The emergence of staffing services some 5 decades back presented a landslide shift which changed how employers were using traditional employment processes. This was not only limited to the western market but travelled over the globe. Employers with advanced methods came to know that they could save time and cost and leverage the expert services and secure the best talent with the help of hiring third-party recruitment agencies.
Employer of record, which might have got this name in some recent years, but has definitely been used for decades. It only got refined and became more reliable with time and now the pandemic has taught us lessons, no employer anywhere in the world can turn face from the fact that your workforce must not be bounded to borders and you must have options as back support. All thanks to the attendance softwares which contains geofencing which has enabled employers to hire their workforce from any corner of the world and manage hassle free.
Post covid, the whole scenario changed and this trend grew only and models like EOR became popular. The EOR market grew by an astonishing 170% in 2020 and 150% in 2022. It’s quite evident from here that shift is inflated in the covid for the remote work.
EOR Addressing The Hiring Challenges?
EOR is the future of how employers have been hiring, how is this addressing challenges which earlier seemed like that they cannot be bypassed is discussed below;
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Reduced Risk:
- EORs ensure all complete compliance to local labour rules reducing the chances of getting into legal complexities.
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Speed and Flexibility:
- Speed and flexibility comes with EOR, as companies will be focusing more on their operations and could rapidly hire employees overseas and scale up or down their reach as required.
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Cost-Effectiveness:
- EORs handle everything ranging from onboarding to payroll, benefits, and compliance, minimizing the need for spending resources on HR management and accounts internally.
- More Focus on Core Business:
- Administrative tasks will be managed by the EOR, the company can emphasize on their core strategies and operations enabling them to achieve desired revenue and enhance quality of their services or products within the industry.
Also Read : What Are EOR Solutions and How Do They Work?
EOR Taking Over From Traditional Business Models?
EOR has already almost taken over the traditional business models. When recently the employment pass quota restrictions were tightened in Singapore, employers were suffering to secure talent from overseas, then the only option was EOR, which helped them secure business. Understand below how EOR is different from traditional business models;
- EOR vs Professional Employer Organisation (PEO)
- EOR vs Staffing Agencies
- EOR vs Human Resource Outsourcing (HRO)
- EOR vs Subsidiary Formation
1. EOR vs Professional Employer Organisation (PEO)
A professional employer organization or PEO is a third party service that offers human resource services to companies. Understand below how an employer of record is different from PEO.
| Parameters | Employer of Record | Professional Employer Organisation (PEO) |
| Legal employer | EOR is the official and legal employer for your employees | PEO acts as a co-employer, but you remain to be the legal employer |
| Entity needs | You don’t need to establish an entity | An entity setup is required |
| Onboarding frequency | Fast. You can hire employees within a few days/weeks | Slower. You need to set up the entity and divide the roles and responsibilities with your PEO partner. |
| Compliance management | EOR assumes full employee-related compliance management | PEO may advice on compliance but you have to be legally responsible |
| HR & administration burden | EOR manages the full scope of HR and administration including payroll, benefits, etc. | The HR and administration load is shared with your PEO |
| Operational control | You manage the daily operations of the employees while EOR manages the HR & admin. | You have complete operational control of your workforce along with ensuring full compliance. |
| Scalability & Geographical reach | EOR is highly scalable and can provide global reach by allowing you to hire in multiple nations without a legal entity | Same as above. You can only expand business to locations with your legal entity. |
| Exit strategy | Easy. Exit strategy can be initiated by completing or ending the contract with EOR. | Takes longer as you need to wind down the entity. |
2. EOR vs Staffing Agencies
A staffing agency is a third party service helping companies source, and hire employees on contract, short-term, and long-term employees, understand the difference below.
