We are seeing an increasing number of companies engage individuals in multiple jurisdictions (including the UK) through Employer of Records (“EOR”). The term EOR refers to a third-party organisation which is engaged to contract with an individual in one jurisdiction to provide services to an entity in another jurisdiction (the “end user”).
EORs can provide an efficient solution for expanding international companies. For example, an EOR deals with administrative services, including dealing with tax, payroll, benefits, insurance, and other local employment law requirements. Further, there is no need for the end user to incorporate an entity in the relevant jurisdiction to administer the employment relationship.
It is, however, important to note that the end user will not normally have a direct contractual relationship with the individual concerned, but they will usually direct and control their work on a day-to-day basis. This gives rise to potential uncertainty in relation to issues such as confidentiality and post-termination restriction protection, management responsibility and potential liabilities. However, these will largely turn on the arrangements and commercial terms set out in the service agreement between the end user and the EOR.
End users should also be mindful of potential tax issues, including whether their use of an EOR could avoid triggering a taxable presence or permanent establishment.
For the reasons outlined above, and to ensure an EOR is the right fit for your business needs, we suggest obtaining prior UK legal and tax advice.
Learn More: UK Founder Series: Building Your Team