Three Indicators it’s Time to Graduate from EoR

Have we started to see the great separation in the Employer of Record (EoR) industry? Companies like Deel, Remote, and Rippling announced product enhancements to differentiate them from mainstream EoR-only providers. Payroll acquisitions, Professional Employer Organizations partnerships, and a broader offering around the full-stack HR experience can lead us to one conclusion. EoR as an industry is being disrupted again.

Today, we’re focusing on indications that it might be time for you to consider moving away from EoR services. Here’s a list of three common drivers for graduation from EoR as your global employment landscape evolves.

1. Headcount in country

Employer of Record is a quick-to-market, mitigated risk solution that helps empower companies to tap into global talent. Undoubtedly, the “arms race” in global expansion from the over two billion dollars of outside investment has placed companies like Deel, Remote, Rippling, and others into the spotlight. They have world-class sales organizations and multi-million-dollar marketing budgets aimed at selling you on EoR. So, what happens when it goes well? Additionally, headcount can be a leading indicator that it’s time to consider an EoR transition. There are many reasons for this, but let’s start with the most obvious one. Cost. If you’re paying $700 monthly for ten workers or more, the platform costs alone would likely be double what you expect for your EoR to entity transition from local payroll to benefits, bookkeeping, and HR support.

2. Types of hires on EoR

Permanent establishment (PE) risk comes from employment engagement and revenue recognition. If you’re hiring loads of revenue-generating people or recognizing revenue in a country where your company utilizes an EoR provider, you may be operating under a PE risk. The remedy for PE risk is infrastructure. This takes planning and time. Consider the timeline for the EoR to entity transition: setting up a bank account, registering your own legal entity, finding a local payroll provider, aligning benefits, and transitioning employees to your newly found entity. This process can take up to a year or more in some countries, depending on external influences.

3. M&A

Let’s face it. There are plenty of companies that are struggling in this current economic environment. If M&A is part of your strategy for global growth, EoR may not be an option for you to utilize at all—you need to consider an EoR transition. Restoration of benefits and employee confidence are key factors in a successful transaction. Limitations typically found with EoR providers around prior employment agreements and other factors may create a necessity to move away from EoR as a mechanism for global workforce management. It’s easy to overlook, but deals can fail if the right diligence is not performed at the front end. Preparing for an EoR to entity transition exercise can help negotiations, especially with durations of things like the Transition Service Agreement (TSA) and the culture mesh of bringing multiple companies together under a newly formed business.

Let’s discuss your needs.

At HSP Group, we know that EoR is rarely a long-term or permanent solution. We specialize in guiding businesses from EoR when launching operations in-country to the time when establishing their own EoR to entity transition is the right choice. Our comprehensive, employee-centric process ensures a compliant, cost-effective, and efficient transition for your growing business.