Since an EOR is a body that holds legal responsibility for employment on behalf of an employer, its functions are made up of HR and payroll management tasks. Put in simplest words, EOR is a layer between an employer and a worker that performs as a representative of the employer in a foreign setting.
An EOR’s tasks include, but are not limited to:
- Payroll, including tax withholding and employee benefits
- Managing insurance, such as workers' compensation and unemployment insurance
- Compliance, from drafting correct employment contracts to termination and offboarding conditions
However, it is still the company that manages staff. The actual employer is the company, so it is up to the company to fire or to hire individuals abroad.
To work with an EOR and use it as a representative, companies need to sign a three-side agreement with an employee and the EOR. The conditionals are generally along the lines of:
- Company and Employee are in a direct work relationship, where the former is responsible for workload, tasks and performance management — everything and anything that is connected to the working process.
- EOR is Employee’s legal employer. This means that on paper it is EOR that hires Employee and manages their payroll and tax. The amount of money paid is decided by Employer.
- Employee follows and fulfills the obligations assigned in a work contract.