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How to Switch to a New Employer of Record

Companies that are currently employing staff abroad, either expats or residents, may have chosen to use a third-party Employer of Record (EOR) for hiring and payroll.  Due to the ease and cost-efficiency of using this employment method, international employers are drawn to the employer of record solution, especially in a new foreign location where the rules are unfamiliar.

Nonetheless, not every EOR offers the same type and quality of services.  Just as with other professional business services, the company-client has to be in a continual process of evaluation and always be prepared to make a change if necessary. 

This guide will cover some of the key elements of changing from one employer of record to another, and how to evaluate a new EOR provider in every category of service.

Why Switch to a New Employer of Record?

The EOR is technically the local ‘employer’, even though your company compensates and manages the employee.  When you switch EORs it is similar to changing employers in that country, with all the administrative time and cost that entails, so its not an easy decision. 

Why might you go to the effort and expense to change to a new EOR?  Here are a few reasons, and it could be one or more of these or repeated incidents that motivate the change.

  • The employee experience doesn’t align with your company values: Disrespectful or discriminatory actions toward employees, disorganized approach, little understanding of client-company culture
  • Poor and unreliable service: Communication issues, no personal contact, delays processing payments, insecure data processing, unresponsive to requests
  • The employer of record made a costly error: Incorrect payroll calculation, non-compliant termination, penalties resulting from employee claims of violations
  • Limited scope of services: Cant provide local health insurance, unable to reimburse employee expenses, automated interface rather than personal contact
  • Unexpected fees or overall cost is too expensive: Add-on costs, percentage-based fees that increase over time, hourly charges for specialized advice
  • The EOR is not a ‘core’ business for the provider: Lack of staffing and local expertise, low priority service, impersonal management, reliance on automated software

If any of these seem familiar to you, it may be time to look at the next steps toward a change.

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What Should I Consider When Choosing a New Employer of Record?

If you have made the decision to make a change, you will want to fully vet the available EORs to make sure they will deliver the service you need and to avoid the issues from the past.

Active EOR Partners in Your Target Countries

If you are employing in a core set of countries and want to maintain that option, the EOR service should have active, knowledgeable partners in your target countries.  At the very least, they should be well-staffed and established in the countries and regions that matter most, with account representatives who handle those regularly.  You never know where you will find remote talent, and you don’t want to be limited by your EOR provider.

Access to Local Employment Expertise

One of the core benefits of an employer of record is having access to in-country knowledge and expertise.  But, not every EOR is working with a local provider, and may instead be administering employment in-house and remotely, via an unstaffed entity with contracted legal and accounting support.  Due to the fact that local culture and laws may be hard to learn and monitor from abroad, having active local resources can be invaluable.

Customer Service

This may seem obvious, but there are varying levels of customer service, so you need to ask some questions such as:

  • How responsive is the EOR to requests and questions? Is there a long wait time?
  • Is there an account manager assigned specifically to your account?
  • Who handles different types of requests, and how easy is it to reach them?
  • What is the EOR’s business culture when it comes to client service?

Fees and Cost Structure

One of the advantages of an EOR is that it saves the expense of local incorporation just for hiring purposes.  But there is still a cost to the employer of record service, and you should analyze it closely for the following issues:

  • Is the fee a percentage of total compensation or a fixed flat fee per employee?
  • Are there variables or potential add-on costs?
  • Is the fee scalable if you want to hire more employees as you expand?
  • Is specialized advice such as tax and legal included in the fee, or billed hourly?

Technology and Security of Employee and Company Data

Data security and protection is a major issue in all industries, but its multiplied when hiring remote employees in foreign countries.  Employee and company data need to be stored and processed according to industry standards, and the EOR should demonstrate how they do that and who has access to the data.

The EOR should also be familiar and in compliance with any data protection laws, such as the GDPR in the EU that sets rigorous standards for EU-citizen data sharing.  You can ask for a copy of their data transfer/privacy policy which would confirm this.

Who They Work With – Past and Present Clients

If you evaluate the employer of record’s current and previous client list, you can get a good sense of their quality and industry reach.  For example, if you are in the IT sector, you would look for an EOR that has worked with similar companies and their employees.  They can offer you insights into protecting intellectual property and how to structure any confidentiality terms in the local employment contract.

