Spending too much on recruitment, payroll or global HR?
If you need to hire employees around the world and don’t own entities in different countries, you can partner with an Employer of Record (EOR) to help you. These service providers not only make global hiring possible but also support you with a wide range of other professional services, letting you stay focused on your core business activities. Choosing the right provider to partner with is not easy, however, and one of the biggest factors to consider is price. This article will answer the questions, “How much does an EOR cost?” and “What’s a fair price for EOR services?” to provide the basic information you need to choose a provider to help with your global expansion.
What Is an Employer of Record (EOR)?
To understand EOR pricing, it’s important to know how Employer of Record service providers work. These companies operate networks of legal entities around the world, which may include only entities they own or third-party entities that they partner with. If you want to hire employees in a foreign country but don’t own an entity there, you can engage an EOR provider, which will hire them for you. It does this by concluding employment agreements between its entity in the country and the workers you want to hire, becoming their legal employer in that country. The EOR will also manage HR for those workers and take on the responsibility of maintaining compliance with the country’s applicable employment and tax laws.
For example, imagine your company is based in the US, but you’ve found a couple of brilliant software developers in India you want to hire as full-time employees. You don’t own a registered business in India, so you engage an EOR instead. The EOR hires them through its entity and manages their HR needs, including paying their salaries, personal income taxes, and social security contributions in India. In exchange for these services, you pay the EOR a (usually monthly) fee for each employee it manages for you.
How Much Do EOR Services Cost?
EOR services around the world can range from highly affordable to very expensive, though there are some important reasons for this. According to our research on providers across the globe, an EOR can cost between $99 and $999 per employee per month (PEPM). Companies on the lower end of this range still provide the core services that define all EORs, while those on the higher end of the scale typically justify their pricing with highly tailored packages and boutique, personalized service.
What’s the alternative? Many business owners might consider this extra fee expensive, even at the lower end. However, it’s important to take into account the alternative cost of hiring employees in other countries. If you don’t use an EOR, you’ll need to incorporate an entity in each country where you want to hire (in effect, becoming the EOR in each location). While the cost of entity registration can vary widely from under $100 in fees to thousands of dollars, that’s not all you’ll need to pay for. In addition to one-time incorporation fees, you need to pay for HR, tax, and legal specialists to manage HR for your international employees and ensure legal compliance. Unless you’re going to work directly in that country’s market and hire a significant number of employees, these costs can be prohibitively expensive. Working with an EOR is almost always a more cost-efficient option.
Factors That Affect EOR Pricing
The range from $99 up to $999 for EOR prices may seem confusing. What would justify a tenfold difference in fees for the same service? The answer is that the service isn’t the same for several important reasons, with all of the following factors contributing to vastly different pricing:
1. Country of Hire
One of the biggest factors that affects pricing is the country where EOR services are provided. This makes sense because EOR services need to be provided by staff working for entities registered in different countries. Those entities have different overheads and pay their staff vastly different salaries, in addition to the costs associated with providing payroll, tax, and benefits management in different countries. This is why hiring through an EOR in India will be much more affordable than hiring in the US or Europe, for example.
2. Services Provided
The range of prices of $99-$999 for an EOR to manage a single employee actually represents just the starting prices offered publicly by providers around the world. This means that these prices include the core services that all EORs provide, which are: Hiring your employees, ensuring legal compliance, managing payroll, and administering mandatory benefits.
However, most EORs offer a lot of other, additional services that can include:
- recruitment
- relocation support (visas and work permits)
- supplementary benefits administration
- employee engagement
- employee equity management
- equipment provision
- background checks
- expert consultations
- business planning advice
Some more expensive EORs create packages that automatically include these otherwise non-standard services. These additions partially justify their higher fees. They may also provide more personalized, white-glove service, which can also explain their higher prices.
3. Contract Duration
Like most businesses, EOR service providers want to ensure long-term income from their clients. For this reason, many offer a reduced monthly rate when clients sign on to annual service agreements instead of monthly contracts. Normally, however, this works out to only a small monthly discount of between $10 and $50 PEPM.
4. Number of Hires
Since higher volumes can ensure greater income for most businesses, many EORs offer discounted rates for businesses that hire greater numbers of employees. These discounts may be substantial. For example, an EOR may set its starting price at $300 PEPM, but for above ten employees, may drop this price to $200 PEPM.
5. Employee Salaries
Like many recruiting agencies, some EORs assess their fees not based on a fixed price, but instead, based on each employee’s salary. They may, for example, charge 20% of an employee’s salary for EOR services across the board, so that more valuable, highly skilled employees would cost more to hire than less skilled workers.
Pricing Models
Not all EORs plan their fees in the same way. They typically choose one of the following pricing models for their services:
- Fixed per employee per month fee: Most EOR service providers charge fixed fees, with a range of starting prices of $99-$999 PEPM. They typically increase these fees when hiring in more expensive countries.
- Custom pricing: A large proportion of EORs don’t provide any set prices but instead, provide tailored service packages to their clients with custom prices based on the number of people they’ll hire, the locations, and the services required.
- Percentage of employee salary: As we saw above, some EORs will charge a fixed percentage of each employee’s salary as their service fee. These fees can range from 5% to 25% in most cases.
- Monthly service fee: Some EORs charge a flat monthly fee for their services, similar to a subscription, no matter how many employees are hired or where they work.
How to Select an EOR Based on Price
While price isn’t the only factor to use when selecting a service provider to partner with, it’s one of the most important for most businesses. After all, the price of this service has to be included when calculating the price of hiring international talent. Most organizations set a budget for hiring that includes salaries and recruitment fees, and EOR fees should be rolled into salary estimates. Once this budget is set, organizations look at prices for employees around the world to find workers they can afford, including their EOR service fees. Any provider with fees that exceed their budgets is eliminated from consideration.
Why Choose a Cheaper EOR?
Cost savings will, of course, be the primary reason to search out an EOR provider with low fees. At the same time, many of these providers offer only core EOR services and may also not provide discounted rates for long-term contracts or multiple employee hires. However, they may offer additional services for affordable prices, and clients can typically choose only the extra services they need. This gives them flexibility and helps them stay agile.
Why Choose a More Expensive EOR?
EOR providers with higher fees may offer extensive packages for those fees that include multiple services. Clients who want to outsource as much as possible will find that these comprehensive packages conveniently help them remain completely hands-off. A lot of pricier EORs also provide highly attentive service, both to the clients themselves and to their employees. This attention may be costlier, but for employers who hire top talent and need to keep them happy, this extra attention can be worthwhile.
How Much Does an EOR Charge to Hire Employees Around the Globe?
EOR services can range dramatically. It can cost anywhere from $99 to $999 per employee per month to hire international talent, and this might just be the starting price. Adding extra services or hiring in more expensive countries can increase the price. Compared to setting up an entity abroad and managing HR for foreign workers internally, however, working with an EOR can often be the most affordable option available.
To find out the best deals for hiring an EOR in your country of choice, get in touch with RemotePad’s global hiring experts.
