Why An EOR Can Save You From Illegal Freelancing
As time passes, new ways of employing remotely appear. However, it isn’t as easy as it sounds.
Navigating legal and compliant frameworks is crucial for both workers and employers. Everything changes when you want to work for a company abroad – not located in the country you’re residing. Suddenly, a bunch of legal and tax issues appear. And that’s when you realize that if you and the company aren’t in the same country, the latter cannot employ you.
But that couldn’t be farther from the truth. And that’s probably when you both arrange a freelance (or contractor) agreement, as you’d love to work with each other – which is fine if you’re not forced to work in a specific schedule during a set number of days per week or month.
Because that’s illegal (we’ll explain why later on).
And that’s when an Employer of Record (EOR) can save you. Learn everything about this legal, hassle-free arrangement and why it can be your best option right now.
Everything Explained: What Is an EOR and Why It Speeds Up Hiring
EORs are lifesavers in many situations. They’re the entities that make an (apparently) impossible hire possible. And they do it while keeping everything compliant for both parties: employees and employers. So, let’s go through how it all works.
What Is an EOR?
An Employer of Record (EOR) is a third-party entity that works between you and the company you work for.
Wait, it’s not that confusing. As a worker, you won’t even notice the EOR’s existence.
All it does is employ you on behalf of a company abroad. By doing so, it handles all the legal and tax responsibilities without your “official” employer worrying about it. In other words, it means there’s no need for you and the company to be registered in the same country.
An EOR handles payroll, taxes, benefits, and compliance with local labor laws. This allows you to operate in a compliant manner without the administrative burden of the company – that’s hiring you – having to establish a legal entity in your country.
You just need to worry about your job and everyday tasks. You’ll handle everything with the company you’ll work for.
However, there are different types of EORs, mainly local and global. Understand their differences now.
What’s a Local EOR? And a Global One?
Yes, they’re different.
Local EOR
A local EOR is the legal employer for foreign workers in a specific country.
It’s responsible for legal, compliance, and fiscal matters. It must follow laws and regulations, including taxes, insurance, and benefits. It’s the perfect option for companies that need to employ 1 to 6 workers in a single, specific country. Usually, local EORs are established in the country the company is interested in. And that comes with a lot of benefits:
Local expertise: Local EORs have in-depth knowledge of local employment laws and regulations. In other words, they help companies avoid many (expensive) legal mistakes.
Closer relationship: With a local EOR, companies have more control over the employment relationship.
Cost-effective: Local EORs are generally less expensive than global EORs. When companies only need to hire in a specific country, local EORs are the best answer.
Global EOR
On the other hand, a global EOR works as the legal employer for foreign workers in multiple countries.
They’re still responsible for compliance with local employment laws and regulations in all countries they operate. So, when a company needs to employ in different locations, this probably is the best option, as it gathers these benefits:
Simpler compliance: As Global EORs operate in multiple countries, they simplify legal and fiscal processes.
Consistency: Global EORs help ensure consistent employment practices and policies across many countries. This reduces legal mistakes.
Reduced costs: Compared to working with as many local EORs as the countries they operate in.
When deciding between a local or global EOR, a company needs to consider the size and scope of the business and the countries it’ll be expanding to. Either way, any business should consider using a professional employer organization.
Why Working Full or Part-Time Without a Contract is Illegal
Working without a contract, whether full-time or part-time, is illegal in most jurisdictions.
Sure, you can move on to a freelance agreement if you set the rules. If you decide the hours you work and which days, that’s absolutely fine. However, many companies use these agreements to disguise regular hiring – which is illegal.
You need to be employed if you have a working schedule and a set number of days to work per week or month. You need a contract.
A contract establishes the terms and conditions of employment, protecting your rights and obligations (and the employer’s too). It sets clear expectations on working hours, compensation, benefits, and other essential aspects – fostering a fair and legal employment relationship.
And that’s what an EOR provides you.
The Difference Between Freelancing and EOR
Freelancing typically involves an agreement between you and a client or company. From that moment, you’re considered self-employed and responsible for your taxes, benefits, and legal compliance.
But that has nothing to do with an Employer of Record.
With an EOR, you’re an employee of a legal entity, often in a different country. You always deal with the end company (the one you work for), while the EOR assumes all of the employment’s legal responsibilities and obligations.
Yet, there’s another way of employing compliantly in Portugal.
Differences Between EOR and a Foreign Employer
As you know, an EOR acts as a bridge between you (the worker) and the company you work for. It provides a compliant solution if you want an opportunity abroad without the company establishing a local subsidiary in your country.
In turn, a foreign employer directly hires and employs workers within their home country. Therefore, it must comply with that country's specific labor laws and regulations.
How to Choose the Best Employer of Record
We’re not going to lie: that’s up to each company.
Sure, you can help by sharing some knowledge – as some companies have no idea what an Employer of Record is (invite them to chat with us, if needed) – but the ultimate decision is up to them.
The best EOR is the one that aligns with the worker's needs, offering comprehensive legal compliance, superb administrative support, personalized solutions, and a global network that enables smooth international employment.
The best EOR guarantees a healthy, solid balance between legal adherence and a seamless, hassle-free work experience for you, the employee – regardless of location. Working with an Employer of Record can avoid legal complexities and risks associated with illegal freelancing. And it can also be cheaper than a foreign employer, in some cases.
It opens doors for remote work opportunities, allowing professionals to explore global roles without the burden of legal intricacies.
