As technology advances and strives to make everything around it more efficient and convenient, it’s no surprise to see the Employer of Record (EOR) industry welcome workforce enablement technology, such as AI, with open arms. While AI can streamline various services offered by an EOR, it also has the potential to disrupt the traditional EOR space and global HR market.
From analyzing data, automating compliance processes, and improving efficiency, AI is designed to reshape any space it invades. In fact, 2023 research suggests that 35% of all global companies reported using AI as a part of their business operations and over 50% of companies plan to incorporate it in the near future. This means over 250 million companies are using or exploring AI in their business operations.
With the increasing popularity of AI, it's no wonder many industries are resulting in incorporating AI into their day-to-day operations.
While AI has the potential to enhance any space, it can also disrupt and reshape it. In this article, we’ll explore five ways AI has disrupted the EOR space and how it continues to reshape traditional EOR services.
Understanding the Employer of Record Space
Before exploring some of the ways AI disrupts EOR, we must define what the EOR space is, what services it provides, and why business founders, CEOs, CFOs, and HR professionals should consider partnering with an EOR.
An Employer of Record (EOR) acts as the legal employer of a new hire, taking care of administrative tasks such as payroll and taxes - all while the client company retains day-to-day supervisory control.
Administrative tasks include but are not limited to, compliance with local employment laws, payroll processing, tax filing, benefits administration, visa processing and even managing employment contracts.
What is AI?
AI or artificial intelligence is a machine or software’s ability to perform the cognitive functions that typically require human intelligence. AI is designed to analyze complex data efficiently and provide solutions without complex programming.
From minimal human interventions to identifying patterns and examining high volumes of data, AI is just what businesses need to streamline their day-to-day operations and ensure compliance with local employment laws.
Before we dive into the five ways AI will disrupt the Employer of Record space, let's explore the type of AI that exists today.
The Seven Types of AI
While AI is ideal for streamlining operations with efficiency, the seven types of AI all serve a different purpose that can eventually help create a data-rich technology platform.
1. Artificial Narrow Intelligence
Narrow AI is the type of AI that is designed to perform specific tasks. However, they are unable to generalize their knowledge to other software. For example, Siri is a type of narrow AI that can search for information based on voice commands.
However, it is not able to provide any other function or further continue searching without the voice command.
2. Artificial General Intelligence
AGI is the type of AI that can understand, learn and apply knowledge across multiple platforms. AGI is still a work in progress and is considered to be the ultimate goal of AI since it can perform any intellectual task that is humanly possible.
One of the most popular examples of AGI is Apple’s co-founder Steve Wozniak’s Coffee Test. A coffee test is the AI’s ability to walk into a kitchen, find the coffee machine, find the various ingredients and materials needed to make the coffee (ie; coffee pods, coffee cups, water, etc.), and then to be able to push the correct buttons on the coffee machine to brew a nice cup of coffee. This test examines the AI’s ability to understand, learn, and apply the knowledge.
3. Artificial Super Intelligence
This is a hypothetical type of AI and is designed to surpass human knowledge and intelligence by manifesting cognitive and developing thinking skills. Artificial superintelligence would be technology that is self-aware and can replicate human behavioral intelligence along with interpreting emotions and experiences.
4. Reactive Machines
Reactive machines are unable to store memory or have the ability to learn. However, they respond to external stimuli in real time. This means they will react to immediate requests and tasks but will not be able to store any of the information for future interactions.
IBM’s Deep Blue is a great example of the potential of reactive machine AI. Deep Blue was able to defeat grandmaster Garry Kasparov in a chess competition by understanding the rules of chess and how the various pieces of a chessboard move.
5. Limited Memory
Unlike reactive machines, limited memory is the type of AI that can store, retain, and use their past experiences to make decisions in the future. Self-driving cars are a great example of limited memory AI. A self-driving car observes other cars, considers road rules, and drives according to its surroundings.
6. Theory of Mind
While this type of AI is still in the developmental stages, it is being designed to sense and respond to human emotions while performing all the functions of a limited-memory AI.
Rafael Tena, insurance company Acrisure’s senior AI researcher, provides an example of how self-driving cars are safer since they surpass human error, however, they do not have the ability to respond to human emotions. If you neighborhood kids play on the street after school, you as the driver will instinctively slow down when turning into the street. However, a self-driving car will need to store, retain, and use their past experiences to ensure the safety of the kids when turning into that same street.
