Companies of all sizes use employers of record (EORs) to help manage the legal and administrative responsibilities of employing remote workers across borders. These EORs are third-party organizations that legally employ workers on behalf of other companies. They handle compliance, onboarding, employer tax filing, payroll processing, and other HR functions.
It's not just large, enterprise-level businesses that can benefit from using EORs, but also startups as they grow and scale. EORs can help these young companies expand and enter new markets by making it easier to hire internationally. In this article, we'll go into more detail about the value EORs offer to startups.
Interested in Oyster but want more information about how the platform works? This product overview should help.
What Is An Employer Of Record For Startups
An Employer of Record (EOR) for startups is a third-party partner that legally employs your international team members on your behalf. This lets you hire talent anywhere without setting up costly local entities. The EOR manages all compliance, payroll, taxes, and benefits in each country, so you can focus on growing your business instead of navigating complex local employment laws.
Why employing abroad is a good idea for your startup
Hiring internationally may sound daunting to many startup decision-makers, but it provides many benefits. Some of the reasons why hiring abroad might be a good idea for your startup include the following.
Cost savings
The cost of employing international workers is often less than hiring comparable employees locally, especially if you're based in a high cost-of-living country like the U.S. You may be able to attract and retain top talent at your startup without paying New York or San Francisco salaries.
In addition, the required employee benefits vary significantly from one country to the next, affecting employers' total hiring costs. Even while offering competitive and equitable compensation to all employees, employers can still find cost savings by hiring internationally.
Access to a wider talent pool
Startups that limit themselves to hiring exclusively within their own borders may encounter shortages of highly-skilled employees in various fields. For instance, software engineers, web developers, IT professionals, and other technical roles are in such high demand that they're sometimes hard to fill locally. Hiring international employees allows startups to widen their talent pool and increase their chances of hiring successfully for these and other difficult-to-fill roles.
Even if you're not trying to hire for roles with skills shortages, tapping into a wider talent pool can hugely benefit your startup. A broader talent pool means you increase your odds of finding the best person for the role. If you stick to local candidates, you could miss out on incredibly talented employees from other countries who could really help your startup succeed.
Ability to scale quickly
If your startup is expanding rapidly and needs to fill a lot of roles fast, hiring internationally makes that easier. International job listings receive many more applications, giving you plenty of potential employees to choose from. You won't have to worry about waiting for applications to trickle in one by one.
Common Challenges Startups Face Without An EOR
Trying to manage global employment on your own can create significant hurdles for a growing startup. Without an EOR, you're likely to face:
- Compliance and misclassification risks. Every country has its own complex labor laws, tax requirements, and benefits mandates. A mistake can lead to fines, penalties, and legal trouble you can't afford.
- Slow and costly market entry. Setting up a legal entity in a new country can take months and cost tens of thousands of dollars, delaying your ability to bring on key team members.
- Heavy administrative burden. Managing payroll, benefits, and HR tasks across different countries and currencies drains time and resources from your lean operations team.
How an EOR can help
So, how exactly do EORs solve the global hiring puzzle? They handle all the legal complexity of international employment—payroll, compliance, onboarding, and local HR requirements. This means startups can expand globally without the time and expense of setting up entities in each country. Since establishing a legal entity can take months and cost tens of thousands of dollars, working with an EOR is often the smarter path.
Different types of EORs approach the process of providing these services in slightly different ways. Fundamentally, though, they all help companies hire compliantly in other countries. If you use an EOR, the EOR will act as the formal employer of your new international hire. You won't have to manage the legal and tax requirements placed on employers in that country—the EOR will do that for you.
What's the difference between an EOR and a professional employer organization (PEO)? Here's the key distinction:
- EOR: Becomes the legal employer, no local entity needed
- PEO: Co-employs with you, requires you to already have a local entity
For startups entering new markets, this makes EORs the more practical choice.
What To Look For In An EOR Provider
So, how do you choose the right EOR for your startup? Not all providers understand the unique pressures growing companies face. Here's what to prioritize:
- Transparent pricing. You need predictable costs without hidden fees for things like onboarding, offboarding, or expert support.
- Expert human support. A self-service platform is great until it isn't. Ensure you have access to HR and legal experts when complex situations arise.
- An easy-to-use platform. Your team doesn't have time for a clunky, complicated tool. The platform should be intuitive for both your admins and your team members.
- Global coverage and compliance depth. Make sure the provider has deep expertise in the countries you're hiring in, not just a name on a map.
How Oyster might be a better option
Here's a common headache with traditional EORs: you need a different provider for each country. Planning to hire in five countries? That means managing five separate EOR relationships, contracts, and billing systems. For busy startup teams, this quickly becomes a distraction from what really matters—growing your business.
Working with Oyster may be a better option for startups hiring employees worldwide. Oyster's global employment platform makes hiring international employees from multiple countries easy—from a convenient, easy-to-use platform. Try Oyster today to start scaling your team and your company fast. Bring in the best global talent without all the headaches.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, hire, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.
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