Employer of Record vs Staffing Agency

In our previous article How Can EOR Save Your Company, we described in detail of what an EOR service is. In contrast, we now understand what is a staffing agency and the difference between an EOR provider and a staffing agency.

A staffing agency — also known as a search, recruiting or staffing firm or service — is an organization that matches companies and job candidates. Although an employer of record often works with a staffing agency, they are two different business models. Let us take a deeper dive into their differences for you to understand which would be more suited to your business needs.

Purpose

An employer of the record serves as an employer for tax and legal purposes while the employee performs work that is dedicated to the EOR provider's client. An employer of record handles all personnel functions, including payroll processing, tax deposits and filing, insurance payments, and employment contracts. An employer of record also performs background checks, administers benefits, terminates employees, and may handle worker issues.

On the other hand, a staffing firm recruits employees and assigns them to businesses for worker absences, temporary skill shortages, seasonal work, or special projects. Their main focus is to match temporary, temp-to-hire, long-term, or permanent workers with clients in need.

Benefits

Using an employer of record allows the client company to free up time and enjoy a cost-efficient solution to outsource its necessary human resource functions, employee benefits, payroll, workers’ compensation, and compliance issues. The money saved by outsourcing these functions can be used to expand the business, provide a steady income for the owner, or fulfill a variety of other purposes. On-boarding quality talent can be done quickly by an employer of record so clients can quickly ramp up staff and operations in a targeted country.

Staffing agencies may deliver top quality workers to their clients. However, they may not have the HR training, payroll and accounting skills, compliance knowledge, risk management, insurance, and employee benefits background to meet the demands of being an employer.

Responsibilities and Liabilities

The client company or staffing agency owner retains control over business operations and responsibility for workplace safety and compliance. The employer of record assumes responsibilities and liabilities for employment issues such as administration, payroll, taxes, benefits, and maintaining employee records. Because the employer of record assumes most of the responsibility for compliance and tax laws, the client receives peace of mind, knowing their business is being taken care of by qualified professionals.

While employer of record and staffing agency often work together, they have diverse purposes in the workplace. For help with your employer of record needs, contact us today!