In the era of globalization and remote work, many companies face challenges in recruiting and managing employees across different countries. One increasingly popular solution is to use Employer of Record (EOR) services. EOR allows companies to hire employees abroad without the need to establish a legal entity in that country, thus accelerating global business expansion more efficiently and in compliance with local laws.
Why EOR Is Becoming a Modern Solution
An Employer of Record (EOR) is a third-party entity that officially becomes the employer for employees recruited on behalf of a client company. In other words, the EOR handles all aspects of administrative tasks and legal compliance related to employment in the country where the employee works, including payroll, taxes, benefits, and employment contracts—while the client company still manages the day-to-day work.
The demand for this model has grown with the rise of remote and hybrid work models. According to a report by Global Growth Insights, the global Employer of Record market is projected to reach USD 8.3 billion by 2033, with a CAGR of 6.8% during the 2023-2033 period. This growth is driven by the increasing demand for global workforce expansion, the need for efficient compliance management, and flexible recruitment solutions for multinational companies.
How EOR Works: Behind the Scenes of Global Operations
For example, if your company is based in Vietnam and expanding into Indonesia, and you want to hire a developer and a market analyst from Indonesia, without EOR, you would need to understand the labor laws in Indonesia, manage income taxes, social security contributions, and employee litigation risks.
By using EOR services, you only need to sign a service contract with the EOR provider. They will become the legal employer for your employees, handling all compliance issues, while you can remain focused on work output and the KPIs you set. This model allows companies to enter new markets within weeks, not months.
Using EOR to Reduce Market Expansion Time and Save Operational Costs
Utilizing the Employer of Record (EOR) model can significantly accelerate market expansion and save initial operational costs compared to establishing a subsidiary. EOR allows companies to avoid the legal and administrative complexities associated with setting up a new legal entity in the target country. With EOR, companies can immediately hire local employees without worrying about compliance with labor laws, tax management, or other social responsibilities.
For example, a study published in the article “Employer of Record (EOR): An Emerging Opportunity for The Indian IT/ITeS Sector” revealed how the IT sector in India adopted the EOR model to support global expansion and digital transformation. The study showed that EOR allowed Indian IT companies to send employees to countries where they did not have a legal entity, ensuring strict legal compliance and smooth operations. The key benefits companies gain from EOR include cost savings, increased flexibility in recruitment, better compliance with local regulations, and mitigation of legal risks that may arise when operating in international markets.
Is EOR Right for Your Company?
Foreign companies looking to expand into Indonesia and hire local employees can take advantage of the EOR model to avoid legal risks and bureaucratic complexities. EOR is ideal for companies that want to test new markets with limited resources, manage a global remote team, or provide project-based services overseas. This model is not only suitable for large companies or global startups but is also highly relevant for medium-sized companies in Indonesia that want to expand their international operations efficiently.
What’s Next?
Employer of Record is more than just an HR solution. It is a bridge between global ambitions and complex legal realities. In today’s fast-moving business world, speed and compliance are not options–they are a must.
Want to expand your business internationally without the hassle? Sinergis HR Consulting & Services is here to provide you with a legal, efficient, and compliant EOR solution. For more information, contact our call center or visit our website at www.sinergis.co.id.
