Employer of record - Cost and comparison with local entity

Mayank Bhutoria

Does EOR pricing range between $200 to $500 / month/ employee?

This is a generic estimation as EOR costs can vary depending on company needs. However, knowing the cost of EOR can help you prepare better and plan your budget based on each new hire.

In this blog, we’ll cover everything you need to know about Employer of Record costs.

Types of pricing model of an EOR

EORs practice two pricing models. 

Percentage of the employee’s CTC: The employer pays a predetermined percentage of the employee’s salary. This model is beneficial for employers with conservative expansion and salary budgets. Moreover, if the employer wants to test a market, then paying off of a certain percentage of employee costs helps businesses scale. However, this pricing model will be taxing on employers when employee headcount and compensation increase. Additional bonuses and commissions also influence costs.

Fixed pricing - Employers pay a flat fee every month irrespective of the headcount, employee salary. A flat fee allows businesses to scale headcount without additional EOR costs. This model is beneficial for businesses with clear and aggressive hiring goals and expansion strategies in the chosen foreign market. 

Factors That Influence The Pricing of an EOR

If you are an employer looking to onboard talent in a foreign country via an EOR, you will typically pay for the following elements:

EOR Setup

EOR providers usually charge a one-time setup fee for new employees. 

The fee covers:

  • The cost of the contract
  • One time-onboarding 
  • Payroll profile

Refundable security deposit

To ensure compliance, an EOR provider charges an initial deposit for each employee, equivalent to the employee's notice period pay. The deposit can be a lump sum or a percentage of the employee’s pay. 

The EOR provider will withhold that amount, as long as the employee continues to work for the employer. The amount will be given back to the employer upon the termination of the employment contract, once all the dues are closed. 

Employee’s Salary and additional liabilities

An employer is liable to pay the employee’s salary and local employer cost, commonly known as contributions. Each country has a set of laws on the contributions every employer must pay over and above the employee salary, such as social security, unemployment insurance, retirement fund, etc. EORs such as Gloroots offer a one-click payroll solution, ensuring you pay your distributed teams on-time. The EOR determines the employer liability per employee based on local laws and raises the relevant invoices to the employer. EOR will then make the necessary payments to employees and government authorities.

Supplementary Employee Benefits

Some countries require employers to provide mandatory employee benefits. These are a part of the local contributions in the employee’s payslip. Additionally, to remain competitive, many companies offer supplementary benefits, such as meal vouchers or software subscriptions.

EOR Service Fee

EORs charge a service fee - as a  SaaS employee management fee - on top of the setup fee. Different EORs charge service fees differently. Some charge it once a month per-employee, while others ask for a lump sum. The onboarding candidate’s salary may also influence the service fee. Please talk to your EOR provider on this matter and note down all the factors that contribute to the final billing.

Currency Exchange Fees

EORs help businesses ensure best global pay practices, help navigating currency fluctuations and ensure employees are paid in full, worldwide.

It is important to note that these costs vary from one EOR to another, depending on their pricing model.

EOR vs. Local Entity – Cost-Benefit Comparison

Let us take a look at what factors contribute to the decision between a local entity and an EOR.

Parameters Local entity EOR
Time required 2-6 months 3 days
Capital requirement 1. Country registration charges
2. Taxation and Legal charges for country compliance
3. Upfront capital for bank account
4. Acquiring legal and financial consultant services
1. One time Set-up fee
2. Service fee
Legal compliance 1. Registering a legal entity
2. Aligning with employment laws
3. Local regulations
4. National requirements
Full compliance without any risk to the employer
Taxation Income, property, profit, and many more taxes The bill comes inclusive of all taxes

As you can see, an EOR clearly provides more value and support for its cost, proving to be more profitable and effective for business expansion.

Why Is an EOR The Right Choice For You?

The previous section sheds light on the cost-benefit analysis of an EOR. However, that is not all an EOR offers. The following points detail the main reasons why an EOR is the perfect option for you:

Faster business expansion

With an EOR, you can onboard local talent globally in record time and catalyze your expansion strategies. Whether you are a small or large-scale business, EORs help you meet your cross-border hiring goals without the hassles of global compliance and payroll. 

Access to infrastructure and features

An EOR manages a variety of responsibilities – contract generation, onboarding, payroll, benefits administration, and much more.

Recently, SaaS-based EOR platforms have been disrupting the industry with their tech-savvy onboarding and payroll solutions. For example, Gloroots’ EOR solution, besides an onboarding workflow, also offers a single-click payroll solution to disburse salaries for your distributed teams. These solutions ensure fully compliant payments and benefits administration and enable automated payments if possible.

Full compliance with domestic and international laws

The biggest challenge to remote hiring and onboarding is compliance. Without expert advice, any company can unknowingly skip mandatory regulations, resulting in penalties. An EOR ensures you do not have any risks associated with the onboarding of the employee. EORs also assign employers with dedicated account managers to navigate queries around compliance, labor laws and payroll.

Myths and facts about EOR

Myth #1: Employer of Record solutions are generally costlier than setting up a local entity

Fact: An EOR solution requires a monthly payment to the EOR provider, who assumes all the compliance responsibilities for the employee’s employment. If you are experimenting in a new market or looking only to leverage the talent of a specific country, an EOR will provide more value.

Setting up a local entity to hire talent, results in monetary and opportunity costs. Opening a bank account and availing business insurance and utilities, and paying corporate taxes scale the price multifold.

Myth #2: EOR solutions have many hidden charges

Fact: EOR solutions only charge for the initial setup and the subsequent monthly employee costs. Gloroots provides a complete breakup of all the costs involved in the monthly charge, so users know what they are paying for. Furthermore, the details of the monthly cost are provided in the initial proposal before the client signs off.

In any situation where external advice is required, the additional cost will be first discussed with the user and pursued after full agreement.

Myth #3: EOR solutions are best for long-term projects

Fact: EOR solutions are very flexible, as the pricing model and onboarding solutions are suitable for a business's short and long-term needs. The EOR platform is scalable for contractors and full-time employees; hence, EOR solutions can be used for any project of varying duration.

Myth #4: EOR is used mostly by big companies

Fact: MNCs and SMEs require the best global talent for their endeavors, and an EOR provides this solution with no prejudice to the size of the client. An EOR’s features and costs are accessible to small and large companies without infrastructural requirements.

Myth #5: EOR is only viable for overseas employment

Fact: While EOR is a go-to solution to hire talent across borders, employers can also avail an EOR’s payroll services to pay their local talent.

Choose Gloroots as your EOR partner

As you can see, EOR is the most versatile solution on the market for expanding your distributed team and leveraging global talent in a faster and more compliant manner. With Gloroots as your EOR partner, you can onboard any candidate within a day.

Furthermore, Gloroots’s EOR platform takes care of the contract generation, payroll, benefits, insurance, and much more of both your independent contractors and full-time employees. You can view the breakup of the invoice for each professional you have on boarded via our platform and process the payment in various currencies.

When you think of onboarding global talent compliantly and swiftly, think of Gloroots.

Employer of record - Cost and comparison with local entity

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