HR Leaders and Labour Shortages

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Gino Peters

Written By:

Gino Peters

Reviewed By: Belinda E.

June 3, 2026 7:26 pm

Category Tag: News

The rise of remote work made international expansion much easier in recent years, but hiring abroad still comes with legal and administrative complexity, as every country has its own labour laws and payroll rules that must be followed. In addition, not many companies can open a new entity in every new market that they are expanding into. That is when the Employer of Record (EOR) solution comes in handy.

The EOR serves as the legal employer on paper, while the client company manages important activities related to the employees responsibilities and performance.

In this guide we will cover what an employer of record is, how it works in detail, how much it can cost and which business should consider an EOR solution.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third party service provider that legally employs a person on behalf of another company in the country where the employee officially resides. As an official employer the responsibilities of EOR include issuance of an employment contract, processing payroll and withholding taxes and necessary social security contributions, as well as preparation of offboarding documents or any documentation that need to be signed by the employer. In addition, EOR ensures the compliance with local labour laws and serves as a first point of contact for any legal disputes.

The client company that hired the employee through an EOR also has a list of responsibilities. As an Employer of Record does not have the visibility on operational activities behind the scenes a client company needs to provide direction and ensure proper team integration.

In simple terms, the EOR provider acts as a legal employer in the country of the employee’s residence, while the client company takes on day-to-day manager work.

Responsibility	Employer of Record (EOR)	Client Company
Employment contracts & any other official documentation
Payroll processing
Income tax & social security contributions
Compliance with local labour laws
Statutory benefits administration
Managing daily work and projects
Setting goals and performance expectations
Providing equipment and tools
Leading the employee’s team and workflow

Employer of Record solutions gain more and more popularity in the field of global expansion as they allow businesses to hire best candidates fast and easy while staying compliant with local employment regulations. More information about EOR service are available if you would like to understand more.

EOR Meaning

The term “EOR” is the abbreviation for Employer of Record.

Employer in this instance stands for the company that hires the employee and takes on duties related to it, such as onboarding and offboarding process, payment of wages and compliance with other legal requirements.

“Record” from the EOR perspective refers to official registration with government authorities. The name of the EOR provider is stated in all payslips and tax filings, and should also be listed by the employee in any documents where employer must be stated, such as mortgage or loan applications.

One might ask a question of why this legal structure exists. As it is not possible to provide an employment contract directly to a person that legally resides in another country, the business expanding abroad typically needs to establish a local entity. That involves legal registration, arrangement of local bank accounts and organisation of payroll structure, as well as compliance with local law.

EOR allows to simplify the global hiring and reduce administrative burden through their existing legal entity.

There are some other hiring models that can be confused with EOR.

EOR and PEO

Many sources online refer to EOR as “international PEO”, which may create confusion as these models have 1 important difference.

A Professional Employer Organisation (PEO) serves as a co-employer of a client company. In other words, a business must already have an established entity in the country. The hiring tasks are, therefore, shared between 2 companies, while legal liability stays only with the client company. In the EOR model all legal risks are being taken by the official employer. Read more about the difference between PEO and EOR here.

EOR and staffing agency

Staffing companies mainly provide assistance for short-term projects by providing temporary workers. If the client wishes to employ a person for a longer time, EOR approach must be chosen.

EOR and contractor model

Contractor agreements assume the involvement of independent workers rather than employees. This model is also often used for temporary, project-based assignments. It is important to remember that there is a big misclassification risk between a contractor and an employee in the company which can lead to potential legal issues. An EOR ensures that employment is legally compliant with local labour law.

How does an Employer of Record work?

While it may sound complicated at first, a process behind the employer of record model is relatively straightforward.

The operating company selects a candidate

The client company recruits the employee they want to hire in another country

The EOR becomes the legal employer & local employment contract is issued

The Employer of Record uses its local legal entity to prepare and issue an employment contract that complies with labour law of the country where the employee is based. Depending on case-by- case situation, the work visa might need to be secured beforehand. Our company provides immigration services, more details can be found here.

Payroll and taxes are managed

The EOR takes on recurring responsibilities related to a payroll and ensures correct processing of income tax, social security contributions etc

Benefits are administered

Paid leave, sick leave, pension contributions and any other statutory benefits are being managed by the EOR.

Ongoing compliance and HR support

It is the responsibility of the EOR to monitor changes in local labour law and ensure ongoing compliance.

Example:

Imagine a UK-based tech company found a perfect candidate in Germany for a position of a software developer.

Instead of going through the administrative burden of opening a legal entity in Germany, the company chooses to work with an Employer of Record. The EOR hires the developer under a German employment contract and manages payroll and taxes. At the same time the UK company welcomes the new employee in the team and manages the daily work of a developer.