| Parameters | Employer of Record | Staffing Agencies |
| Legal employer | EOR is the official and legal employer for your employees | Staffing agencies may act as your legal employer, for contractual employees. Their scope extends to deciding salaries and policies. |
| Entity requirement | You don’t need to establish an entity | You don’t need an entity while hiring a staffing agency either. |
| Onboarding speed | Fast. You can hire employees easily | The onboarding speed is similar to an EOR. |
| Compliance management | EOR assumes full employee-related compliance management | A staffing agency does not fully manage compliance but might assist and the responsibility remains with you. |
| HR & administration burden | EOR manages the full scope of HR and administration. | A staffing agency manages HR and administration, for contract and short term employees. |
| Operational control | You manage the daily operations of the employees while EOR manages the HR and admin. | The operational control is lesser than an EOR. Communication and control restraints become challenges. |
| Scalability & Geographical reach | EOR is highly scalable can provide global reach by enabling you to hire in multiple nations without a legal entity | A staffing agency usually caters only to local businesses. |
| Exit strategy | Easy. Exit strategy can be started by completing or ending the contract with EOR. | Exit strategy can be easy with contract employees. However, it may have a longer process for long term employees. |
3. EOR vs Human Resource Outsourcing (HRO)
Human resource outsourcing is hiring a third-party service to hire some or all of the HR tasks. Below is the difference;
| Parameters | Employer of Record | Human Resource Outsourcing (HRO) |
| Legal employer | EOR is the official and legal employer for your employees | You remain to be legal employer as your HRO only provides HR support. |
| Entity requirement | You don’t need to set up an entity | You must have your legal entity set up |
| Onboarding speed | Fast. You can hire employees within a few days/weeks | Fast, if you have your entity set up. |
| Compliance management | EOR assumes full employee-related compliance management | HRO manages complete compliance related to employees |
| HR & administration burden | EOR manages the full scope of HR and administration including payroll, benefits, etc. | HRO manages HR and administration |
| Operational control | You manage the daily tasks of the employees while EOR manages the HR and legal employee responsibilities | Least operational control. You have no communication with the employees, but with the HRO company who hires them for your work. |
| Scalability & Geographical reach | EOR is highly scalable and can give you global reach by allowing you to hire in multiple countries without a legal entity | Relatively high and can give you blogbal reach. |
| Exit strategy | Easy. Exit strategy can be initiated by completing or ending the contract with EOR. | Relatively easier as you can exit by completing or ending the contract. |
Also Read: Guide to Choosing the Right Talent Management System
4. EOR vs Subsidiary Formation
Subsidiary formation is the process of forming a new subsidiary company which remains legally separated but is controlled by the parent company, understand below how it’s different from EOR.
| Parameters | Employer of Record | Subsidiary Formation |
| Legal employer | EOR is the official and legal employer for your employees | You are the sole employer. |
| Entity requirement | You don’t need to set up an entity | You will set up an entity here. |
| Onboarding speed | Fast. You can hire employees within a few days/weeks | Slow. You need to hire all the workforce, including HR, legal, finance, etc.. |
| Compliance management | EOR assumes full employee-related compliance operations | You have the full responsibility of all compliance. |
| HR & administration burden | EOR manages the full scope of HR and administration including payroll, benefits, etc. | The HR and administration is for you to manage. |
| Operational control | You manage the operations of the employees while EOR manages the HR admin | You have full operational control including HR. |
| Scalability & Geographical reach | EOR provides global reach by allowing you to hire in multiple nations without a legal entity | Low scalability as you need high capital to expand, both the size of your company and expand overseas. |
| Exit strategy | Easy. Exit strategy mostly is started by completing or ending the contract with EOR. | Difficult. As you need to shut down the entity and follow all due legal procedures. |
Recruitment Central As Your EOR Partner
Recruitment Central excels in all three essential pillars of successful EOR services which have earned them prestigious awards in all three categories i,e, Best EOR Firm, Best Recruitment Firm, Best Workforce Management Platform. The Hassle-free onboarding and compliance management and streamlined hiring to find the right talent along with the end-to-end payroll and workforce solutions has helped thousands of businesses in Singapore to bypass staffing challenges and expand their teams globally.
Conclusion
The current situation in countries like Singapore has been mainly demanding for services like EOR. While we conducted a survey over there, we found that one in every three employers is badly struggling to secure the ideal talent for their company needs. In 2024, the EOR market was valued at over USD 5.8 billion, which is expected to grow to over USD 12 billion by 2030.
