Employer of Record, Meaning and Function for Companies

31 December 2022 By admin

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Companies need employees to be able to run well. The system of hiring workers has also developed over time. Currently, there is an employer of record which makes it easier for companies to find employees. That way, they don’t have to lose time and money just because of the difficulty in finding workers.

What does this Employer of Record EoR mean? How is this system of employees employed?

Employer of Record Meaning

Employer of Record Meaning
Source: Unsplash

Employer of Record, abbreviated as EoR is a third-party independent contractor that the company hires to take care of everything related to a legal employer. Not only that, but EoR also handles everything related to employees such as employment laws, payroll taxes, compliance risks, being legally responsible, and others.

Employer of Record services or EoR services handle matters relating to employment. Because managing employees also requires expertise, it will be difficult if you have to take care of the development of your company as well as take care of your employees.

For this reason, EoR can make it easier for you to take care of everything related to employees. Even now, there is already a global employer of record that can make it easier for both local and foreign companies to hire employees from various regions throughout the country.

Employer of Record Function

Employer of Record Function
Source: Freepik

EoR handles various matters related to staffing. There are various functions of EoR that are useful for companies. These functions include:

1. Carry out Personnel Management Activities According to State Regulations

EoR will carry out all management activities related to staffing. However, they will still comply with all local laws that apply in the region or country they handle.

EoR will not take the risk of breaking the law and ensures all obligations will be carried out properly. Policies related to EoR include employment contracts, employment regulators, recruitment, tax reporting, salaries, insurance, and many more.

2. Manage Resources Effectively

EoR must be able to manage human resources effectively. The effectiveness in question is in the form of time management and also the work they do in day to day work. Have a lot of employees but they can’t do the job effectively, so you will only waste money to pay them.

Meanwhile, if you don’t have a large number of employees, then you also can’t carry out work activities which can reduce productivity and also company income. Therefore, there is a need for equality between the number of employees and also the effectiveness of work.

This is where the role of EoR is very important to be able to find quality employees who can benefit the company. But still able to prosper employees.

3. Utilizing Technology

To create effectiveness in work, it is necessary to advance in technology. Therefore, EoR will also utilize existing technology to create a fast and effective work environment. For example, a payroll system that is certainly faster than transfers or giving all employees one-on-one salaries.

Then, using an absence system that is connected online so that staffing managerial activities can be faster and more effective. Recording in any form can be done digitally and online so that it can be organized more quickly and effectively.

4. Avoiding Lawlessness

Holding various types of employees in many companies, of course, also have the function of avoiding various legal violations that can harm companies that use EoR services.

EoR will do managerial work on how they give punishment to their employees who violate the law to avoid bigger laws which of course can be detrimental to the company.

Professional Employer Organization

Besides EoR, there is also a Professional Employer Organization that also functions as a third-party provider of human resources for companies. This Professional Employer Organization PEO has almost the same meaning and function as EoR.

PEOs are third parties that employ employees from various companies. PEO reaches out to small and medium-sized businesses to be able to outsource administrative needs to increase company productivity and business efficiency.

They also have a major function in staffing activities. That is to minimize staffing costs and burdens. Reducing company risk and also increasing productivity efficiently with existing resources.

Difference between Employer of Record and Professional Employer Organization

Difference between Employer of Record and Professional Employer Organization
Source: Freepik

If you look at it with the naked eye, both PEO and EoR have the same function and purpose, namely to provide and also perform personnel administration for the company. However, both have differences.

PEO manages administrative activities such as payroll, termination of employment, employee appraisal, bonuses, and others. However, most of the liability remains with the company, not the PEO vendor.

Meanwhile, EoR employs staff and manages all responsibilities as an employer while returning workers to companies that need employees.

We can also see the difference between the two from the way the contract is signed. PEO helps handle contracts between employees and clients or companies. While EoR, work contracts are made between employees and EoR vendors themselves. However, the details of the work adjust to the initial agreement between the EoR vendor and the client.

In terms of hiring quotas, PEOs usually place a minimum of five to ten employees before entering into a cooperation agreement with the organization.

EoRs are different. Usually, the EoR is ready to work with a smaller number, namely one to two. This is suitable for companies that want to start a small business.


Both PEO and EoR have the function of providing employees for the company. However, both have different ways of providing services. PEO and EoR are qualitatively different, but they will provide solutions to company needs in different ways.

PEO is suitable for companies that want to increase HR with external assistance. It can provide long-term HR development solutions.

EoR is suitable for companies that want to grow quickly. You can get human resources flexibly compared to PEO. The way that EoR does this is by bringing in labor or geographic expansion without the need to build entities in other countries.

For HR Services or Human Resources who want to bring in qualified employees who are suitable for your company, then Synergy Pro can be your choice to find employees.

Synergy Pro can be a bridge between your business and solutions for all kinds of business problems, from administration, and business strategy, to staffing problems. If you are confused about finding employees or any form of employment such as an Employer of Record, you can look for them directly at Synergy Pro by directly clicking on the our website here.