What services does an Employer of Record provide?

The Employer of Record does more than just providing an employment contract to the employee. Typically a wide range of HR and compliance services is included in the EOR offer. For example, read about the services included in our EOR package here.

Employment and HR administration

Locally compliant employment contracts and support with other documents requested by authorities
Employee onboarding
Employee record management. For example, control over PTO

Payroll and tax management

Regular payroll processing
Tax withholding and reporting of social security contributions with authorities
Payslip generation and creation of annual wage tax certificates

Benefits administration

Management of statutory benefits
Pension contributions (where required)
Support with benefits such as maternity leave allowance, sick leave allowance etc

Compliance and risk management

Insuring compliance with local labour law
Management of onboarding and offboarding processes
Representation in difficult legal and court cases

Additional services:

Some EOR providers ( such as ThisWorks EOR Services) provide additional services such as:

Work permit and dependent visa support
Background checks
Relocation support
Value added services: support with housing, company car, banking, etc ( depending on the country).

This vast list of services allows businesses to manage international teams, while staying compliant and avoiding complex local employment administration.

Benefits of using an EOR service

There are multiple advantages the businesses can get from working with an Employer of Record provider.

Faster global hiring

Setting up a new entity can take up to several months. With an EOR the hiring process can take several days.

Reduced compliance risk

A trustworthy EOR provider ensures the compliance with all local regulations. As the labour law varies greatly between countries, having a knowledgeable party to rely on can make a big difference.

Lower expansion costs

Establishment of a new entity is not only a time-consuming process, but also costly. With EOR services these costs can be avoided.

Access to global talent

The location of a remote candidate is not a problem if the company uses Employer of Record services. In other words, the best candidate for specific business purposes can be chosen.

Scalable hiring model

EOR services are ideal for organisations that want to scale international hiring quickly. They are particularly useful in the following situations:

Remote-first teams and organisations
Companies testing new markets abroad
Startups expanding internationally

How to choose the right Employer of Record

Choosing between several EOR providers is important, as it influences not only compliance, but also employee experience for new hires and how your company is perceived on the job market.

Here are some important things to keep in mind when deciding on your EOR partner:

Geographic coverage

Make sure that EOR provider can cover the country where you want to expand globally. Read about our EOR coverage here.

Pricing transparency

Check that EOR provider does not have any hidden costs and the pricing is clearly outlined in your MSA.

Compliance expertise

A strong EOR provider should have a team of experienced local HR specialists who understands all in and outs of a national labour law.

In-house vs partner model

Some EOR providers rely on their third-party partners, while others manage employment directly through their own local entities.

Customer support

It is important to find a EOR partner that helps with any questions or concerns in a quick and professional manner. That can be crucial when dealing with employee offboarding or any legal disputes.

Warning signs

Understanding the importance of choosing a right party, your company should be cautious of providers that lack local expertise and cannot give clear answers to your labour law questions. In addition, companies with slow response times can prove to be unreliable in critical situations. Furthermore, providers with complex pricing models with many hidden fees can create a lack of cost transparency and result in unforeseen expenses.

By selecting a provider with strong expertise in local labour law and reliable support from dedicated teams, your company can ensure a smooth international growth. Learn why companies choose ThisWorks as their EOR partner.

How much does an employer of record cost

The vast coverage of services the employer of record provides makes many businesses ask how much an EOR costs.

Pricing models vary greatly on the provider and the country of coverage, but most EORs use one or more of the following structures.

Flat monthly fee per employee.

The EOR provider charges a fixed monthly fee for each employee they have on the payroll from the client.

Percentage of salary

While not being a popular approach, some EOR providers charge a percentage of the employee’s salary, typically ranging between 5%-15%.

Setup fees

Some providers charge onboarding or offboarding fee for each employee.

The fee that the business needs to pay to an EOR provider also depend on the location of a service. Local labour law complexity of some countries can influence the fee. In addition, some countries have specific statutory benefits and payroll administration requirements. Furthermore, employee headcount in the specific location can influence the fee.

EOR vs setting up a legal entity

To establish a new entity the organisations needs to go through legal and tax registration. In addition, accounting support and ongoing compliance costs such as the fees for local labour lawyers can make setting up a legal entity significantly more expensive.

An EOR allows companies to expand globally without these upfront investments.

EOR vs hiring contractors

Some businesses decide to hire international workers as contractors. However, this approach can often lead to a misclassification risk, which can cause legal and tax liabilities.

A professional EOR provider ensures that the new starters are compliantly onboarded under local employment regulations.

EOR FAQs

Is an EOR the same as a PEO?

