Employer of record? Beware false claims

January 28, 2022

Employer of Record

Some providers claim to have direct in-country expertise when they really don't

A global employer of record (EOR) can help you quickly grow your international workforce by employing professionals on your behalf. With their local reach and expertise, you can hire around the world without the expense or hassle of setting up legal infrastructure in-country, or the risk of independent contractor misclassification.

How can an employer of record enable organizational growth?

  1. Employing your workers through their own direct entities
  2. Employing your workers through trusted in-country partners

Often, organizations looking to expand would prefer an employer of record, sometimes referred to as a global or international PEO, that can engage their workers through a direct subsidiary—rather than a partner—because this method ensures the most comprehensive service and expertise. But not all providers who claim they have direct, in-country entities really do, which can lead to costly co-employment issues that you’re trying to avoid.

Some providers claim to be a “direct” partner with in-country entities throughout most of their global footprint. But many times, they are actually registered as a temporary foreign employer and have a limited presence in the local market. As a foreign employer, they likely don’t have in-country staff and lean on vendors and other local resources to carry out their services. An EOR who is leaning on vendors as a foreign employer could also have inconsistent tax reporting—putting their stability (and your credibility) at risk.

If a global employer of record claims to be a direct provider, it’s important for you to gain clarity about their local presence and whether they truly have in-country expertise and service—or they just say they do, when in fact they’re relying on local vendors.

How can you better understand the local service an employer of record offers?

Ask the following questions to learn more about the services being offered and better understand whether they’re being deceptive in their claims:

  • What kind of business entity do you have? Is it an LLC, a foreign employer registration, a service branch?
    An employer of record should have a permanent entity in-country, like an LLC or service branch, in order to provide local invoicing and other comprehensive services. A foreign employer registration is a temporary entity with significant limitations in the local market.
  • How many staff members are on the ground in the country?
    If they have no in-country staff, they are relying on vendors and other resources for local service and expertise.
  • How long have you been direct in the country?
    Providers with young entities will have less expertise and may not be able to manage overly complex employment situations.

Asking these questions will help you understand the service-level details about an EOR, including whether they truly are a direct provider. A direct provider should not only have a permanent entity in-country, but boots on the ground at a local level to fully manage their clients’ HR and payroll services. If the employer of record is utilizing local vendors, they’re probably not as direct as you’d like. Top providers will also have at least one year of direct employment experience in-country with multiple client examples to prove their expertise.

With endless noncompliance risks involved in international hiring, you have to be able to fully trust your EOR provider. If they’re being deceptive about their in-country presence or entity status, can you trust them to ensure your employees are receiving country-mandated benefits, for example? Mandatory benefits are often hard to interpret, especially for an HR team who isn’t local. To ensure the most comprehensive global employment service and expertise, make sure your employer of record is a credible provider who means what they say.

At Safeguard Global, we know how tough it is to get global employment right—because every hiring situation in every country is unique. At any given time, we’re engaging over 1,400 workers via GEO, our first-to-market global employer of record service. We have extensive expertise throughout our growing network of direct, local entities around the world, including the top destinations for international expansion.

To learn more about how GEO can help you hire workers directly in new global markets without taking on the risks of entity setup or independent contractors, contact us today.

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