Why EORs streamline global expansion in uncertain times
Looking to expand internationally? You’re probably considering establishing a business entity – long viewed as the most efficient way of building a long-term international presence.
In today's world of evolving labor laws, political uncertainties, rapid AI advancement, and hybrid work models, international entities can be riskier than they seem. Keeping full control of operations can be very costly, both in terms of money and management.
Let’s look at some of the potential risks that come with establishing entities in new markets so you can determine if it’s the right path for your company.
Establishing entities comes with a number of pitfalls
Some of these may not be obvious at first when strategizing for global expansion – but even the hidden costs must be factored in.
Issue | Description |
|---|---|
Delays | Hiring the right workforce requires speed and efficiency, both to ensure that you don’t lose preferred employees to competitors, and to meet the business needs of your expanding company. |
Operational costs | Initial investment is significant, requiring employment registration fees, entity tax compliance, and bank setup, typically costing companies upwards of $200,000 USD. |
Legal risks | Running a business entity requires a deep and nuanced understanding of local employment laws and practices, and staying compliant is a 24/7 job in each entity you operate in. The costs risked by breaches to that compliance can be financial or reputational, and in some cases can result in legal action. |
Regional variations | Every country will come with its own hurdles, whether they’re differences in labor laws and employee expectations, different levels of legal bureaucracy to navigate through when establishing new entities, or even political instability. |
Global Uncertainties | Global fluctuations exacerbate those regional differences. Mercer’s Global Talent Trends Report 2024 found that a series of factors – with inflation, AI acceleration, and rise of alternative working models the top three challenges – has created a high degree of global uncertainty. It’s an extremely difficult time to project which markets will be considered most consequential in the coming years. |
An inflexible structure | This global uncertainty makes being locked into country-specific business entities a lot less enticing than perhaps in previous years. However, because of time and costs involved, there’s a high degree of commitment required in establishing entities. This will make it hard to pivot when priorities and growth potential changes in a region. |
Hindering innovation | While global expansion should make your company more competitive, the burden of HR, payroll, and legal compliance administration across entities could distract core business operations to the point where it hampers your ability to focus on what makes your company stand out. |
These are just a few of the hidden costs companies face in managing global entities. From HR burnout, to legal risks, to a company culture averse to innovation that an inflexible entity structure creates, the real cost of establishing new entities goes far beyond the initial set-up fees. In fact, such hidden costs may only grow more pronounced over time, ultimately slowing global growth.
Is your HR team equipped to handle all of the challenges that come with entity management? Staying agile in an ever changing world becomes almost impossible when mired in the day-to-day admin of a network of inefficient entities.
EORs are a modern, globally-minded solution for uncertain times
Employer of Record (EOR) service providers offer an efficient solution to these challenges. Built to fit the needs of growing businesses in a digital world, they have the scope and flexibility that will allow businesses to evolve and customize their global business over time.
When weighing up whether to work with EORs or to establish owned entities, your company needs to consider business priorities and long-term cost projections. Let’s look at how they stack up:
Concept | Managing own legal entities | Employer of Record |
|---|---|---|
Control | Complete responsibility over all HR and financial frameworks. | EOR will handle all HR processes in the region with its trained in-region specialists. |
Compliance and risk | Requires resourcing to closely manage all labor compliance in each entity. | EOR handles local labor laws, tax regulations, and employment compliance. |
Costs | Usually upwards of $200,000 USD in initial costs alone. | Since an EOR already has an entity in target markets, hiring can cost as little as $30,000 USD. |
Complexity | Coordinating across different entities requires sophisticated management systems. | EOR takes on the management of local tax and labor compliance. |
Speed | Establishing a legal entity typically takes an average of twenty weeks. | An EOR can set up and onboard a client’s employees in a new country in just two weeks. |
Benefits and employee satisfaction | Varying expenses of benefits in different countries can lead to an uneven employee experience. | By leveraging EORs, companies can access better local benefits, such as health insurance and pensions, and save up to 25% on costs. |
Flexible working models | Juggling employee preferences against local working laws can prove challenging across multiple entities. | EOR offers flexible working models thanks to their range of established entities and visa sponsorship in many countries. |
Scalability | A long-term investment across different regions may allow companies to tailor and shape their entities as they grow. | An EOR makes it easier to manage growth and seasonal demands, allowing companies to pivot quickly. |
Scalability sometimes gets highlighted as a major benefit of establishing multiple entities. But the reality of running global entities in a rapidly shifting world is that they lock you into certain strategies that may quickly become outdated. With the risks and time involved, it’s a gamble that may not pay off.
EORs offer a low cost, low commitment way to test regions, allowing you to transform your strategy as needs and outcomes shift. This will also allow your company to focus on core business priorities that will future-proof your business.
Efficiency is the name of the game in the modern world – an agile company will be a successful one. This is why companies around the world are increasingly looking to EORs to fulfill their expansion needs, with the IEC forecasting the EOR market to grow to $12 billion USD by 2030.
Premium Employee Experience: The Atlas Difference
Such efficiency won’t be enough, however, if you don’t have the right team behind you. Our focus on employee experience, including our excellent perks, is what really sets Atlas apart from other EORs.
Recently named Employer of Record Organization of the Year for the second year running at the 2024 Global Payroll Awards, Atlas believes that employee growth, in tandem with overall company growth, is crucial. This is why we launched Atlas Learning in partnership with Coursera. With over 9,000 courses accessible to all client employees, your team can upskill or retrain in key areas like Generative AI to stay relevant and engaged.
This commitment is matched by our premium benefits packages, which gives companies of all sizes access to best-in-class life, medical, and travel insurance. We’ll offer this regardless of where they’re based, as our global presence in 160 countries gives your employees the flexibility to work in the hybrid environment that’s best for you and them.
Overall, this employee focus and roster of benefits will give you the edge in hiring the top talent. At Atlas, we’ll ensure that your workforce is not only best-in-class, but also a flexible one, helping remain agile and competitive as you evolve.