The difference between a Foreign Employer vs. Employer of Record

When considering hiring solutions in Europe, two key solutions exist; direct employment as a foreign employer, and contracting Employer of Record (EoR). While both aim to simplify the complexities of international employment, they operate differently and come with their set of pros and cons. Here, we explore the key differences between hiring as a foreign employer and an Employer of Record, spotlighting how each impacts your hiring costs and operations.
What's the difference between EU Remote and an Employer of Record

Global hiring has opened up a world of opportunities, letting companies tap into diverse talent pools. When considering hiring solutions in Europe, two solutions exist; direct employment as a foreign employer, and the Employer of Record (EoR). While both aim to simplify the complexities of international employment, they operate differently and come with their set of pros and cons. Here, we explore these differences, spotlighting how each impacts your hiring costs and operations.

EU Remote: Facilitates the direct employer-employee relationship as a foreign employer

Pros:

  1. Direct Employer-Employee Relationship: EU Remote ensures a direct bond between firms and their global hires, strengthening trust and communication.
  2. Regulatory Compliance Assurance: Companies gain an ally in navigating European employment laws, ensuring operations align with local standards without heavy legal investments.
  3. Localised Expertise: Employers are assigned an expert in each of the countries where they have employees, who guide them on local employment norms and requirements as an employer.
  4. Cost Efficiency: By facilitating rather than outsourcing the employment relationship, EU Remote offers a more cost-effective approach. Without third-party fees or administrative markups, businesses can benefit from significant savings.
  5. IP Security: Direct legal relationships reinforce intellectual property protection, granting companies confidence in safeguarding sensitive information.

Cons:

  1. Set-up times: To establish the status of a foreign employer requires appropriate registrations with local governments. Initial set-up times will vary from country to country, it is recommended to seek advice for more precise timeframes for your particular country/ies of interest.

Employer of Record (EoR): Outsourcing Employment to Third-Party Organisations

Pros:

  1. Speedy Set-up: With pre-established networks, EoRs can accelerate hiring timelines, making them attractive for rapid deployment needs.
  2. Localised Expertise: EoRs possess regional insights, guiding companies through local employment norms and nuances.
  3. Hands-off Administration: EoRs shoulder responsibilities like payroll and taxes, allowing companies to remain focused on core activities.

Cons:

  1. Higher Costs: One of the most significant drawbacks of EoRs is their cost. They essentially manage the complete employment relationship on a company’s behalf, leading to marked-up fees. Over time, these costs can accumulate significantly, especially when hiring multiple international employees.
  2. Intellectual Property Risks: The indirect legal relationship with an employee might render intellectual property vulnerable, particularly during disputes or potential information breaches.
  3. Compliance Variability: The efficacy of EoRs hinges on local legislation with some European countries not recognising this model under law.

Deciding the Best Fit

Choosing between hiring as a foreign employer or via an EoR largely depends on a company’s priorities, financial considerations, and desired operational depth.

Hiring as a foreign employer emerges as the go-to for businesses that prefer direct engagement, are keen on safeguarding their intellectual assets, and wish to achieve cost efficiencies. It is the only model which facilitates compliance throughout Europe.

Conversely, organizations valuing swift rollouts, coupled with regional insights (and prepared to bear the associated costs), might find EoRs appealing in the countries where they are allowed under local legislation.

Companies hiring globally, they can use a combination of solutions based on the region, for example, utilising EU Remote’s solution in Europe and other countries around the world where they are compliant.

In wrapping up, it’s clear that international hiring, alongside the opportunities it brings, it does also invite additional challenges. Evaluating both the operational and financial elements of hiring as a foreign employer, or contracting an  EoRs, can guide businesses toward an optimal talent acquisition strategy to access talent globally.

To discuss your company’s particular hiring challenges, schedule a free call with a member of our team.