EOR and Its Role in Your Business and People Strategy

What Every HR Leader Needs to Know to Scale Global Teams and Drive Business Growth and Culture Development

I recently had an interesting and fun conversation with Jeff Nugent, Workplace Contingency Strategist, and we conducted a future-focussed thought-experiment asking ourselves:

“What if companies in the future outsourced all their employment responsibilities to Employer of Record (EOR) providers?”

The idea was that HR professionals globally would be freed up to focus on their strategic roles—especially in People and Culture—rather than being consumed by administrative tasks such as payroll, compliance, and benefits management. And although the idea is intriguing, in reality we don’t expect the EOR solution to fully replace in-house employment management. However, it certainly holds significant strategic value alongside traditional HR functions.

As I dug deeper into the topic after our conversation, it became clear that People leaders need a solid understanding of the strategic importance of EOR when it comes to addressing business needs like talent shortages, international expansion, and building cross-cultural teams. Knowing when and how to deploy this solution is essential to elevate People leaders to become key strategic advisors within their executive teams.

The role of HR is increasingly shifting from operational to strategic, and an in-depth understanding of how to integrate EOR into workforce planning can be a game-changer. EOR allows HR leaders to scale global teams efficiently, ensure compliance across borders, and, crucially, focus on the softer but vital aspects of HR—such as fostering diversity, inclusion, and culture development.

This article will explore how mastering the EOR model can enable People leaders to become powerful drivers of both business growth and cultural cohesion. You’ll discover why HR must take the lead in advising the board on EOR strategy, and how this can help them deliver greater impact on the overall success of the company.

What is an EOR?

An Employer of Record (EOR) is a third-party service provider that becomes the legal employer of (part of) a company’s workforce, handling the complex administrative aspects of employment. These include processing payroll, managing benefits, ensuring tax compliance, and adhering to labor laws in different jurisdictions. However, the EOR does not manage the day-to-day tasks of the employees; that responsibility remains with the company that has hired the workers. The EOR ensures that the company complies with local employment laws, which can vary significantly across regions, especially when companies are expanding internationally or hiring remote workers in different countries.

For companies, especially those in rapid growth or expansion phases, EORs provide a way to hire talent in new markets without needing to establish a local legal entity. This allows businesses to enter new regions quickly, while the EOR navigates the legal complexities. As companies increasingly operate with distributed workforces, the EOR model offers flexibility and simplifies the management of global teams.

How EOR Collaboration Works

In practice, the collaboration between a company and an EOR is a partnership. The company maintains control over employee roles, responsibilities, and daily activities, while the EOR ensures that all employment-related legal and administrative tasks are handled. This collaboration allows companies to stay focused on business growth, while the EOR manages risks associated with local labor law compliance, tax obligations, and employee benefits.

Communication and coordination between the company’s HR team and the EOR are essential. For example, in cases of performance management, contract termination, or reintegration after sick leave (such as burnout), the EOR handles the formal legal aspects, while the company’s HR team manages the practical, day-to-day issues. This close collaboration ensures that both sides are aligned and that employee-related processes are carried out smoothly and in compliance with local regulations.

Navigating Liabilities with EOR

While EOR services offload much of the administrative burden, it's important for companies to understand that they don’t completely absolve themselves of responsibility. Companies still need to actively manage employee relations, particularly in areas like performance, culture, and employee engagement. It’s also critical to have a clear understanding of the liability that remains with the company, especially in regions with strict labor laws, such as the Netherlands. Here, for example, the legal employer (EOR) is liable for issues like health and safety, but the company must still ensure that working conditions and operational management align with these standards.

Miscommunication or unclear roles between the company and the EOR can lead to compliance risks or disputes, particularly if both parties attempt to deny responsibility in sensitive cases such as workplace injuries, conflicts, or reintegration following sick leave. Therefore, companies must ensure a thorough, strategic understanding of the EOR’s role and liabilities, and they should maintain close collaboration to ensure a smooth working relationship.

The HR Function as a Strategic Partner in Growth

For scale-ups and rapidly expanding companies, the role of HR is no longer just about managing day-to-day operations—it’s about being a strategic partner to the board and executive team. In this capacity, HR leaders are uniquely positioned to advise on the use of EOR as part of the company’s broader expansion strategy.

