What is an Employer of Record?

In an ever-evolving global job market, UK companies are exploring innovative ways to expand their workforce and harness international talent. One such approach gaining traction is the adoption of an Employer of Record service.

An Employer of Record is a specialised entity or third-party organisation that assumes the legal responsibilities and obligations associated with paying employees in a certain country. This encompasses crucial functions such as payroll management, tax compliance, benefits, visa and sponsorship applications, benefits, insurances, adherence to local labour laws, and various other HR related tasks. Essentially, an Employer of Record acts as a co-employer, allowing the company to concentrate on core operations while delegating administrative responsibilities to the Employer of Record.

Employers of Record often work with seasonal workers, contractors, project-specific hires and international employees.

How does an Employer of Record work?

An Employer of Record takes on the responsibility as the legal employer of the employees, commonly referred to as ‘employees of record’, meaning it will hire, pay the employees on behalf of the company and take responsibility for all formal employment tasks.

Nevertheless, the day-to-day tasks, assignments and supervision of these employees remain firmly under the control of the company.

What are the benefits of using an Employer of Record?

There are several benefits for employers looking to use an Employer of Record, such as the following:

• They may facilitate global expansion, as for UK business eyeing international markets, the Employer of Record model offers a streamlined approach. It eliminates the need for dealing with intricate legal, tax, and compliance requirements, which can be a significant impediment to expansion.
• They can help to ensure compliance and risk management are covered when taking on employees from an international country. An Employer of Record possesses expertise in local labour laws and regulations, ensuring that all employment related activities adhere to the legal framework of the host country. This significantly mitigates the risks associated with non-compliance.
• They can alleviate administrative burden. By entrusting employment related tasks to an Employer of Record, employers may be able to liberate valuable time and resources. This may enable them to focus on their core strengths, which could lead to enhanced productivity and efficiency.
• They may provide greater access to a diverse talent pool. Utilising an Employer of Record allows employers to tap into a broader pool of international talent. This diversity in the workforce can yield fresh perspectives, innovative ideas, and increased competitiveness in the global market.
• They may improve cost efficiency. Engaging an Employer of Record can lead to cost savings in various ways. It eliminates the need for setting up a physical presence in a new country, resulting in savings on office space, legal fees, and administrative overheads.

Significantly, the Employer of Record will also process payroll every month, ensure that the appropriate taxes are filed and stay on top of all other statutory obligations. This means that the employer will be less likely to be exposed to any compliance risks and can rest assured that the workers are taken care of.

Considerations when selecting an Employer of Record

While the advantages of using an Employer of Record are significant, it is imperative for UK businesses to choose the right Employer of Record partner. Key factors to consider include:

• Global reach: Ensure that the Employer of Record has a well-established presence in the target country or countries, along with a proven track record of compliance and reliability, if they are being used for international employees.
• Expertise in local regulations: Verify that the Employer of Record possesses a comprehensive understanding of local labour laws, tax regulations and compliance requirements in the respective country.
• Industry experience: Seek out an Employer of Record with experience in your specific industry, as different sectors may have distinct compliance and regulatory considerations.

Overview

Employers of Record have emerged as invaluable allies for employers seeking to navigate the complexities of global expansion and tap into international talent pools. By shouldering the legal responsibilities associated with employment, Employers of Records may help to empower employers to concentrate on their core strengths, propelling innovation and growth. When chosen judiciously, an Employer of Record can be an instrumental partner in achieving success for employers in a variety of ways.

If you have any questions about using an Employer of Record or have any other employment related questions, please contact our employment law team by emailing employment@warnergoodman.co.uk or calling 023 8071 7717.