Employer of Record vs. Independent Contractor: Which is Lower-Risk?
In today’s global marketplace, companies across industries are expanding into new regions to capture growth opportunities. Setting up a local legal entity has been the standard approach, but this can be costly, time-consuming, and complex.
Now, businesses have more flexible options. The two most common are:
- Partnering with an Employer of Record (EoR), or
- Engaging Independent Contractors.
While both approaches enable companies to expand without unnecessary complexities, the EoR model provides stronger compliance, structured protection, and reduced risk and more sustainable choice for long-term growth.
To help you better understand the differences, here is a detailed comparison of Employer of Record (EoR) and Independent Contractors in the context of Cambodia, Laos, and Myanmar:
|
Category |
Employer of Record (EoR) |
Independent Contractor |
|
Agreement |
Compliant employment contracts with clear roles, compensations, and protections. |
Service agreements with no legal employment protections. |
|
Benefits |
Statutory benefits as paid leave, maternity leave, severance pay. |
No statutory benefits and must arrange personally. |
|
Compliance & Risk |
In all three markets, inbound payments from companies to individuals are closely monitored, requiring extensive documentation and proof of statutory compliance. With EoR handling all documentation and compliance, risks are reduced, and employees are paid on time through the safest, fastest, and most compliant structure. |
In all three markets, inbound payments from companies to individual are closely monitored, requiring extensive documentation and proof of statutory compliance. Contractors managing their own filings and payments may face scrutiny. This makes contract-based employment challenging and risks funds being returned by banks to the sender. |
|
Employment Protections |
Labor law protections, including against wrongful dismissal. |
No statutory protection and governed by contract. |
|
Legal Framework |
Fully compliant with labor laws, structured for employer and employee. |
Governed by commercial law and labor protections are usually absent. |
|
Payment |
Timely salaries with tax and social security deductions handled. |
Payments via invoices and contractors manage taxes themselves. |
|
Social Security |
Registered with Social Security, covering health, maternity, and injury benefits. |
Not covered and must arrange own insurance. |
|
Tax |
Withholds and remits income tax on behalf of employees according to local regulations, with rates varying by income level. |
Payments to contractors differ from employees and are subject to withholding tax, which varies by country. Contractors manage their own tax filings, including income tax and VAT. |
|
Termination |
Structured termination with notice and severance per labor law. |
Based on contracts and typically no severance. |
P&O, the leading Employer of Record partner across Cambodia, Laos, and Myanmar, can assist with all your local workforce requirements. Reach out to us to explore how we can help you expand your business smoothly and compliantly.
