EOR or setting up an entity: Which is right for your business?

By Mark Baggs, Head of Global

eor or setting up entity

Expanding your business internationally is a complex task. Firstly, there’s ensuring you’re doing this at the right time. Then, it’s making sure you have the provisions in place to set up your legal entity. The commitment that comes with setting up a legal entity requires a great deal of forward planning. Therefore, a route many choose is using an Employer of Record (EOR).

Deciding which is best suited to your business is important. Setting up a business in your current residence is challenge enough. But, doing so in a foreign location comes with a whole new raft of complexities.

So, which should you consider, setting up an entity or hiring an Employer of Record?

What is required to set up an entity?

To have an entity in a country, means your business has a physical legal presence in that location. This means it’s registered in the country, adhering to the regulations and trading laws.

What does an EOR do?

 With an Employer of Record, they already have the entity in place. They serve as the in-country employer, dealing with all the arduous admin work that comes with setting up and maintaining business compliance in a foreign country. For example, an EOR deals with taxes, payroll, benefits, risk management and other HR related responsibilities. However, you still maintain control of your employees and their day-to-day tasks.

There are several factors to consider when deciding whether to set up an entity or hire an EOR. These include:

Time

Setting up an entity can take anywhere between a few weeks and up to six months. Then, you need to source the right team. These include local HR, financial and legal teams to ensure your business meets the laws and regulations. When you have the right team in place, there’s the onboarding and admin required to make your employees fully compliant.

With an EOR, they can be the employer on your behalf. This means, you can focus on the core business activities whilst they manage all the admin that comes with sourcing and hiring your employees. This means your entry into a new market is faster and smoother.

Alongside a faster entry to market, if you decide to shut down operations, dissolving an entity can take months depending on the country, building type and the number of employees. When you work with an EOR, they can help navigate and manage this process to ensure a compliant termination process.

Compliance

Not maintaining compliance can put your business at heavy financial and reputational risk. It’s therefore your responsibility to ensure you remain up to date with the latest local and national laws and regulations. With an EOR, this responsibility lies entirely with them.

A good EOR should create a risk management strategy for your business which includes worker’s compensation, health cover and compliance assistance to enable business continuity and recovery in the event of any issues you may encounter.

Talent Acquisition and retention

Until your foreign entity is full registered and operational, you are unable to hire an employee. Further to this, there are several complex laws and regulations which can vary from country to country. All this can mean the process of hiring can be time consuming and resource heavy. When you work with an EOR, they already have an expert team in place to manage the process from a legal and compliance perspective, saving you time and allowing you to focus on getting the right talent for your business.

A key factor of the acquisition and retention of top talent is being able to provide competitive benefits. These must be relevant and culturally appropriate. When entering a new country, it can be a challenge to figure out which benefits should be provided. An Employer of Record can guide you on the right benefits, so you can hire the best possible talent for your business.

Next steps

Whatever you decide to choose, it’s important you’ve researched and considered the right option that will take your business in the right direction.

If you would like to find out more about what an EOR can do for your business, request a call back from one of our dedicated team of experts today.

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