Similarly, an EOR that works with companies where compliance is a priority (such as NGOs and non-profits) would be a good sign they are trustworthy.  Employers of record that work with single companies that employ many workers in multiple countries would be a sign of the depth of experience and expertise, as well as demonstrating the client’s confidence.

What Are My Legal Obligations When Changing EORs?

The legal obligations when switching to a new EOR will depend on local labor and employment laws.  It’s not always possible to just make an instant change, as the EOR also has obligations to follow or they risk non-compliance or employee complaints.  As the client, this means that you cant take a casual approach to transferring the employee, and will need informed local support to help make the change.

At a minimum, you will need a lawful employee termination from the existing employer of record before onboarding, along with a new local employment contract.  You will also need to terminate the existing master services agreement if no employees will remain with the existing EOR.

Are There Risks When Transferring My Employees to a New EOR?

There may be a few risks when transferring employees, so it may be worthwhile to ask the EOR if they have handled transfers before.  In that case, they would be able to advise you on how to avoid any problems.  Here are some possible issues:

  • Transferring an employee to a new employer of record will likely mean following a lawful termination process with the old EOR, including notice periods and severance pay. Only then could the employee be onboarded with the new EOR.
  • The EOR should be familiar with laws that surround employee transfers between entities, such as TUPE in the UK which protects employee rights when there is a change between entities. There could be hidden costs such as paying out leave accrued from the last employer of record, as the new EOR may not want to take on pre-existing, unpaid benefits.
  • You will want to consider how to handle using multiple providers, where only some of the employees are being moved to the new EOR, due to a pending contract end or other contractual restrictions.

Why Switch to Shield GEO as Your Employer of Record?

Shield GEO takes a dedicated, personalized approach to our EOR service, and offer some clear advantages over competing EORs: 

Inclusive Flat Fee

Shield GEO’s fees are all-inclusive with a monthly flat fee billed up-front, with no add-ons.  Contrast this with other EOR services that use a percentage-based fee, calculated on salary plus social security costs, which means any employee bonus or increase in compensation will mean a fee increase for that month.  Shield GEO’s clients don’t have to worry about forecasting fees month to month and receive the full spectrum of our services and expertise and no extra cost.

Customer Service

Shield GEO assigns one dedicated account manager to each client, who personally attends to all client requests and questions, and is there during every step of the hiring, onboarding and payroll process.  We don’t use an online ‘client portal’ or impersonal software for communication and processing requests.  Our EOR service is hands-on and designed to meet every client’s specific needs.

Global Employment Expertise

Shield GEO offers dual channels of expertise to our clients: 1) skilled local partners in all host countries, and 2) a professional internal team with broad global mobility experience gained with four big consulting firms.  Access to these resources is facilitated by the account manager as a single point of contact for the client.

Local Partners

Our partners in the host countries bring insight and skill to their local employment service, with knowledge of current conditions, cultural traits and social customs.  Naturally, they speak the local language and understand how employment and labor laws are applied in their own country.  The local EOR staff can more easily bridge gaps in understanding business and cultural differences, to ensure that employees receive services that are tailored to their unique needs and expectations.

Active, multilingual, in-country expertise has a clear advantage over employment and payroll that is remotely administered with no local staff on the ground.

Shield GEO Internal Teams

Our teams comprise each area of global mobility; onboarding, offboarding, subject matter experts and finance, all integrated to meet any level of complexity when hiring abroad.  All clients have access to this internal network of expertise, with inquiries guided by the account manager who will make sure that your issue reaches the right person, and you get the information you require.

To Avoid Unpleasant Surprises

You expect an EOR service in a foreign country to be compliant and reliable, and if your employees are having issues with your current provider, the EOR may lack the experience you need.  Shield GEO’s track record of high-quality service and transparency ensures that you and your employees will have the professional service that you expect when hiring globally, with no unpleasant surprises.

Shield GEO embraces a culture of attentive client service, and we work hard to stay abreast of current trends and changes in global mobility.  As a client, you have a single point of contact at Shield GEO, who knows your organization and is connected to all of our local resources and internal teams. We make international employment simple.

 

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