Why do some accounting firms choose to bring on an Employer of Record (EOR) for compliance when they hire employees or independent contractors directly, while others forgo it entirely?
Both choices offer distinct advantages and drawbacks, and choosing which model to use can significantly impact your firm's operational efficiency.
In this article, we examine the benefits, drawbacks, and key considerations of using an employer or record.
An Employer of Record (EOR) is a company that takes care of the HR, payroll, and compliance aspects of hiring an employee in The Philippines.
This means that after you hire someone directly, you contract with an EOR that handles all the formal HR employment tasks, such as payroll, taxes, employee benefits, insurance, and compliance with labor laws. For example, your accounting firm might want to employ bookkeepers as employees instead of independent contractors but don’t want the headaches of managing all of the HR and legal compliance.
You’re then able to have a local team without having to set up a legal entity in the new country, navigate their foreign employment laws, or manage payroll and taxes there.
Then, you sign a contract with the EOR service provider, who, in turn, has a contract with your team member.
Some accounting firms mistakenly confuse BPOs and EORs and think they are one in the same.
In reality, BPOs are contracted to manage specific business operations and processes for you. Think of them as an extension of your business.
EORs, on the other hand, just handle HR and payroll for workers on behalf of your company.
With a BPO, employees who perform your outsourced tasks are hired and managed by the BPO company. With an EOR, they handle justall of the HR and compliance tasks on your behalf.
Here are some key differences between BPOs and EORs, summarized:
Employer of Record services are attractive because they take care of the HR and compliance aspects while you retain control over your team culture and management.
Here are the benefits that come with partnering with an EOR:
EORs streamline all HR processes, from onboarding to payroll to benefits and administration. This efficiency can save you time and money, allowing for a smoother operational flow.
For example, say you want to bring on a new bookkeeper named Mia,
An EOR will handle her contract preparation, collection of personal documents, setting up payroll accounts, and making sure there’s compliance with local employment laws.
They’ll manage Mia's payroll, accurately calculating her salary in Philippine Pesos, deducting the correct tax and social security contributions, and making sure there are timely payments.
Through the EOR, Mia receives a comprehensive benefits package, including health insurance, Pag-IBIG, and PhilHealth contributions, which matches local practices and improves her job satisfaction.
He says that he’d heard more bad than good stories about people hiring through BPOs, and didn’t like that he would have no control of the employee’s working conditions.
He ended up hiring an accountant directly, and has been able to scale his operations because of it.
While EOR services offer significant advantages for large accounting firms looking to expand or streamline their HR operations, especially across borders, it's not a solution without its drawbacks.
Namely, it is more expensive. You have to pay a monthly fee to the EOR on top of what you are paying your team members. Plus, many team members in The Philippines, who have previously worked in BPOs, don’t like going through an EOR as it adds another layer of red tape.
Here’s what to think about when choosing an EOR:
Understanding the payment structure, including how salaries, government-mandated benefits, and contributions are managed, is important. The EOR should provide a transparent breakdown of costs associated with employing staff.
Make sure you understand how comprehensive the HR services are that the EOR provides. This includes benefits administration and handling employee inquiries.
For example, say your employee Mia has questions about her health insurance coverage options and how to enrol in the retirement savings plan.
The EOR HR team should be open to explaining the benefits package to Mia during onboarding, detailing the coverage options and enrolment process.
The EOR should facilitate Mia's enrollment in her chosen benefits plans, ensuring she receives all her entitlements without any administrative burden on her or your firm.
Using an EOR is a good idea when you plan to hire a lot of accountants in The Philippines as Filipino employees.
That’s because EORs take care of the legal and payroll side, and you can focus on training, managing, and integrating your offshore team member/s.
An accounting firm that wants to find affordable, skilled accountants overseas but is new to hiring overseas or doesn’t have the capacity or know-how to handle legal compliance can benefit greatly from using an EOR.
The majority of accounting firms that we work with TeamUp indeed up hiring as independent candidates because candidates have a strong preference as contractors (you’ll miss out on candidates if you use an EOR)
When you hire directly as independent contractors, you have access to experienced accountants with skills that make them competitive enough not to have to work for a BPO.
Consider this example where US accounting firm owner Jonathan Sturgeon bought three Filipino bookkeepers on board. Because they have a very specific team culture, he didn’t want to go through a BPO.
He says that his Philippines-based team is outperforming most of his US-based staff due to their experience and commitment to the job. He wouldn’t have been able to work with these employees if he’d gone through a BPO.
Top accountants would rather work directly for a company with a better work culture.
You have the peace of mind of knowing that your employee is operating under your work culture and values.
Depending on what you offer, this could mean they have a better work-life and are thus happier, more productive, and more likely to stay with you long-term.
Ryu Naoi from Impala Accountants specifically mentions how important it was for him to hire staff directly rather than through a BPO so that he had control over how they were treated.
✔️Employees can access their virtual desktop from any device, offering flexibility and convenience.
✔️ Reduces the need for high-spec personal or company hardware and can lower IT maintenance costs.
❌ Setting up a VDI environment can be costly and complex, requiring specialized IT skills.
❌ Users may experience lag or reduced performance, especially with high-demand applications or poor internet connections.
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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. If you want to learn more, you can schedule a free call with us and we’ll be happy to talk through your needs.
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