat monthly fee ensures that you can budget your costs for the long run.
- Besides the base fee, here are some questions about possible hidden fees:
- Is there any additional onboarding or setup fee for a new hire?
- Do you have any additional fees for off-cycle payroll and annual bonuses?
- What are your FX conversion fees for changing currency?
Clear pricing prevents unpleasant surprises on your monthly invoices.
Question 4: How Do You Manage Local Statutory Benefits, Taxes, and Labor Compliance?
- Every nation has its own labor laws, mandatory deductions, and statutory benefits. For instance, if you are venturing into South Asia, specifically India, through an eor partner, you will encounter some very complicated statutory issues:
- Provident Fund (PF): This is the mandatory retirement contributions made by eligible employees.
- Employee State Insurance (ESI): Mandatory medical insurance contributions for certain income slabs.
- Gratuity Act: Statutory one-time lump sums paid to employees after having worked continuously for five years.
- Professional Tax (PT): These are employment taxes imposed at a state level in India.
What You Need to Know:
- How do you manage local payroll and tax filings on your platform?
- Do you include statutory contributions as part of your monthly calculations?
- How soon do you update your platform with any changes in local labor laws/tax codes?
Why This Matters:
- Not paying the required statutory payroll taxes or incorrectly calculating the required benefits will lead to hefty fines and other serious legal and financial consequences. It is important that an eor partner operating in India or any other part of the world have extensive knowledge of the local labor law code and handle all the tax returns correctly.
Question 5: How Much HR Help Do You Offer to Our Remote Workers?
The experience of the worker plays a crucial role in retaining him/her and improving his/her productivity. If a worker has any queries about his/her paystub, health insurance plan, tax withholding and/or leave entitlements, s/he will be expecting an instant response.
Questions That Should Be Asked:
- Does our staff have a portal through which s/he can access his/her paystubs and submit leave requests and tax returns?
- Do we have dedicated HR help for the employee’s local timezone and in his/her language?
- How will you address complex employee issues?
Why It Matters:
Employees who receive late pay, have their taxes incorrectly deducted, and get unsatisfactory assistance from the HR department won’t be happy. The selection of your EOR will reflect on your employer brand. Choose an organization that will take as much care of your remote employees as your internal HR does.
Question 6: What Is Your Process for Terminations and Offboarding of Employees According to the Law?
- Offboarding an employee is one of the most dangerous procedures in HR management. Even though “at-will” termination is common in some countries, like the USA, most international jurisdictions offer high employee protection laws.
In many countries, termination of an employee involves:
- Having documented and legitimate reason (like major misconduct or performance improvement plans).
- Mandatory notice period of 30-90 days.
- Severance payment according to the years of employment.
Questions to Consider
- How do you facilitate the PIPs and terminations process for our managers in specific countries?
- How are the severance pay costs covered if a worker is fired?
- How do we shield ourselves from wrongful termination lawsuits?
Why Does it Matter?
Wrong termination of international employees leads to lengthy court proceedings and high costs for settlements. Your EOR partner needs to help your managers with labor laws prior to any termination actions.
Question 7: Can you Help Us with Our Growth Plan?
When expanding your international team, your company’s growth strategy will change. A team of five engineers in India initially can grow into a team of fifty people within three years.
Questions That Must Be Asked:
- Is it easy for you to scale from 1 employee to 100+ employees?
- Are there services available in case we wish to create our own legal entity later on?
- Can you help us with visa sponsorships and movement in case we need to transfer some of our employees?
Why Is It Important:
Once you hit a certain scale (around 15 to 30 employees in one particular country), it may be cheaper to create your own local legal entity rather than paying monthly fees for EOR services. Good EOR will be your real partner who will help you grow and will be able to do the entity transition when necessary.
Don’t Missout : How PEOs Protect You From Compliance and Legal Penalties
Comparison Table: Evaluating EOR Providers
When interviewing potential EOR partners, use this scorecard to compare their capabilities:
| Evaluation Criteria | High-Quality EOR Partner | Red-Flag EOR Provider |
| Entity Ownership | Direct-owned legal entities in core operating countries. | Relies entirely on unvetted third-party local agencies. |
| Pricing Model | Transparent flat fee per employee with zero hidden charges. | Unclear percentage-based pricing with hidden FX markups. |
| IP Protection | Direct, multi-layer IP assignment built into local contracts. | Vague, single-tier IP clauses that expose risk. |
| Local Compliance | Automatic updates for statutory tax changes and labor laws. | Manual tracking that risks missed filings and penalties. |
| Employee Support | 24/7 localized HR support with self-service portals. | Email-only support with slow response times across time zones. |
| Termination Management | Guided, legally compliant offboarding protocols. | Leaves termination strategy and risk entirely on your team. |
FAQs
Q1. How does EOR differ from PEO?
A. A PEO works on a co-employment model whereby you have to first have a legitimate presence of your company in the country. An EOR will hire the employee for you through its own local entity and this means that you do not need to form a business locally.
Q2. How quick is it to on board an employee using an EOR?
A. On boarding with a global EOR is quite quick. Once you get your employment contract signed and checked, you can easily have your employees on board and available for work within 2 to 5 working days.
Q3. Is hiring via an EOR legitimate?
A. Yes, hiring through EOR is a legitimate practice across most countries in the world. An EOR makes sure that all employment contracts, tax withholdings, statutory benefits match the labor codes of that nation.
Q4. Who supervises the employee’s day-to-day activities in an EOR structure?
A. Your firm does. The EOR takes care of activities such as payroll processing, taxation, and legal compliance while your company has full management of the employee’s tasks, deliverables, evaluations, and working hours.
Scale Globally and Compliantly with InsourceIndia
Scaling your company into the global market or creating a remote team for your company doesn’t have to be difficult due to complex employment laws, multicurrency payroll, and legal responsibilities. In case you want to scale your workforce hassle-free and form a compliant team in India without the need of establishing a local presence, then opt for InsourceIndia.
Being a reputed eor service provider in India, InsourceIndia provides end-to-end HR lifecycles management, payroll processing, statutory compliance and risk mitigation services. They help both foreign and Indian companies hire the best available candidates and run their operations in perfect coordination with the local labor and tax regulations. Get rid of the complexities involved in scaling and learn how you can scale hassle-free with InsourceIndia!
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