What is an employer of record company?

How to use this glossary for nearshore hiring

Start with the decision in front of you. If you have chosen a candidate, focus on the legal employer and employment costs. If the role is still open, settle who will find and assess candidates before comparing payroll services.

Use the terms below while reviewing a proposal. Keep the quote, service agreement and proposed employment contract together. A price can look clear while leaving questions about what your company must do each month.

Give each provider the same hiring details. Include the role, seniority, work location and proposed salary. State your required working hours and intended first day. If a candidate plans to move, raise that before asking for final terms.

For an engineering hire, describe the work beyond the job title. A software engineer who works from home has different practical needs from someone testing hardware in a lab. Specify access to equipment and any travel you expect.

Ask for answers you can use in an offer or budget. "Payroll support" should lead to a named contact and a process for correcting pay. "Flexible terms" should lead to the notice clause and an explanation of exit charges.

Opus is one option to discuss when comparing service models. This site is an Opus-owned reference; recommendations are editorial.

Compare EOR and managed recruiting with Opus.

What terms should you check before signing?

Read each definition against the documents you will sign. The questions below turn those terms into checks for your hiring manager and finance team. Record the answers in writing so the person managing the hire can use them later.

Identify the employer and the client company

The legal employer is the entity named in the worker's employment contract. Your company is the client buying the service and directing daily work. Ask for the employer's full legal name before approving the arrangement.

Check that the documents describe how the parties work together. Who can approve a salary change? Who responds to an employee's question about leave? Name your own manager for daily priorities, then confirm the employer's contact for employment matters.

If the provider's brand differs from the employing entity's name, ask it to explain the relationship. Keep that explanation with the signed contracts.

Read the employment agreement alongside the service agreement

The employment agreement governs the relationship between employer and worker. The service agreement governs your company's purchase of the service. Review both before making promises to the candidate.

Compare the role, work location and pay terms across the documents. Ask how an approved change reaches the employee's contract and payroll record. Confirm who prepares the paperwork and who must sign it.

Check how the agreements end, too. Your company's service cancellation date and the worker's employment end date need separate review. Ask the provider to explain the steps and charges for each.

Separate recruiting from employment administration

Recruiting means finding and assessing candidates. An EOR arrangement concerns employing a worker. A proposal may cover both, but ask for that scope in writing.

If you already have a finalist, explain that at the start. Ask what the provider needs to assess the proposed employment arrangement. If you need a search, define who writes the role description, screens applicants and schedules interviews.

For a managed recruiting partner, review the duties before and after placement. Ask who handles candidate rejection and offer changes. Confirm whether another search costs extra if your requirements change before you choose a finalist.

Clarify direct hire and contractor arrangements

In this glossary, direct hire means employment through your own company or local entity. Providers may use the phrase differently. Ask whose legal name appears on the worker's contract rather than assuming that everyone means the same thing.

An independent contractor arrangement needs its own review. Describe the actual work, supervision and expected schedule to the person assessing it. Ask for a review under the rules of the country where the person will work.

Keep the classification decision separate from the payment method. A contractor invoice answers how you are being billed. Have the working relationship reviewed before choosing the contract.

Separate gross salary from net pay

Gross salary is pay before employee deductions. Net pay is what the employee receives after deductions. Keep both separate from the amount your company pays the provider.

When a candidate names a salary expectation, ask which figure they mean. Record the currency and pay period as well. A monthly take-home figure cannot be compared directly with an annual gross salary.

Before putting net pay in an offer, ask the provider to explain its estimate and assumptions. Give the candidate a clear breakdown so they can assess the offer without guessing which deductions remain.

Compare the total employment cost

Total employment cost is the budget you need for the hire. Ask the provider to separate the worker's salary from employer costs and service fees.

Review excluded expenses before comparing proposals. Ask about equipment, approved expenses and any setup charge. Check whether an initial deposit is refundable, what it can be used for and when it is returned.

Request a view of costs across the year. A monthly invoice alone may not answer how a later bonus payment affects cash needs. Have finance compare the same salary, start date and benefit assumptions in every quote.

Check payroll dates and cutoff rules

Payroll is the process of calculating and paying wages. The payroll cutoff is the deadline for changes to enter a pay cycle.

Ask when the provider needs a new hire's details. Then check the deadlines for approved expenses, leave records and pay changes. Assign someone on your team to submit those items.

Walk through a correction before you need one. If a salary change misses the cutoff, when will the employee receive it? Who explains the delay? Ask who can authorize a correction and how your company sees it on the next bill.