No. PEO model assumes co-employment and requires the business to already have established local entity, while EOR employs new talents through its own entity only.

Can an EOR hire contractors?

While some EOR providers can support hiring contractors, it is important to remember that main function of EOR is the employment of full-time workers legally in a country. A risk of misclassification between EOR and contractor should be also considered carefully.

Is an employer of record legal?

Yes, when established and structured properly, Employer of Record entities are legal and widely used for international expansion by many companies.

When should you use an EOR?

The most common reason for using EOR include:

Hiring employees located in another countries remotely
Testing new markets before establishing an entity
Expanding internationally

Can you switch from EOR to your own entity?

Yes. Many companies initially hire through an EOR for the ease and speed of expansion and later transition employees to own legal entities upon their establishment. It is important to remember that some countries require specific procedure to be followed in such a scenario.

Get in touch with ThisWorks

Expanding your team globally does not need to be long and administratively complex.

With the use of Employer of Record the businesses can have access to the best talent from around the world while ensuring full compliance with local labour laws.

ThisWorks can support your global expansion with our compliant Employer of Record services.

Contact our team to find our how we can help your international team glow fast and compliantly!

Strategies for HR Leaders Facing Labour Shortages

One problem that has become the most critical to HR leaders is the lack of labour. Due to global supply chain shocks, demographic changes and shifting employee expectations, organisations find it challenging to attract and retain the talent required. A recent survey released by ManpowerGroup has supported this situation. According to this survey, 77 per cent of employers globally experience a shortage of talent in filling positions, which is the highest in over 15 years.

The article will examine some of the significant steps that can be taken by HR leaders to overcome labour shortages and make their workforce more sustainable and resilient, as well as how organisations can prepare to grow sustainably in the long term. We will also mention how recruitment is being transformed by the likes of such platforms as ThisWorks and how they are facilitating workforce needs at a global level.

Rethinking Workforce Planning

The conventional workforce planning tends to go wrong in the case of labour shortages. HR leaders need to think long-term and strategically, and not just in the short-term hiring needs. This involves studying demographic, industry and skills gap to be able to predict the demand.

The main actions are:

Scenario planning to plan back-up scenarios against various labour market conditions.
Cross-functional efforts with finance and operations to ensure that talent strategies link to business needs.
Employ human resource/workforce analytics to forecast turnover and imminent skills gaps.
Planning of the workforce would make businesses more prudent even in volatile markets.

Developing Employer Brand and Employee Value Proposition (EVP)

The available labour is choosy in a tight labour market. Employer brand and EVP must be enhanced by the HR leaders in order to be seen. A good EVP is more than pay – it has exemplified career growth, culture, work-life balance and purpose.

Create showcases of diversity, inclusion and sustainability practice.
Showcase the success stories of employees and their career growth.
Invest in genuine storytelling on the digital phase.

A case in point, the likes of ThisWorks enable employers to promote their opportunities to the world and, in the process, establish themselves as attractive destinations to skilled workers.

Embracing Flexible Work Models

The pandemic necessitated an irreversible change in the workforce expectations permanently. Flexibility has become one of the primary concerns of employment seekers and HR leaders who do not provide it; they run the risk of losing talent.

Flexible strategies are:

Combined work patterns of remote and office work
Work flexibility in areas where work-at-home is inapplicable.
Part-time and job-sharing positions to enable the skill mix.

McKinsey & Company research displays that flexibility is among the three most potent drivers of both employee satisfaction and retention.

Upskilling and Reskilling Employees

During times when talent becomes scarce, one would expect the maintenance of the talent pipelines within the company to be more effective than outside recruitment. Customised learning and development programs should be put in place by HR leaders in order to deal with the shortages in skills.

Provide certification and training online.
Offer the employees career mobility plans.
Invest in leadership development, getting ready for the third generation of supervisors.
Upskilling not only addresses the absences but also increases employee engagement and loyalty.

The potential of focusing on technology and artificial intelligence in recruitment

The correct technology can assist HR leaders in beating labour deficiencies by smoothing out the recruitment process and discovering concealed talent.

The AI-powered recruiting systems can read through resumes quickly and reduce bias.
Talent marketplaces link global job seekers to employers.
The automation tools assist the HR departments in handling repetitive work and concentrating on strategy.

Global Recruitment to questionnaire decoding talent

This is where the flexibility of the questionnaires comes in useful, even when the entire questionnaire was predetermined, flexibility was introduced because Talent Directories could be expanded or narrowed depending on the needs of the enterprise, as well as dependencies.

Among the causes of labour shortage are the region-based demographic issues. This can be overcome by recruitment across borders by HR leaders.
Explore global recruiting as a means of getting skilled employees.
Exploit schemes such as the UK Skilled Worker Visa to get global talent.
Partner with international recruitment sources in compliance and source.

