Let’s start with a conversation between a Company and Sam, a new recruit:
Company: We are ready to make you an offer
Company: We are going to send you a link to our EOR partner to get the onboarding going…
Sam: EOR – what is that?
Company: Well, we don’t have an entity in your country so will be using the EOR to employ you
Sam: So I am not on your direct payroll?
Company: Well, you are an FTE – just not directly on our entity – we use an EOR for that
Sam: But will you convert me at some point?
Company: No plans as of now to open an entity in your country…
Sam: How do my appraisals and career track work in this case?
Company: Same as other FTEs
Sam: But will my manager know that I am not a direct employee?
Company: Yes – but that shouldn’t impact how she views your performance
Sam: I am not very comfortable with this – it still sounds like 3rd party payroll
Company: Yes and No. YES because we are hiring you through another local entity – so technically you are on their payroll. NO because unlike 3rd party payroll, we are hiring you directly and using the EOR simply for paperwork
Sam: Well – I don’t know – they say a downturn is coming and companies typically first fire non-direct payroll employees or contractors– so I don’t feel secure with this
Company: But you are not a contractor – we view and will treat you like an FTE…
Sam: Well – I am not on direct payroll - let me ask you a simple question – would you be comfortable if you were on EOR?
Company: Well…we are based in the US where we do have an entity so have never been hired through an EOR…
Sam: Well, that’s the point…
Company: If it helps, I will tell you that we will offer you benefits including allowances and leaves on par with our other global FTEs and you will also have all system access like our other FTEs
Sam: all that is fine but I have never worked in this model so just not comfortable…
I think by now you get the drift… 😊
In this new post-COVID, remote-first world, EOR is a model with a great value proposition for the company: (1) faster hiring with access to larger global talent pools, (2) auto pilot for compliance and local in-country through the EOR, and (3) zero setup costs to hire in new countries (at least from the well-funded EORs).
However, for talent, especially the kind that has always worked as a direct employee – and by direct I mean on the company’s owned entity’s payroll – this is a very new concept. And more importantly, has a historical stigma of being eerily similar to the concept of ‘3rdparty payroll’ – an idea used even by the likes of Google to engage temp contractors or folks for experimental or non-core work.
When you talk to folks at the company-end including hiring managers and HR, their response is that the talent has to understand that we have no other option but to use an EOR to employ them. However, in our experience, companies doing the EOR model well with long-term chances of sustainability are truly thinking from the talent-perspective and here are a few things I’ve personally seen work well:
1. Maximize EOR usage: maybe your HQ country and other markets where you have a local business have owned entities, but all other locations are EOR – including converting some existing owned entities to an EOR model – this makes the EOR story more compelling and perceivably more secure for new candidates while of course also saving the company quite a bit
2. Internal Communication Plan: Probably the single-most important element for success is to educate current team members on why an EOR is being used and how they need to address and interact with colleagues coming through an EOR – in mid to large companies, one small slip-up where someone even accidentally refers to an EOR employee as a contractor could be end-game for the talent through the EOR
3. HRMS System Config: Create a new category (apart from owned entity employees and contractors which are standard) to ensure EOR folks have access to same tools and systems as FTEs – this is possible in most HRMS systems like Success Factors – this will avoid folks seeing themselves tagged as ‘contractors’ (as they can’t be owned entity employees in the binary employee and contractor setup) and will go a long way in affirming a positive perception. This will also automatically solve for a lot of the downstream aspects like accesses to tools and learning platforms, appraisals, performance feedback, etc.
4. Onboarding: New laptop, swag, all other intros and sessions like any other FTEs are a must – the onboarding experience is super critical to winning the mindset battle your newly hired talent is fighting with themselves
5. Global Benefits: Work with your EOR provider to offer globally-equitable benefits to folks through EORs – in some cases, maybe a little extra even to make up for non-access to free lunches and other perks at your HQ location
6. Show Empathy: Recognize this is hard for the talent and have an open dialog addressing their fears and apprehensions - even after you've done 1-5 above :)
In a nutshell, a company has to do a lot more than engaging an EOR platform when hiring in countries where they don't have legal entities. Yes, the talent has to develop a mindset evolving away from traditional 3rd party payroll stigma, but you as a company can and must do so many things to help them cross this bridge mentally.
Have you done things that worked well for you when hiring through an EOR? Do share...