As businesses scale, they face numerous challenges, including navigating complex international labor laws, ensuring compliance across multiple jurisdictions, and managing a dispersed and diverse workforce. Here, HR’s role is critical in determining when and how to integrate EOR into the company’s growth plans. By providing expert advice on the strategic use of EOR, HR can help the company enter new markets swiftly and compliantly, avoiding the pitfalls of establishing local entities where it may not yet make strategic sense.

This advisory role requires HR to deeply understand the company’s growth objectives, workforce planning needs, and long-term vision. By aligning the use of EOR with these strategic goals, HR not only facilitates smoother expansion but also helps optimize resource allocation, ensuring that the company can scale effectively while minimizing risks.

Elevating HR’s Impact on People and Culture

Beyond the operational advantages, EOR frees up HR to focus more on the 'softer' but equally critical aspects of their role—People and Culture. During periods of growth and strategic change, maintaining a cohesive company culture, promoting diversity, and ensuring employee engagement are more important than ever. When HR is not burdened by administrative tasks, they can devote more time and energy to these areas, driving initiatives that reinforce the company’s values and enhance the employee experience.

In this capacity, HR can have a profound impact by:

• Building a Unified Culture Across Borders: With EOR handling the complexities of international employment, HR can concentrate on creating and maintaining a strong, unified company culture that transcends geographic boundaries. This involves developing programs that ensure all employees, regardless of location, feel connected to the company’s mission and values.

• Fostering Diversity and Inclusion: EOR can enable companies to access a diverse global talent pool, but it’s HR’s role to ensure that this diversity is leveraged effectively. HR can design and implement initiatives that promote inclusivity, ensuring that all employees feel valued and have equal opportunities for growth and development.

• Enhancing Employee Engagement: As companies grow, maintaining high levels of employee engagement can be challenging. With the administrative burdens lifted by EOR, HR can focus on developing engagement strategies that resonate across different cultures and work environments, ensuring that employees remain motivated and committed during times of change.

HR’s Dual Role: Strategic Advisor and People and Culture Leader

As more companies explore the benefits of EOR, the HR function is set to evolve, taking on a dual role as both a strategic advisor to the executive team and a leader in People and Culture. This dual focus allows HR to add significant value in multiple ways:

• As a Strategic Advisor: HR guides the company’s approach to workforce management, advising on when and where to deploy EOR solutions to support growth and expansion. This strategic input ensures that the company can scale efficiently and compliantly while aligning with broader business objectives.

• As a People and Culture Leader: Freed from the day-to-day operational tasks, HR can drive initiatives that strengthen the company’s culture, enhance diversity and inclusion, and ensure that employees remain engaged and aligned with the company’s values. This not only improves the employee experience but also helps attract and retain top talent in a competitive market.

Conclusion: The Importance of Understanding EOR for Strategic Growth

The evolution of the HR function towards a more strategic focus on People and Culture is inevitable. As companies navigate the complexities of global expansion, hybrid work, and increasing demands for diversity and inclusion, EOR will play an important role in enabling these shifts. However, it’s crucial for HR leaders to have an in-depth understanding of EOR, including its benefits, risks, and liabilities. This knowledge is essential for making informed decisions about when and how to integrate EOR into the company’s broader HR strategy.

To explore these topics further and gain actionable insights, I’m hosting a two-hour knowledge session, followed by a networking dinner, on September 19th in Amsterdam. This session will be a deep dive into how EOR can empower you in your strategic role as a People Leader. We'll build on the discussion in this article, offering solution-oriented approaches and practical tools that will help you increase your influence and lead your organization through the complexities of international expansion and workforce management.

During the workshop, you’ll have the opportunity to:

• Empower yourself with strategies to scale global teams and align culture across borders.

• Share experiences and collaborate with fellow People Leaders facing similar challenges.

• Explore real-world business cases presented by our knowledge partner Globalization Partners, giving you the insights you need to advice on the EOR solution as a workforce strategy.

• Leave with a stronger understanding of how to maximize your impact as both a strategic advisor and a People and Culture leader.

This interactive session is designed to give you the tools to solve common challenges and position yourself as a critical driver of strategic growth in your company. It’s an excellent opportunity to deepen your knowledge, expand your leadership influence and network with like-minded peers.

Spaces are limited, and invite-only, so apply now for your spot:

Photo by Dave Photoz on Unsplash

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