This past month, NelsonHall released the first market analysis dedicated to the Global Employer of Record (EoR) Services space, an emerging yet largely unknown HR outsourcing service model that enables growing multinational firms to compliantly employ foreign workers in support of global expansion initiatives.

While co-employment service models have historically been U.S. centric, global co-employment offerings have emerged, providing multinational firms with a highly agile, turnkey support model for rapid, compliant international expansion.

Global EoR services at a glance

Global Employer of Record services, also commonly referred to as Global PEO or International PEO services, facilitate international expansion by leveraging vendor-established legal entities and pre-defined country-specific contracts to employ workers in new countries of operation, where the organization lacks the proper business base, expertise, and capability to operate in full compliance. Contracted workers are thereby employed compliantly, in-country under the provider’s/partner’s established entities, while the client maintains full day-to-day control over workers’ activities and performance.

The service provides a comprehensive, highly localized HR and payroll support model for workers throughout the life of the contract and remains purposely decoupled and un-integrated from the organization's broader HR infrastructure and service delivery model.

While large multinational organizations are leveraging the service, the model is particularly well suited toward small and midsized firms operating in high-growth sectors, which often lack the resources and knowledge (time/cost, attorneys, expertise, infrastructure) to execute on a global expansion effort in-house.

The solution offers a lower risk, cost-effective, time-saving alternative (often deployable within days) to navigating the lengthy and complex process of establishing legal entities in-country, or simply deploying contract workers, which are often misclassified under local laws exposing the firm to fines, penalties, and compliance risks.

By design, the service model is particularly effective at enabling HR with greater speed and agility in supporting strategic business initiatives, leading to a competitive advantage for growth-focused multinational firms seeking to expand their footprints globally, test emerging markets, or access talent outside of their home country of operation.

Global EoR market outlook

Despite the recent global economic impacts of the COVID-19 pandemic, buyers interviewed overwhelmingly indicated that global expansion remains in their plans in the coming few years, as borders re-open and economies restart. While North American-headquartered firms will remain the predominant target and adopter of global EoR services, Europe and Asia will provide strong pipelines for new client/new worker growth, as the top targets in focus for expansion by both external and regionally-based firms.

Further, with organizations of all sizes increasingly finding their brands expanding internationally, and the intensifying need across sectors to access top talent globally, particularly as the 'Work from Anywhere' trend continues breaking down talent access barriers, the demand for agile, compliant global HR and payroll operating models will continue to intensify, accelerating the global EoR services market size toward more than $1bn by 2024.

While buyers confirmed that the global EoR service enables HR with greater agility in supporting international growth strategies, its ability to transform operations is less impactful at this stage, partly due to the lack of digital maturity present in the market, but also the narrow scope, low volumes, short durations, and temporary/contract nature inherent to the global EoR service model. 

However, look for enabling technology platforms across the global EoR services marketplace to mature in the coming 12 to 24 months, particularly as differentiation in the space is commonly centered on the volume of entities under vendor control and in-country expertise, and the overall customer/worker experience. 

Despite global EoR workers being purposely unintegrated from the broader HR infrastructure and operating model, it is critical that employers provide the same level of employee experience expected by a traditional employee. Therefore, expect to see increasing vendor investments in maturing, developing, and offering digital enablers and capabilities including mobile-first design, deeper process automation, infusion of AI, and analytic insights.

Looking ahead, as the solution gains traction and adoption, expect to see a deeper focus by vendors in cultivating a technology-enabled, 'one-stop-shop' of global expansion enabling solutions. Marketplaces of integrated partner services and technology aren't there just yet, but I expect to see these gradually take shape as vendors seek to fill the white spaces within offerings and extend client value beyond their core service offering.

I’m excited to see this service mature as I believe it is an exceptional lever which HR leaders of emerging, growth-focused firms have available to quickly execute and deliver speed and agility for their business. With vendors in hyper growth mode and currently investing in advancing their capability, technology, and offerings, I will be keeping close watch on the space as it heats up and matures!

For more information, or to access to the Global EoR Services market analysis report, contact Guy Saunders.