Using Employer of Record Service For International Expansion
An employer of record service enables you to employ people before establishing a legal entity thereby handling background checks, tax filing & payroll services.
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Today’s digitally advanced society unlocks tremendous opportunities for doing business. Namely, outsourcing non-core business processes.
In this article, we focus on the employer of record service which is part of the ‘next-generation operating model’. We also explain, why you might want to consider using it in order to improve your business.
An employer of record (EoR) is a service provider that hires employees who will be on their payroll, but work for other companies.
For instance, let’s say that you have a company in the United States, but you wish to expand to Southeast Asia. Employer of record enables to employ people before establishing a legal entity there.
Employer of record also works if you do not aim to operate in Southeast Asia at all and would only like to outsource some processes like customer support or IT services.
Among other personnel functions, EOR will handle:
- Recruitment and background checks
- Employment contracts
- Payroll services
- Tax filing
In brief, the main idea of an EoR and a PEO is the same – to handle staff for other companies. However, an employer of record is responsible for all legal matters regarding your employees. A PEO, on the other hand, becomes your staff’s co-employer and you would still hold liabilities.
One of the main rewards you gain from using an employer of record is the significant cost reduction, regardless of whether you outsource employees from another company in your own country or choose to contract employees from neighboring or offshore countries.
Outsourcing employees from a professional organization will optimize your cost-benefit ratio. An employer of record is a recruiting specialist who has experience with professionals in various fields. Therefore, they have the knowledge on where and how to look for skilled experts.
Plus, an EoR already has the necessary tools for such employees, e.g software, office space, equipment. You also wouldn’t need to waste your money nor time on hiring and training these employees either.
What comes to using an employer of record from another country, the most important win by far is the difference in salaries. Many companies choose to outsource employees from developing countries such as Indonesia, Vietnam, or the Philippines where the salaries are much lower.
#2 Faster international expansion and access to new markets
In most Western countries, companies can be registered within a few days, or even within hours. In emerging markets such as Indonesia, Vietnam, or the Philippines, the time of a company setup is longer and more arduous.
Standard time of company registration
In some regions (e.g Bali), it can even take several months
*Incorporation process can take longer if additional licenses are required.
Employer of record, on the other hand, allows you to begin with conducting business in these markets almost immediately.
Furthermore, an employer of record can also grant quicker access to those markets by sponsoring work permits for foreign professionals.
#3 Test the market
Using an EoR also dissolves many risks that accompany business expansions. In particular, an employer of record enables to test the market and learn whether there is a demand for your products or services before making any initial investments whatsoever.
After gaining enough confidence you can proceed to company registration (if you wish to incorporate at all) with an already existing client base.
#4 Compliance with local laws
Emerging markets are known for their myriads of regulations which, moreover, can sometimes even change overnight. Therefore, there’s a chance that by the time you have enough local knowledge to comply with all the employment and tax laws, some of them might already be outdated.
An EoR, however, has up-to-date information. Moreover, there is no need for you to worry about compliance at all since you don’t bear any responsibilities regarding these employees.
#5 Focus on your core business
Another perk of using an employer of record which might not come to mind at first is that having a third party manage your staff will enable you to focus on your main business.
Instead of dealing with time and energy consuming staff administration – recruiting, payroll, compliance – you will only receive an invoice once a month from your employer of record who has already taken care of all respective matters. Thus, you will have more time to focus on your core activities.
One of the main characteristics of Indonesia, the largest economy in Southeast Asia, is its young population. According to Worldometers, the median age in Indonesia is 28.3 years.
In addition to being vigorous, the workforce is educated as well. In fact, 9 universities out of Indonesia’s top 10 are in QS World University Rankings 2018.
Generally, fresh graduates’ salaries in Jakarta are around Rp. 4 million (~US$ 280). However, salaries can even be lower in other regions outside of Jakarta.
Read our previous article to learn more about reasons to invest in Indonesia or fill in the form below to start with using employer of record in Indonesia.
If your business location is on the paradise island of Bali and you would like to try our employer of record service, contact our Bali office directly at [email protected].
Using an employer of record in Bali is also a great way to get a taste of doing business in Bali and to determine whether your company would have a future here.
Vietnam too offers young and educated employees at relatively low costs, despite the overall economic growth. For example, wages in Vietnam continue to remain half of what they are in China.
Read more about business process outsourcing in Vietnam here.
The uniqueness of the Philippines lies in the high levels of English proficiency. In fact, the Philippines is the only country where you can hire employees who are competent in English and at a low cost.
Find out more about outsourcing to the Philippines in our previous article.
Employer of record service, among other business processes, is a part of Emerhub’s outsourced operations model which enables you to conduct business without incorporating a company.
Getting started with the process of using an employer of record is almost as easy as counting to three. You only need to provide us with some details about your employee requirements and we will handle the rest:
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