What is an employer of record?

21 April 2024

What can an Employer of Record do for your company expansion in Portugal?

Written by: João

Tax and Fiscal Consultant

Are you seeking to enlist some of Portugal’s top professionals or setting a new department, yet your company operates outside this picturesque nation? No need to worry, we’ve got the solution you’ve been looking for!

Whether you’re assessing the local market, relocating seasoned staff, or facilitating remote work arrangements for employees located in Portugal, our Employer of Record services provide an ideal fit. Collaborating with us ensures seamless team expansion and effortless pursuit of opportunities in Portugal.

Let’s delve into how an Employer of Record in Portugal can support you in this endeavour. In this article, we’ll offer a succinct overview of the service, explore the dynamics of cross-border collaboration, and compare the EOR approach with alternative strategies for global hiring.

What does an Employer of Record Service do?

An Employer of Record serves as an agency for hiring individuals on behalf of an employer. This service provider takes on the responsibility of managing employees’ payroll, handling payments, taxes, and insurances, all while the client and employees maintain their regular working relationship. In return for these services, the employer pays a fee to the EOR, covering both the service itself and associated employment costs.

Businesses choose Employer of Record services for various reasons. For instance, startups without in-house HR or payroll departments often opt to fully outsource these functions. Similarly, foreign companies embarking on projects or expansions in new countries may turn to EOR services to ensure compliance with local regulations. Instead of establishing a new entity, they can use the infrastructure provided by the Employer of Record, sometimes referred to as an umbrella company.

This is the Employer, Employee and EOR triangle

Imagine a triangle arrangement: at its centre stands the Employer of Record, flanked by the employer on one side and the employee on the other. Despite this structure, the usual working relationship between the employee and employer remains unchanged, while the EOR efficiently oversees all legal and administrative matters. Clear contractual agreements ensure smooth cooperation, empowering you to expand your business into new markets, support your workforce, and effortlessly overcome any obstacles.

Let’s simplify the key components of an Employer of Record (EOR) for employers expanding into new territories, into four sections. Put plainly, it excels in managing compensation and benefits, offering tax advantages, and navigating visa and work permit intricacies. See the breakdown below.

Legal compliance made easy: Streamlining international employment
By enlisting an EOR’s support, you ensure adherence to local employment laws and regulations.

Seamless benefits administration: A hassle-free approach for employers
An EOR takes charge of managing compensation and benefits for your employees in foreign jurisdictions.

Maximising tax benefits for your company’s advantage
With expertise in tax incentives, an EOR can identify if your company qualifies for advantageous tax benefits.

Visa and work permit assistance: EOR serving as your immigration partner
An EOR acts as your company’s dedicated guide, navigating the complexities of visa and work permit procedures on your behalf.

EOR compared to other approaches to expand globally

Let’s delve into direct comparisons to clarify the essence of an Employer of Record and what it doesn’t involve. In this section, we’ll explore the differences between EOR and other players in the employment landscape, highlighting the critical nuances for international endeavours.

Come along as we unravel the differences between EOR and setting up a fresh business entity, engaging with a staffing agency, and hiring freelancers. We will provide examples to equip you with the knowledge needed to make well-informed decisions regarding your employment strategies.

1. EOR vs. establishing a new company abroad

Opting for an Employer of Record (EOR) is a savvy and streamlined choice for your company’s expansion into a new territory. Establishing a new legal entity involves significant costs and consumes valuable time, dealing with legal complexities, payroll, HR, and financial matters. Conversely, selecting an EOR provides prompt solutions, scalability, transparency, and efficiency. By partnering with an EOR, the employment process in a foreign country is seamlessly managed for a fixed monthly fee, encompassing administrative duties, payroll processing, and possibly additional expenses such as visa and work permit facilitation.

2. EOR vs. staffing agencies in recruitment

Staffing agencies are primarily involved in recruitment for clients seeking new hires, while EOR providers intervene at a later stage. EOR services target clients aiming to onboard employees in different countries, requiring local employment options with the flexibility to explore new markets. Unlike staffing agencies, EOR providers do not handle recruitment; instead, they handle record-keeping, payroll, administration, and legal compliance in the foreign jurisdiction. This nuanced distinction outlines the specialised role of EOR in ensuring a seamless employment transition abroad.

3. EOR vs. freelancing

Freelancing provides the freedom of independent contractor status, granting flexibility but also bringing uncertainties regarding project continuity and financial stability. Employer of Record (EOR) services come into play later in employees’ careers, guaranteeing job security through established fixed contracts. EOR manages compliance, facilitates visa applications, and offers tax advantages, making it an ideal option for international team relocation while upholding job commitments.

Discover the advantages of using EOR for employment in Portugal

Fast team integration emerges as a notable advantage for employers leveraging the services of Portuguese Employer of Record. As the dedicated Employer of Record in Portugal, we boast a profound understanding of local labour laws, ensuring prompt onboarding regardless of the employee’s location. This expertise is a must for employers seeking to seamlessly incorporate new team members into their global workforce.

Ensuring compliance is another key benefit provided by EOR providers with local labour laws. We handle compliance matters, ensuring that the employment setup follows Portugal’s specific labour regulations. This careful approach helps companies avoid legal issues, establishing a smooth and legally sound international workforce.

Cost-effectiveness becomes a significant consideration for employers choosing an Employer of Record (EOR) solution. It’s cheaper and simpler than setting up a new company in another country. This cost advantage is especially clear when moving one worker to Portugal, making Portuguese Employer of Record a smart and budget-friendly choice for companies going global.

Effortlessly expand with the Portuguese Employer of Record solution

Portuguese Employer of Record is designed to facilitate smooth collaboration between international companies and professionals located in Portugal. Our committed team stands ready to guide you through every step of the hiring process. Don’t hesitate to contact us with any questions you may have. We’re here to support you!

Start your journey today, and in just a few days, you and your team can be fully operational in Portugal.

Written by:

João | Tax and Fiscal Consultant

A skilled tax and fiscal consultant who has lived in several European cities, he currently calls Porto home. He specialises in guiding foreign businesses through Portugal's tax landscape as they expand into the country. With his extensive knowledge of Portuguese fiscal regulations and international business practices, he helps companies navigate complex tax issues with ease. An avid surfer, he loves exploring Portugal's coastline and often jokes that he's as adept at riding waves as he is at managing tax waves for his clients.

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