With an embracing global talent mobility, organisations can recruit and fill critical positions and make their workforce diverse.

Enhancing Staff Retention and the Employee Experience

In recruitment and retention, it is crucial. High employee turnover can only aggravate labour shortages, and therefore, the responsible HR leaders should work on employee experience (EX).

Establish frequent feedback mechanisms and address the employee issues.
Provide wellness initiatives to promote physical and mental well-being.
Offer open career pathways as a way of retaining high-performing employees.

The high EX decreases turnover and increases the reputation of the employer in a competitive labour market.

Collaboration with Education Organisation

The other long-term option is establishing cooperation with schools, universities, and training institutions.

Come up with internship and apprenticeship programs.
Fund industry-specific training programs.
Take part in curriculum building with the aim of matching the academic skills and the requirements of the industry.

These partnerships provide a healthy source of talent, along with creating a positive brand awareness among the youngest generation of workers.

Why HR Leaders Should Choose ThisWorks

Managing labour shortages comes with a need to be innovative and quick, as well as having access to the right tools. ThisWorks can assist the HR leaders through the provision of:

International Access: Employers are able to access skilled workers internationally.
Enhanced Hiring: AI-supported tools cut down the time-to-hire and are more successful at matching recruits.
Compliance Support: In-built systems to make sure that international labour laws and visa compliance are followed.
Scalable Solutions: Applicable to start-ups, SMEs and large organisations.

Through this collaboration with ThisWorks, HR leaders will access the partner who will provide the necessary strategic lift to surmount labour shortages and achieve long-term workforce stability.

Success Stories with Examples Case Studies

A European logistics company collaborated with institutions of higher learning to equip them with supply chain experts who could reduce its reliance on outside hiring.
Another example of healthcare providers using an international hiring site like this is to staff necessary positions in healthcare in the UK.
A technology firm has adopted hybrid work regulations, and its attrition rates have reduced by 30 per cent.
Such practices as global hiring, upskilling, and employee experience, when united, can help to curb labour shortages as these examples show.

Conclusion

Labour crunches are not simply (one-time) disruptions, but rather the uniquely new future of labour. Human Resources leaders have to be bold, creative, and purposeful in their approach to the problem of the workforce. It is possible to improve planning, employee development investment, flexibility, and the use of platforms to create resilient workforces that will be ready to face the future.

As we continue to compete in the global environment to get the right talent, adaptation is the key to success. As HR leaders, the challenge is obvious–but so is the opportunity.

FAQ

1. What has been driving labour shortages in 2025?

The causes of labour shortages are varied and include the ageing populations, declining birth rates in the developed economies, post-pandemic changes in the workforce, skill mismatch and restrictive immigration policies. There is moreover the matter of fast technological development that requires specialised skills, the market of which is not entirely covered by the existing workforce.

2. What can HR leaders do to fill core gaps when there is a labour shortage?

The fastest way for HR leaders to fill the talent pool gaps is to invest in employee up-skilling and re-skilling, continuous learning efforts, and collaborating with learning institutes. Apprenticeships, mentorship, and the utilisation of digital learning platforms are also other ways to ensure that employees understand the in-demand skills necessary to fill these gaps.

3. Where does employer branding fit during talent shortages?

It is important to have an employer brand when there is a high demand for talent. A powerful brand displays organisational culture, career development, job diversity programs, and employee welfare programs. This assists organisations in differentiating themselves to the potential candidates who look beyond salary in their work decisions.

4. Is flexibility in the work solutions effective in addressing labour shortages?

Yes. More variable work patterns, including hybrid, remote, and part-time, are appealing to wider talent pooling, including working parents, retirees, and other people who need flexible work and improved balance between work and life.

5. What are the possibilities through technology that HR leaders can use to mitigate labour shortages?

AI-based recruitment systems, employee analytics and automation of personnel processes can assist companies in simplifying the employee selection process, eliminating talent shortages, and raising employee engagement. Besides, with a global workforce, digital collaboration tools enable businesses to have a broader talent pool.

6. Will international hiring address local labour shortages?

One of the best solutions to labour shortage is international hiring, particularly in areas such as healthcare, IT and engineering. HR leaders can utilise the skilled migration schemes, international talent marketplaces, and visa sponsorships in order to attract foreign candidates.

7. What are the long-range plans that the HR leaders should follow to be ready in anticipation of challenges in labour in the future?

The strategies that will be involved long term are the development of a strong in-house talent cylinder, the development of firm succession plans, investing in automation to reduce human labour dependency and the development of relationships with the universities.