7. Self-Aware
Self-aware AI is a type of AI that is designed to understand its existence along with its emotions. It is a type of AI that goes beyond the theory of the mind. Sophia is a robot developed by Hanson Robotics, and while she is not fully self-aware, she provides a real-life example of AI’s potentially self-aware future. Her ability to process visual, emotional, and conversational data is an example of how self-aware AI can understand their own existence and emotions.
While many of the seven types of AI are still in their developmental stages, they still make an impact on the global economy and the various industries that it consists of.
The development of the seven types of AI raises the question of how AI will impact the future and how it will impact the traditional workforce.
A Look into the History of AI
From Amazon’s Alexa to Apple’s face ID feature, AI is being incorporated into various traditional workspaces. A deep dive into the past will open more doors and allow us to explore how AI has transformed and continues to reshape the EOR industry.
Our history lesson takes place in the early 20th century when the idea of robots and creating another life form came into existence. In fact, the heartless Tin Man from The Wizard of OZ played a significant role in scientists, mathematicians, and other professionals pondering the concept of AI.
By the 1950s, a polymath by the name of Alan Turing published a paper outlining how to build and test intelligent machines. Unfortunately, he did not have the financial resources to act upon his theory. You see, computers in the early 20th century were only capable of executing commands and could not store them. This means Turing would have to re-program and develop a new model of a computer to act upon his theory.
Five years later, the Logic Theorist was developed. It was a program designed to mimic the problem-solving skills of humans. A conference was held to discuss artificial intelligence - a term given to the development and theory of creating technology that could imitate humans and surpass their capabilities.
From 1957 to 1974, AI and computers saw an exponential growth. Computers became cheaper and more accessible, and they were able to store more information. This advancement convinced governing regulations around the world to fund the development of AI.
A few years later, during the 1990s and 2000s, the absence of government funding encouraged the advancement of AI. In 1997, a chess champion was defeated in chess by IBM’s Deep Blue, a chess-playing computer program. That same year, speech recognition software was implemented on the Windows software.
Then came Apple’s introduction to Siri. A year later, a Google brain computer cluster trains itself to recognize a cat from millions of images on YouTube.
Eventually, the development of AI and the popularity of Chatbots such as ChatGPT led to various industries incorporating AI into their day-to-day operations. The EOR industry is no exception; they too, welcomed AI and used it to enhance their services.
The Impact of AI advancements on EOR
20th-century polymath expert Alan Turing predicted a future where machines could perform functions faster than humans. And today, his predictions are becoming our reality. AI has entered multiple industries and is starting to leave its mark.
AI-powered tools are becoming crucial assets for streamlining EOR processes, improving efficiency, and enhancing the overall client experience. They can create, analyze, and answer questions related to contracts and other legal documentation faster than humans.
Five Ways AI is Disrupting the EOR Industry
AI provides HR and payroll teams worldwide with the ability to streamline operations, access payroll insights, and even study industry patterns without waiting for professionals with local expertise to analyze their results. These developments are disrupting the traditional EOR space.
Here are five ways AI disrupts the EOR space:
1. Automating Compliance Processes
With local labor laws constantly changing and evolving, EOR providers need to monitor and adapt to new requirements. Compliance is necessary if businesses want to avoid hefty fines, legal penalties, and reputational damages. This is why EORs invest time adhering to regulations and ensuring that operations are conducted safely and within legal boundaries.
With the introduction of AI, legal documents are now being quickly scanned and analyzed. Areas of weakness are flagged, accompanied by suggestions to ensure labor law compliance. This is one way AI is disrupting the EOR space and making it more efficient while mitigating risks.
2. Enhancing Data Analytics for Workforce Management
With the integration of AI in an EOR space, data analytics, and workforce management have started to see efficiency-related changes. The traditional method of providing data analytics in the EOR space is timely and prone to human error.
As a global employer, founder, CEO, CFO, or HR professional, your time is valuable, and human errors can sometimes lead to damage to your business. However, when you partner with an AI-powered EOR, you can limit the chances of error.
Large volumes of data can be analyzed in real time, and you can quickly receive accurate global workforce insights. AI is designed to quickly identify trends and patterns so you can focus on conducting day-to-day business operations without having to worry about the analytics capabilities of your reports and team.
3. Streamlining Payroll and Benefits Management
Offering competitive benefits is one way to attract top talent and retain current employees across the industry. EOR providers recognize the importance of great talent and thus provide benefit management services.
