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March 2022
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Global Mobility Basics
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Team Localyze

Employee relocation vs. employer of record: Which is best for your company?

According to Jobvite, improving the quality of a hire, improving the time-to-hire, and growing the talent pipeline were some of the greatest recruiting priorities in 2021 (and certainly going into 2022). For companies to be successful in each area, there’s one simple solution: Hire internationally.

When it comes to hiring international talent, there are many avenues an employer could take – each with a range of benefits and hurdles. In this article, we’ll discuss two of them: An employer of record and employee relocation, to help you decide which is best for your business.

What is an employer of record (EOR)?

Understanding local labor laws can be a bit of a hassle for HR and legal teams. Imagine handling the rules, regulations, taxes, registrations, and everything else under that umbrella in an entirely different country! 

With an employer of record, you don’t have to. If you’ve hired full-time international talent and chosen not to relocate them from their current country of residence, you can ask an employer of record to do the legal work for you. They’ll take care of the financial and legal procedures needed to run an office abroad, including payroll, employee benefits, and taxes. 

Simply put, an employer of record assumes all of your international hiring, employment, and HR processes, leaving your HR and Finance & Legal teams to handle what they’re experts in, locally. 

When to use an employer of record?

Imagine finding the best software developer for your company; only they don’t live in your country. You really want to bring them on board, but you’re not sure how to do it without asking them to be an independent contractor. Understandably, they don’t want to forfeit the security and benefits that come with full-time employment, and you’re not willing to lose exceptional talent. So you hire an employer of record to ensure local legal compliance, therefore unburdening both you, the company and your new employee. 

An employer of record is also handy when you have hired a few employees in the same location but are not at a stage where you want to invest the resources into global expansion; or if you’re thinking about global expansion but want to test the waters first. 

Ultimately, if you’re hiring internationally and don’t need to relocate your employees, an employer of record will make your job much easier.

What is employee relocation?

Essentially, employee relocation is when a company moves an employee from one location to another, whether from their home country to yours or one of your international entities. And even in a pandemic-world, it’s still a popular option for the global workforce. According to a recent Wakefield Research Survey, 80% of respondents said they would relocate for work, despite Covid-19. So, keep it on your list of HR topics! Not only do you increase your talent pool, but you remain competitive.

There’s no one-size-fits-all approach to employee relocation. Still, there are many elements to consider when designing your relocation packages: Visa support, travel arrangements, and housing, to name a few. Get it right, and you have a satisfied and loyal employee. 

When to relocate employees

In many instances, employee relocation involves moving talent from their current location to wherever your office is. Another reason you may want to relocate an employee is to transfer them to another office in another location or if you’re opening an international entity that needs experienced upper-level team members. 

The advantages of both options

Employer of record 

  • Increased hiring velocity: As an EOR is an established entity, newly-hired international employees can commence work right away.
  • Outsourced admin: Hiring, onboarding, payroll and HR admin tasks are handled exclusively by the EOR.
  • Guaranteed compliance: An EOR ensures full compliance with local labor and employment laws.

Employee relocation

  • Full autonomy: Since there’s no third party (EOR), you have more control over important processes like onboarding and HR administration. 
  • Scalable: For tax reasons, if your company is growing rapidly, it’s more sustainable in the long run to relocate employees and hire them directly.
  • Lower employment costs: The cost of adding new employees to an existing payroll is quite low.

The drawbacks of both options

Employer of record

  • Higher employment costs: Typically, there’s an additional monthly fee for each employee.
  • Lack of autonomy: For HR administration, compliance and terminations you have to work through the EOR.
  • Not scalable: Though rules vary by country to country, there’s usually a cap on how many employees you can hire through an EOR before you are considered under local law to have a taxable presence, or permanent establishment.

Employee relocation

  • Decreased hiring velocity: In many instances, international employee relocation is a fairly quick process. However, it requires more time than hiring through an EOR.  
  • Relocation costs: Employees' relocation packages are becoming more and more comprehensive and remaining competitive as an employer, you may need to up your game. Doing so could be an expensive process, but if your employee is truly an asset, they’re worth the investment. 
  • Supplemental benefits costs: It’s not uncommon for people to experience things like culture shock and homesickness when moving to a new country. In addition to baseline benefits, you may need to provide supplemental perks like language classes, travel expenses that allow your employee to occasionally go back home, and mental health resources (if they aren’t already available). All of these help ensure a positive relocation experience.

The bottom line

When it comes to hiring internationally, any avenue you choose to pursue comes with its fair share of benefits and challenges. If your company is looking for a short-term staffing solution, then it may be in your best interest to go with an employer of record. However, if you’re serious about scaling sustainably, then employee relocation is likely the better option. 

Want to learn more about the benefits of employee relocation? Let’s talk! We’d love to answer any questions you may have.