Whether you’re hiring your very first or tenth Filipino accountant, you may have seen some confusing terms when it comes to hiring offshore.

In this article we want to demystify them for you.

You’re probably wondering what an offshoring company - also referred to as a BPO - is and what it stands for.

BPO stands for Business Process Outsourcing, while EOR stands for Employer Of Record.

Here’s the difference between them.

What’s a BPO?

Basically, a BPO hires people overseas and contracts them out.

They handle payroll and compliance.

They usually have an office where they provide laptops, desks, and all the things that you might imagine would go with an office.

They also provide a layer of management between you and your staff member.

Depending on the BPO that you're working with, that layer of management may be stronger or weaker.

You may have more or less of a direct connection with the actual staff doing work.

It's important to note that although it may feel like it, this staff is not your team - they’re employed by the BPO.

You'll realize they're not if you decide to pay them directly (cut out the middleman), and you run into the BPO exit clause. Or when the BPO decides to swap a team member out.

So What’s An Employer of Record?

An Employer of Record is similar to a BPO, but it has some fundamental differences.

Some of them use the term EOR, but effectively are a BPO.

For this article, I’m going to use standard terminology and talk about Employer of Record services that only handle payroll and compliance.

The difference is that there’s no manager between you and your employee. That means you have a direct one-on-one relationship with employees.

They don't provide laptops or an office and have a very low, simple monthly fee because of that.

In my opinion, I think their interests are more aligned with the accounting firms that they work with. With an Employer of Record, you can easily take your employees somewhere else if you’re not happy with their services, unlike with a BPO.

You’re paying them a fee to administer the compliance and payroll, and they're doing it at your service.

They're not recruiting - you're finding the employee and you're contracting with them.

Things to Consider When Hiring a BPO Instead Of An Employer of Record

Unfortunately, when it comes to BPOs, fees can be very high. They include things like monthly management fees, and computer and device fees. These things all add up!

Usually, you’ll find the BPO makes more money than the employee does.

In general, BPO interests often aren't aligned with accounting firms that want to hire in the Philippines.

Making It Work Without a BPO is Easy

Now you might be thinking - don't my employees need laptops? It sounds like the BPO does some necessary things.

Yes, they do provide some value by sorting out laptops for your staff, but at this point in time it’s just a convenience.

Years ago, before we had communication tools like Zoom and Slack, and payment rails like Wise, doing business across borders was much more confusing.  BPOs provided a necessary service, and it was worth paying double someone’s salary, simply because you couldn’t do it otherwise.

Today, things are much easier, and people are used to working internationally.  The remaining obstacles, like “what do you do about laptops?” are pretty easy to solve.

Yes, there’s more work in the initial setup of a new hire.  But it’s not a big deal, and in my opinion, it’s not worth paying a hefty ongoing fee for that one-time convenience.

On the computer question - there are several solutions you could consider. For instance, having employees use their own laptops, buying laptops through a distributor in The Philippines, or setting up a computer in your office that they connect remotely to..

If that's something you’d like to do, we can make some recommendations for you.

At TeamUp, we believe in the power of building your own team, your own culture, and your own relationships. That way, you can train your team your way.

We help accountants and bookkeepers hire directly, and we recruit the absolute best talent in the Philippines for a flat fee.

That means there's no ongoing fees because it's your team. If you would like to use an Employer of Record service, we can connect you with an EOR partner in the Philippines for payroll and compliance.