Using a Local Employer of Record to hire has potential drawbacks and risks, including a false sense of security on liability. Find out more.
Our firm has seen many companies turn to LERs to expand their business operations into foreign markets. A company from California, for example, can now “rent” employees in Canada, Germany or elsewhere without a physical presence or directly hiring them. Why? Because the LER has done the heavy lifting in incorporating in these jurisdictions, hiring the employee, and then “loaning” the employee back to their client as a contractor.
From a legal point of view, what these companies are failing to consider is that they are considered “common employers.” This means any wrongful dismissal or other financial liability that arises while using an LER can lead to significant legal and financial risks for the associated company, which may result in additional costs, legal fees and financial penalties.
Furthermore, working with an LER can also create additional costs and administrative burdens. While outsourcing employment responsibilities to an LER can save time and money in some cases, it can also result in additional fees and administrative work. For instance, there may be additional co-ordination required with the LER on HR and employment-related matters, as well as the cost of any services provided by the LER. Again, this is to save a few hundred dollars.
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