Distinguish statutory benefits from optional benefits

Statutory benefits are required under the law that applies to the employment relationship. Optional benefits are additional terms you agree to fund. Ask for separate lists in the proposal.

Review the employee's benefits alongside your budget. Confirm when coverage starts and whether any enrollment steps must happen first. If your offer mentions a benefit, check that the employment paperwork describes it consistently.

Ask how leave requests move between your manager and the employer. Your team needs a coverage plan, while the employer needs the records required to administer leave. Agree on a process the employee can follow.

Recognize local statutory bonus names

Mexico's statutory annual bonus is the aguinaldo. Ask the provider how it enters your annual budget and payroll schedule. The entitlement appears in Mexico's Ley Federal del Trabajo, article 87.

Colombia's prima de servicios is a statutory benefit. Ask how its cost is accrued and when payments appear in your bill. See article 306 of the Código Sustantivo del Trabajo.

Argentina uses sueldo anual complementario, or SAC. Brazil has a statutory 13th salary. Review each country's calculation with the provider instead of applying one formula to every Latin American hire. These benefits appear in Argentina's employment law and Brazil's Lei 4.090.

Understand accruals before approving the budget

An accrual records an obligation over time, even when payment happens later. Ask which obligations the provider accrues and which amounts it collects from you each month.

Have the provider distinguish a budget estimate from money it holds on your behalf. Ask how balances are shown and how they are reconciled against actual payments.

Review what happens when the employee leaves partway through the year. Request an explanation of the final calculation and the treatment of any remaining balance. Finance should be able to connect that explanation to the final invoice.

Check foreign exchange terms

Foreign exchange, or FX, is the conversion between currencies. Your invoice currency and the employee's payroll currency may differ. Have the provider name both in the quote.

Ask which exchange rate it uses, when it sets that rate and whether it adds a conversion fee. Confirm what happens to your bill when the rate changes.

Separate a change in salary from a change in currency conversion. If the invoice rises, finance should be able to see which caused it. Ask for a sample invoice showing how the provider presents those amounts.

Define time zone overlap using actual schedules

Nearshore hiring describes geography. Time zone overlap describes when people can work together. Confirm the employee's city and agreed schedule before setting recurring meetings.

Bogotá stays on UTC-5 throughout the year. Mexico City stays on UTC-6. Tijuana follows seasonal clock changes. These rules appear in the IANA North America and South America time zone records.

Give the candidate your required meeting window in a named US time zone. Check it during both US standard time and daylight time. Include on-call expectations in a separate discussion so meeting coverage does not become an assumed after-hours commitment.

Separate onboarding from offer acceptance

Onboarding is the work that makes the hire ready to start. Offer acceptance is an earlier milestone. Agree on the first working day after checking what still needs to happen.

Give employment paperwork an owner. Assign equipment delivery and account access to someone on your team. Confirm which tasks the provider handles and which remain yours.

For an engineer, check repository access and the development environment before scheduling production work. Define who approves permissions. Ask the employee to confirm that required equipment has arrived, rather than treating a shipping notice as completion.

Review notice and severance before an exit

A notice period is the time between giving notice and the effective end date. Severance is a payment that may be due when employment ends. The applicable terms depend on the contract and circumstances.

Ask the provider to explain the process for your proposed hire. Request an estimated cost for a defined scenario, including the assumed length of service. Have it distinguish employment obligations from service cancellation charges.

Before communicating an exit date, confirm the required steps with the employer. Coordinate access removal and equipment return with that process. Name the person who will answer the employee's final-pay questions.

Read the replacement guarantee as a separate promise

A replacement guarantee describes a provider's promise to help replace a hire. Read the events it covers and the steps needed to start another search.

Ask whether the guarantee covers recruiting work, employment costs or both. Check whether it changes if you revise the role, salary or work schedule.

Keep that promise separate from the current employee's exit process. Ask how the provider handles any period between the departing employee's last day and a replacement's start. Your manager still needs a plan for work that cannot wait.

Check intellectual property and tax paperwork

Intellectual property includes rights relating to code and designs. Ask how the employment and service agreements address ownership and transfer of the work your hire creates. Have the reviewer check the full contract chain.

Treat tax forms as a separate task. The IRS describes Form W-8BEN as a certificate of an individual's foreign status for US withholding and reporting. Ask your tax team whether your payment arrangement calls for it.

Before signing, collect the answers that affect the offer and budget. Confirm the legal employer, agreed working hours and first working day. Save the payroll contact and exit terms where the manager can find them.

Compare EOR and managed recruiting with Opus.

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