A business expansion into a foreign nation might be promising but presents many complexities, too. Choosing the best employment and compliance solution is one of the most important considerations that founders and HR managers must make.
Hiring from countries like India gives you a much wider pool of high-quality tech talent but also involves several legal aspects—and here, you need employment support services.
This article aims to shed light on three popular options: employer of record (EOR), global employment outsourcing (GEO), and agent of record (AOR). We will explore them in detail and provide insights into making an informed decision for business expansion in India.
What is an EOR?
An employer of record (EOR) is a specialised company that facilitates the employment of international talent on behalf of other businesses. To legally employ international talent, many countries require employers to have a local entity, which can be complex and expensive. EORs simplify this process by utilising their local entities in the hiring country.
When a company engages an EOR, the EOR becomes the official employer responsible for all employment-related obligations, such as onboarding, payroll, benefits and termination, while ensuring compliance. The client company controls day-to-day work, while the EOR handles administrative and legal aspects.
What is a GEO?
Global employment outsourcing (GEO) is a service provided by global employment firms to address the compliance and complexity challenges growing multinational organisations face.
GEO is a service wherein a company partners with a third-party organisation to handle all human resources and employment-related tasks for its foreign employees. It acts as a near-turnkey HR delivery solution, combining elements of a co-employment model, global payroll outsourcing and traditional staffing arrangements.
Unlike EOR, GEO doesn't typically become the legal employer; instead, it acts as a comprehensive HR solution, offering recruitment, onboarding, payroll and benefits administration, while the client company remains the legal employer of record.
What is an AOR?
An agent of record (AOR) is a service in the United States where a provider acts as an intermediary between a staffing firm or client and independent contractors. The AOR manages the back-office activities of hiring these contractors, such as payroll processing and meeting government reporting obligations. It also supports the legal and administrative parts of the contractor engagement, allowing the staffing firm or client to focus on core business activities while assuring compliance and effective contractor management.
However, unlike EOR or GEO, an AOR doesn't handle payroll or other HR functions
EOR vs GEO vs AOR
To choose between EOR, GEO and AOR, founders and HR managers need to assess their specific needs and the level of involvement they wish to have in their foreign operations.
1. Employment Model and Service Offering
EOR: Provides full employment and HR support, handling payroll, benefits, taxes and legal compliance. It offers a comprehensive and hands-off approach, making it ideal for companies looking to quickly establish a presence in a foreign country.
GEO: Provides a near-turnkey HR delivery solution, combining co-employment and global payroll outsourcing elements. Offers end-to-end HR support in multiple countries, allowing agile and compliant global expansion. Suitable for companies that prefer to retain more control over their foreign workforce while delegating HR tasks to experts.
AOR: Primarily focuses on regulatory and legal compliance, making it beneficial for businesses needing assistance navigating complex foreign regulations and obtaining licences or permits. AOR acts as a liaison for staffing companies, clients and independent contractors, managing the contractors' back-office needs like payroll and government reporting.
2. Compliance and Legal Considerations:
EOR: Assumes all legal and compliance responsibilities, ensuring foreign employees comply with local labour laws and tax regulations.
GEO: Mitigates employment-related risk by adequately classifying workers and handling compliance throughout the relationship. While not the legal employer, a GEO partner will ensure compliance with employment laws, reducing the risk of penalties and legal issues.
AOR: Assists in independent contractor (IC) classification and provides ongoing compliance and audit defence support, reducing risks associated with using independent contractors. Concentrates on specific legal matters, such as obtaining licences.
Scalability and Adaptability to Business Needs:
EOR: Highly scalable, enabling companies to expand their workforce rapidly and smoothly without the burden of establishing a legal entity.
GEO: Offers flexibility in managing a global workforce, making it suitable for companies with fluctuating staffing needs or expanding operations in multiple countries. It helps client companies to test and enter new markets without establishing a physical presence
AOR: Primarily focused on specific legal support, which may not be directly scalable for managing larger employee numbers. Helps hiring organisations tap into independent contractor resources while ensuring compliance, providing agility in workforce management.
The decision between EOR, GEO and AOR is based on the company's objectives and goals.
EOR is appropriate for rapid and hands-off global expansion, whereas GEO provides flexibility and lower entry barriers for exploring new markets.
AOR is advantageous for businesses that engage with independent contractors to ensure proper classification and compliance.
Founders should carefully assess their global expansion plans, the level of control they desire and the complexity of compliance in different countries. Seeking expert advice and understanding the subtleties of each model can assist in making an informed selection that corresponds with the company's growth goal and assures compliance with relevant regulations.
Factors to Consider When Choosing EOR, GEO and AOR
To choose between EOR, GEO and AOR, founders and HR managers must examine their individual needs and the level of engagement they want in their international operations.
Especially hiring from India can present unique opportunities and challenges that must be carefully considered.
India is well-known for having a large pool of competent individuals, particularly in the information technology industry, making it an appealing destination for companies wishing to grow their workforce.
However, navigating the complexities of hiring in India requires a comprehensive understanding of local labour laws, tax regulations and cultural considerations.
1. Business Needs:
Before selecting the right employment model, assess your business needs and expansion plans. If your company is looking for rapid global expansion with minimal administrative burden, an EOR might be the ideal choice.
A GEO offers flexibility and a low barrier to entry for businesses seeking to test new markets without setting up a legal entity. On the other hand, if your organisation relies heavily on independent contractors, an AOR can provide expert assistance in managing compliance and engagement with these workers.
Hiring from India can provide cost advantages due to the lower cost of living and competitive salaries. However, it's essential to compare the prices associated with each employment model, including service fees, taxes, benefits and compliance-related expenses.
Evaluating the long-term financial implications will help in making an economically sound decision.
Research the reputation and experience of EOR, GEO and AOR service providers. Look for established businesses with a track record of success in the area. Examining client testimonials, industry awards and case studies might reveal information about the provider's reputation and dependability.
Check that your chosen service provider strongly focuses on compliance and a thorough understanding of local employment rules. Working with a seasoned EOR, GEO or AOR who can handle payroll, benefits administration and tax withholdings can keep you on the right side of the law.
Consider the scalability and adaptability of each employment type to meet your company's changing needs. Whether you intend to hire a few employees initially or rapidly expand your workforce, your chosen model should be adaptable enough to meet your changing needs.
6. Ease of Use:
User-friendly technologies and efficient processes are critical when hiring and maintaining remote staff. To improve operations and reduce administrative strain, look for service providers with easy onboarding systems, accessible payroll platforms and secure data processing.
7. Customer Support:
Effective customer support is essential when dealing with the complexities of hiring and managing a workforce in a foreign country. Pick a service provider with knowledgeable advice and prompt customer support to handle any questions or problems.
If you’re looking for a trusted EOR in India to strengthen your tech team, Rapid can be your EOR partner of choice. Rapid has a deep expertise of 25 years in India to help you hire with minimal legal risk by ensuring compliance with all the local laws. Rapid can also help you manage your payroll, employee benefits and tax compliance through its integrated HR platform.