Think Outside the Box ... or the Border: The EOR Case

It is possible to achieve even greater success beyond one's own borders than what has been achieved at home. This is an option that leads many companies worldwide to venture beyond their territory in search of alternatives to enhance their success, whether in terms of raw materials, advantageous legislation, conquering new markets, or acquiring international talent. For example, a company based in the US might be motivated to expand beyond its borders to relocate its customer service operations and establish administrative centers in Central America or the Caribbean, thereby reducing costs and providing a service that is culturally compatible with its clients while remaining in the same time zone. An automotive technology company might seek to establish an assembly factory in Mexico to reduce labor costs and take advantage of export treaties like NAFTA. On the other hand, a technology company might look beyond borders for top-tier talent that meets their requirements while decreasing their payroll budgets. Whatever the situation that motivates a company to expand beyond its borders, one thing we can be sure of is that it will require a team to execute day-to-day tasks locally.

Thanks to the virtual tools we have today, it is relatively easy to find the necessary information to conduct market studies that lead us to discover new potential markets or databases where we can find talent from around the world. However, when it comes to executing and addressing legal and tax requirements, it can be a headache on the path of crossing oceans and borders, especially when hiring the team that will make the expansion goals a reality.

International growth is becoming increasingly accessible. In fact, hundreds of startups have told us the story of how they began in a small hourly rental office and, in a couple of years, have grown to have a presence in dozens of countries in terms of service, properties, or talent. The rise in demand for companies to expand globally has led to the development of services like Employer of Record (EOR) to assist in these needs. 

In the new normalization where companies seek agile and secure solutions in the international arena, the EOR sector is forecasted to be valued at US$6.79 billion by 2028, according to Valuates Reports data. The central service offered by these companies is related to hiring and compensating one or several permanent-term employees on behalf of another company, allowing companies to work legally with employees from a foreign country without establishing a legal entity locally. Relying on the services of an EOR provides legal and seamless hiring of anyone, anywhere in the world, in a formal manner and in compliance with all legal and tax regulations. This provides access to an international talent pool and contributes to workers' satisfaction, as they are hired formally under local laws; at the same time, the hiring company has the tools to carry out its activities as if it were local.

When Does it Make Sense to Turn to an EOR?

In my experience within the sector, I have found two main approaches companies adopting EOR services take: territorial and talent-focused. The first approach refers to companies aiming to enter new markets in territories without permanent legal and fiscal infrastructure. An EOR acts as a local representative so companies can carry out their commercial operations and hiring without investing in these areas, focusing on their operation and analyzing the results. The second approach relates to hiring personnel beyond borders. Compared to the first approach, companies do not focus on entering new markets; instead, they demand exceptional talent that leads them to hire candidates who meet their professional level. In many cases, companies resorting to this strategy are also looking to make their personnel budgets more efficient, occurring mainly in customer service, software development, and creative areas.

In both approaches, the partnership with an EOR company can be transient, while the company establishes itself in a new territory, or permanent, where the company prefers to offload responsibilities related to payroll, taxes, and hiring.

Is an EOR the Same as an Employment Agency?

An employment agency focuses on finding suitable candidates for a vacancy through job advertising, virtual platforms, conducting interviews, and all relevant processes to screen candidates. On the other hand, the services of an EOR do not necessarily include candidate search services, as their efforts are focused on providing their clients with the necessary tools to represent them under any local labor regulations. However, to provide comprehensive service, collaboration between employment agencies and EOR companies is common.

Whether you're looking to conquer new markets or have access to an international talent pool, EORs have emerged to make the possibilities in the world available to any company in a formal manner. It is among the most effective ways to comply with local legal rights, as well as to meet the insurance and benefits needs that should be  guaranteed for every employee.

Formally entering a new foreign market or hiring dozens of programmers in Latin America in just days is now a reality; a reality that complies with legal regulations, workers' rights, and means savings for the company that requires it. In a world where globalization is the new normal, EOR has emerged as a tool that formalizes and safeguards the social, legal, and economic rights and interests of all parties involved.