EOR - Employer of Record

POSTED Aug 13, 2020 BY Inez Willeboordse

An Employer of Record, or EOR, is an organization that overtakes the legal responsibilities of employing your employees to decrease complexities associated with HR functions, market access, and paying employees internationally. The EOR actually becomes the primary employer of your employees on paper.  This blog digs deeper into the advantages of EOR services.

The question of global expansion

Fast global expansion has become more important than ever for ambitious businesses. Technology is helping the world to shrink, and global expansion has progressively become an expectation for many companies’ long-term business goals. The format for global expansion differs for each company that embarks on their international journey. For some, global expansion is a matter of testing a new market by placing a small number of employees in a single country or region. For others, international expansion could be a way to lower production costs and become more competitive locally and globally.

Elsewhere, it could be essential to add specialized and remote talent to a team or have global coverage for a 24/7 customer service or sales team. Speed to market is a buzzword for international business strategists – and for good reason. The time it takes to establish a business in a new country or region is crucial for the overall success of the company’s business goals. If you can quickly establish your business in a new market, you are well-positioned to compete with local and international companies by winning new customers.

The challenges of expanding into Africa

When a business decides to expand globally, a host of complex issues arise. While the agenda and strategy for global expansion varies greatly by business or industry, the challenges remain the same for all. One of the toughest hurdles international companies face is creating a legal entity in a new country or region. Depending on the country, setting up a legal business entity can be both a very time-consuming and costly journey.

Time frame

A big challenge for ambitious businesses expanding globally is speed to market. Often it is a laborious process to create a legal business entity in a new country or region. On average, it can take up to 20 weeks to create this entity locally, and in some cases, it can take even longer.

Costs

Another issue with global expansion is cost. When creating a local entity in a new market, a business must often pay a local registration fee. The actual amount varies greatly depending on the African country and region. Also, there are ongoing costs such as employment registration fees, entity tax compliance, bank set up, in-country capital requirements, local legal and financial advice, internal staff costs and payroll. The initial costs can easily surpass $20,000.

The benefits of increased speed to market

Expensive fees and a labored launch are major hurdles to global expansion. When a business has decided to embark on the international expansion journey, the question of speed to market becomes vital.

Competitive advantage

One of the biggest advantages of faster speed to market is securing a competitive advantage. When you enter a new African country or region quickly, you have first-mover advantage over international rivals. By entering a new market rapidly, the business gets an opportunity to attract a new customer base and to become the preeminent brand. The business will establish a larger and more loyal customer base than competitors entering the same market later. Being first in a new market not only leads to a larger and more loyal customer base, but it can also influence the business’ local reputation. A company with rapid speed to market will have greater time to develop good partnerships with local stakeholders and quickly accrue local goodwill and brand visibility.

It boosts the company’s credibility and dramatically increases the likelihood of succeeding globally. Conversely, a sluggish entry into a new international market can have the opposite effect. Local stakeholders may view this business as a follower rather than an industry leader and innovator.

Reputation

It is clear that increased speed to market is highly beneficial for competitive advantage, brand recognition and market share, but the barriers of high costs and lengthy delays when expanding globally often hold back companies from embarking on an international journey. However, more and more companies are realizing that the most efficient way to overcome these expansion challenges is to partner with a Direct Employer of Record (EOR).

How to accelerate speed to market

A Direct EOR is a partner that manages the legal, HR, tax and local compliance responsibilities of your employees in countries where you lack a local entity. This removes the need and hassle of creating a local entity yourself and increases the speed to market drastically. A Direct EOR hires the employees in the new country using its own local entity, which means your new international operation can be ready within weeks instead of months. A Direct EOR can reduce time to market significantly.

Getting started with a direct EOR (employer of record)

It is a simple process to begin a partnership with a Direct EOR and accelerate your speed to market. Our partner helps fast-track every step of the global expansion journey. Four different specialized groups work for you as a client: The first is the Implementation Team which supports you during your transition to our partner as your Direct EOR. A dedicated Implementation Manager smoothly handles the entire setup and onboarding of your employees in the new African country. Once implementation is complete, a Global Account Manager becomes the main point of contact and supports your business strategy and global expansion. In the background, our dedicated HR and Payroll Teams work to ensure that all related processes, services and deliverables run effortlessly. They are also on the frontline, responding to your queries, solving your issues and being the direct point of contact for your worksite employees. They will answer all queries about local rules, regulations, benefits or payslips.

Conclusion

Fast global expansion is one of the main goals for more and more companies, but the complexities and time-consuming bureaucracy can delay the decision to expand internationally. Speed to market is crucial when expanding globally because otherwise competitors can secure first-mover advantage. However, creating your own local entity in a new country is both costly and arduous, making it difficult for companies to enter a new African market rapidly and without any guarantee of success. More businesses are realizing that partnering with a Direct EOR like our partner not only dramatically accelerates speed to market, it simplifies the entire process, and is a low cost and risk-free way to test new African markets.

JobnetAfrica's partner on EOR (employer of record) servicesis an award-winning HR technology & services company. They provide employment solutions in 38+ African countries – covering everything from payroll, benefits, HR, local compliance to visa & mobility. They have a global network of offices and employees delivering innovative solutions to its growing customer base.  Their direct employer of record model helps companies expand, onboard, manage & pay employees throughout Africa.

For more information on EOR and its possibilities, contact contact@jobnetafrica.com.