Case Study: How GlobalTech Inc. Saved $2.8M by Transitioning to an Employer of Record (EOR)

Background

Company: GlobalTech Inc. (NYSE: GTIA)

Industry: SaaS & IT Services

Employees Affected: 35

Regions Impacted: 5 countries (France, Brazil, Singapore, Canada, and Australia)

Challenge: Reduce operational complexity, cut costs, and meet the financial reporting deadline.

GlobalTech Inc., a publicly traded company, operated small legal entities in five countries, each with fewer than ten employees. Maintaining these entities was becoming a financial and administrative burden. With increasing compliance risks, high accounting and legal costs, and a looming SEC reporting deadline, the company sought an immediate consolidation strategy.

The decision: Close all five entities and transition employees to an EOR provider within three months.

Challenges Faced Before the EOR Transition

1. High Administrative Costs
   • Annual accounting fees: $750,000
   • Legal compliance & regulatory filings: $550,000
   • Management overhead & HR costs: $1,000,000
   • Annual audits & financial consolidation expenses: $400,000
   • Miscellaneous entity maintenance costs (banking, tax, etc.): $250,000

Total Annual Costs: $2.95M

1. Time Pressure from Financial Reporting Obligations
   • With quarterly earnings reports due, failure to consolidate could cause delays in financial reporting, leading to investor concerns and SEC scrutiny.
2. Complex Local Labor Laws & Compliance Risks
   • Each country had its own severance laws, payroll compliance rules, and tax reporting obligations.
   • A misstep in closing down entities could trigger fines, back taxes, or lawsuits.
3. Employee Retention & Transition Risks
   • The company wanted to ensure that key employees remained during the transition.
   • Any disruption to payroll or benefits could create internal resistance and talent loss.

The EOR Solution

To avoid months of entity dissolution paperwork, legal fees, and regulatory risks, GlobalTech partnered with a leading EOR provider.

Steps Taken

1. Employee Transition:
   • All 35 employees were seamlessly moved to the EOR provider within 60 days.
   • Employment contracts were localized to each country’s legal framework while maintaining benefits.
   • No business disruption occurred.
2. Entity Wind-Down & Compliance Management:
   • The EOR handled local labor law requirements and ensured a smooth termination of entity-based employment.
   • GlobalTech avoided severance disputes and compliance violations.
3. Financial & Operational Streamlining:
   • GlobalTech closed all five entities within four months, beating the financial reporting deadline.
   • The company eliminated legal and accounting overhead from these regions.

ROI Analysis: How Much Did GlobalTech Save?

➡ First-Year ROI: $2.37M saved (80.3% reduction in cost)

➡ Three-Year Projection: $7.1M in total savings

Additional intangible benefits: 

✔ Zero compliance violations

✔ No delays in financial reporting

✔ Seamless employee retention

✔ Improved investor confidence

When Does an EOR Make Sense? (The Magic Number for Entity Closures)

While each company’s scenario is unique, GlobalTech’s case suggests that:

• If an entity has fewer than 10 employees and annual maintenance costs exceed $500,000, an EOR transition is likely beneficial.
• If an entity is strategically necessary (e.g., holding contracts, large client base, or long-term market commitment), it may still be worth keeping.

Conclusion: A Playbook for Other Enterprises

For publicly traded companies and multinationals, entity consolidation via EOR providers offers a fast, compliant, and cost-effective alternative to maintaining costly, underutilized legal entities.

GlobalTech Inc. not only cut costs but also avoided compliance risks and operational disruption, demonstrating that an EOR strategy can drive both.

IEC Rebel’s Digest—Navigating the complexities of global enterprise with clarity and insight.

Go To’s: Here are the key “Go To’s” after reading the article:

1. Identify entities with <10 employees where EOR may be more efficient.
2. Build a decision matrix for the pros and cons
3. Assess entity costs (legal, accounting, compliance) vs. EOR expenses.
4. Engage an EOR provider to evaluate transition feasibility.
5. Ensure compliance alignment before closing entities.
6. Develop a phased transition plan to minimize disruptions.

Last but not Least: If you’re facing challenges and wondering how others are managing similar issues, why not join The Leadership Collective Community? It’s a peer group and webcast platform designed for leaders to exchange insights and experiences.

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