With the integration of AI in the EOR space, you can provide your employees and future employees with competitive benefit plans that fit current industry patterns and the unique needs of an employee. AI can not only streamline but also personalize and tailor benefits to ensure legal compliance while adapting to the needs of your diverse staff.
Besides offering personalized benefits, AI within the EOR space also streamlines payroll management. In a traditional EOR, payroll is a complex and lengthy process in which wage calculations, employee work hours, statutory benefits, bonuses, tax withholdings, pensions, overtime pay, and many other services are offered.
This lengthy process of ensuring accuracy while completing payroll is crucial for any business because failure to comply can result in serious consequences. Each country or jurisdiction also has its own set of rules and regulations about payroll.
An EOR offers access to compliant payroll making global expansion easy. With AI, payment method additions and other payroll tasks will be streamlined, with less room for human error.
4. Optimizing Overall Efficiency
With an AI-powered Employer of Record, all your repetitive tasks, such as data entry, payroll, compliance, and employment contracts can be automated. Your team’s time and resources can be freed up so more focus can be placed on strategic tasks that help grow your business.
In addition, the instant responses and services provided by an AI-powered query function can reduce response times, increase efficiency, and improve customer satisfaction and retention.
5. Personalized Employee Experience
AI is disrupting the EOR space, but that doesn’t have to be a bad thing. The EOR space provides services that allow businesses to expand globally and streamline HR, administrative, and employment services. With the integration of AI, all the services EORs provide just become more personalized.
These personalized employee experiences improve engagement and satisfaction levels since AI chatbots can address issues and generate solutions more efficiently while making them personal. Based on an AI algorithm's ability to recognize and decode patterns, you are provided a personalized experience at every step of the way.
Employee data like direct feedback, performance reviews, and market trends can be quickly analyzed to provide businesses with valuable insights in real time.
The Challenges of AI in the EOR Space
While incorporating AI into the EOR space will bring some positive disturbances to the space, there are some challenges that might surface with the introduction of AI.
One of those challenges includes the potential for bias and discrimination. Since AI algorithms are programmed to historical data and only evaluate the facts or statistics present to it, there is a chance of bias. Without emotions, morals, or a human touch, bias and discriminatory decisions can be made by AI.
For example, during the HR recruiting screening process, candidates may be removed or kept on the list based on gender or race. Situations like this make it very crucial for EORs to carefully cross-examine the results and decisions made by AI systems to ensure they are providing a fair service.
Privacy is another potential challenge that the incorporation of an AI-powered Employer of Record might bring to the space. AI systems have access to large amounts of data, and they use that data to provide accurate and detailed analysis. However, employee privacy and data protection efforts must be made to ensure data is not being leaked, or breached, or that governance policies are being broken.
While AI has a lot of potential to enhance the EOR experience for businesses, it's equally important to ensure your EOR navigates through these challenges and provides you with a safe and sustainable experience.
Embracing AI for a More Efficient EOR Industry
The addition of AI into our lives is inevitable, so let’s start to embrace it and use it to improve the industry’s productivity. In 2023, the AI market was estimated to be worth $207.9 billion and is estimated to be $1.85 trillion by the year 2030. So why not leverage the power of AI and EOR to streamline business operations, increase efficiency, and take our businesses to new heights?
As founders, CEOs, CFOs, HR reps, and directors, we can use AI-powered EORs to recruit top talents and expedite our day-to-day operations.
Alberni: The First-Ever AI agent for Global Employment
You won't have to search far and wide to find an AI-integrated EOR because here at Borderless, we’ve got Alberni.
Alberni is the first-ever AI global employment legal agent. Create contracts, ask questions, and analyze legal agreements — in seconds. With Alberni, you have an AI-powered agent for all your company's global HR compliance needs.
From drafting employment contracts to gaining powerful insights to reviewing your existing contracts, Alberni is built to become the future of global employment.
With an AI agent like Alberni assisting your HR team with the complexities of recruitment and employment, you can ensure all your queries are answered on demand.
Partner up with Borderless AI today!
At Borderless AI, we’re one of the first EORs to offer an AI-powered service that offers the highest standards of compliance along with an extensive range of recruitment and HR-related services.
With our all-in-one AI-powered platform, you can focus on your business’s growth without having to stress over payroll, compliance, complex labor laws, and the many other legal and administrative requirements of expanding into global markets.
Contact us today and find out how this AI-powered EOR can help you hire talent from 170+ countries.
Disclaimer
Borderless does not provide legal services or legal advice to customers, contractors, employees, partners, or the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
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