The Growth of Employer of Record (EOR) Services
What is an Employer of Record?
An EOR service provider allows an organization to hire employees in a country or jurisdiction where they don’t have an existing establishment. The EOR acts as the legal employer of the worker or workers in question, assuming responsibility for the integration and induction of employees, release and termination of employees, and payroll on the client’s behalf.
As the employer, the EOR partner manages the legal, HR, tax, and local compliance needs for the workers as its own employees, while the client organization maintains full control of their day-to-day work.
A Regional Look at Work Trends and EOR Adoption
Despite continued economic challenges in 2023, experts agree that the global EOR market will continue to grow at a fast pace.
The Everest Group has estimated the value of the global EOR market will be between USD 3.1 billion and USD 3.4 billion by 2025. The IEC Group, meanwhile, estimates that the market’s value will approach USD 10 billion in 2028. These valuations are from revenues earned from the sales of EOR services, to companies in every global region.
However, the growth and adoption of EOR services varies distinctly from region to region. What follows is a breakdown of some of the key work trends that HR decision-makers should be aware of in each region and the adoption of EOR services from a recent Atlas survey.
Africa and the Middle East
Key Work Trends:
Moderate to strong economic growth is expected in the ME and North Africa in 2023.
Africa’s population is expected to nearly double to 2.5 billion people by 2050, while it will become home to the world’s largest working-age population by 2040.
Africa is undergoing a structural shift from agriculture to services, with employment in the services industry increasing from 30% to 39%.
Nations that are growing economically in Africa include Ghana, Burkina Faso, Ethiopia, Kenya and Tanzania.
Technology jobs — especially in cyber security, data, and cloud — are in demand in the UAE and Saudi Arabia.
EOR Service Adoption:
According to both the Everest Group, the MEA market remains one of the smallest in terms of EOR adoption.
However, 97% of companies surveyed in the UAE said that they are planning on entering new markets in the next 12 months, with 41% stating that they planned to use external resources for hiring.
This is because almost three in four (74%) of the companies surveyed in the UAE have said that they have difficulty finding the right talent currently.
Asia and the Pacific
Key Work Trends:
In general, APAC countries are expected to have moderate economic growth in 2023.
Upskilling is in demand in China because the workforce is aging compared to other emerging economies and its population is shrinking.
Labor supply and demand do not match. In Japan, for example, companies average just two applicants for every role and millions of jobs remain unfilled.
Organizations are increasingly exploring dispersed operating models to reduce the risk of operations based in China, with some manufacturers moving operations to Vietnam.
EOR Service Adoption:
EOR demand is highest in China, Hong Kong, India, and Southeast Asia.
Industries seeking EOR services include technology, administration, support services, and health services.
The challenges that companies are solving with EOR services include global expansion complexities, general hiring challenges, and the retention of talent.
Europe
Key Work Trends:
Economic growth is expected to be sluggish in Europe throughout 2023.
Labor costs are rising significantly in EU countries — as much as 5.3% in the first quarter of 2023 — as employment rates rise.
More than 75% of EU companies report difficulties finding workers with the necessary skills, highlighting a growing talent gap in the region.
It’s expected that 20 million information and communications tech specialists will be employed in the EU by 2030.
EOR Service Adoption:
The adoption of EOR services is high in Europe due to the increased number of enterprises adopting remote and hybrid work styles. Continental Europe makes up over half of the overall revenue contribution to global EOR providers.
The challenges that companies are looking to solve with EOR technology and services include finding talent, exploring new ways to reduce operational costs, and consolidating HR services onto one platform for improved employee experience.
In the post-COVID landscape, managing and maintaining employee remote working needs compliantly is also a huge driver of EOR services.
Latin America
Key Work Trends:
Weak economic growth is expected in 2023.
The largest economies in South America are Brazil, Argentina, Chile, Colombia, and Peru.
Latin American economies are expected to be as much as USD 9.2 trillion by 2030.
EOR Service Adoption:
As an emerging economy, the LATAM market is considered a targeted area for EOR services.
Brazil remains the key market in the region, but Mexico, Colombia, and Argentina are also emerging centers of EOR expansion considering their favorable locations and highly-skilled pools of talent.
In particular, EOR services that enable the management of contractor services will be particularly relevant to the LATAM market.
North America
Key Work Trends:
Weak economic growth is expected in North America for 2023.
Talent shortage challenges are expected to increase, with 77% of employers reporting difficulties in filling roles – a 17-year high.
Remote and hybrid working trends remain high in North America, with 48% of knowledge workers estimated to be working hybrid or fully remote in 2024, up from 27% in 2019.
Employee retention also remains a challenge, with turnover rates expected to hit as high as 24% in the coming years.
EOR Service Adoption:
North America leads the way in terms of adoption of EOR services.
North American companies represented 36.4% of the global EOR services implementing market in mid-2022, down from 48% in 2021, as reported by the Everest Group.
Top industries in need of highly skilled foreign talent in Canada include the technological, healthcare, and financial sectors. Canada is filling skills gaps by immigrating highly skilled workers.
The challenges that companies are looking to solve with EOR technology and services include supporting employees in locations where the organization does not have its own establishments and the need to become compliant in terms of paying employees.
List of sources: Atlas Surveying, 2023 - The Everest Group, 2022 - NelsonHall, 2022 - McKinsey, 2023 - TechGig, 2023 - WEF Chief Economists Outlook, 2023 - China Briefing, 2023 - Korn Ferry, 2023 - Eurostat, 2023 - European Commission, 2023 - Gartner, ‘Forecast Analysis: Knowledge Employees, Hybrid, Fully Remote and On-Site Work Styles, Worldwide’, 6 January 2023 - ManpowerGroup, 2023
How EORs Will Impact the Future of Work
As the EOR market grows, business leaders are quickly realizing that an Employer of Record isn’t just an extension of their HR team. Rather, EORs are helping facilitate a more flexible, compliant, and globalized future of work.
Find out more about how Employer of Record services are transforming the future of work by downloading Atlas' Global Employer of Record Report: 2023.
In this, you'll learn about:
The Changing Dynamics of the Global Talent Landscape: Understand the forces driving change and how businesses can adapt.
The Rise of Remote and Hybrid Work Models: Discover the benefits and challenges of these models and how to manage them effectively.
The Role of Employer of Record (EOR) Services: Learn how EOR services can streamline your business operations and ensure compliance.
What’s Coming Next: Forecasting the major trends and technologies that will define the next 12 months.
Download the report, for free, by filling out the form below.