Employer of Record vs Staffing Agency: What's the difference?

If you’re considering an employer of record vs staffing agency, the choice comes down to one question: Do you need help finding talent, or do you already have talent and need help employing them legally? In this article, we explain what each option does, when to use them, and how an EOR like FoxHire helps recruiters, HR teams, and staffing firms cut through complexity while staying compliant.

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EOR vs Staffing Agency:
The Core Difference

The difference between an Employer of Record (EOR) and a staffing agency is straightforward. Staffing agencies exist to source and place talent. Their primary role is to identify, vet, and match candidates with companies that need workers. Employers of Record, on the other hand, do not recruit at all. Instead, they step in once a candidate has been identified, taking on the role of legal employer.

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An EOR handles payroll, taxes, benefits, and compliance responsibilities for the worker. A staffing agency delivers the candidate. An EOR makes it legal and easy for you to employ that candidate.

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What Does an Employer of Record Do?

An Employer of Record acts as the official employer for contract or contingent workers. Rather than leaving businesses to navigate complicated state and federal laws, the EOR assumes responsibility. An Employer of Record acts as the official employer for contract or contingent workers. The EOR manages:

• Payroll and tax withholdings
• Workers’ compensation and unemployment insurance
• Benefits such as health, dental, vision, and retirement plans
• Compliance with federal and state labor laws (including ACA and IRS rules)
• Onboarding and offboarding (I-9, E-Verify, background checks)

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What Does a Staffing Agency Do?

A staffing agency, sometimes called a recruiting firm, specializes in sourcing candidates for employers. They:

• Advertise jobs and attract applicants
• Screen, interview, and match candidates to client roles
• Place workers in temporary, contract-to-hire, or permanent jobs
• Charge clients fees (often 20–30% of first-year salary for direct hires, or markup rates for temps)

Staffing agencies are best when a company needs help finding qualified talent, especially in industries with high turnover or specialized skill gaps. In contrast to an EOR, the staffing agency’s responsibility mostly ends with sourcing and matching. They are not typically designed to manage payroll, taxes, or benefits beyond the scope of temporary employment arrangements.

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Industry Use Cases

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Healthcare

In healthcare, compliance is critical. Hospitals and clinics may rely on staffing agencies to recruit nurses or medical assistants, but employing them requires proper credentialing, workers’ comp coverage, and ACA-compliant benefits. An EOR ensures those rules are followed while reducing the risk of costly penalties.

Education

School districts often need substitutes or paraprofessionals across multiple states. While staffing agencies can help source the teachers, they do not always have the infrastructure to handle payroll and compliance. An EOR bridges that gap, making it easier for districts to employ workers legally and quickly.

IT and Clerical

Technology and clerical work often involve remote contractors. A recruiter or in-house HR team might already have candidates in mind but may not be able to employ them in multiple states without creating new legal entities. An EOR allows these companies to scale quickly without extra setup.

Remote and Distributed Teams

The rise of remote work means companies are hiring across state lines more than ever. In these cases, a staffing agency isn’t necessary because talent is already identified. The bigger issue is legal employment, which is where an EOR becomes the solution.

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Buyer Scenarios: Who Uses What?

Independent recruiters are one of the most common buyers of EOR services. When a recruiter wins a contract staffing opportunity, they often do not want to manage payroll funding or compliance risk. An EOR becomes their silent partner, letting them focus on sourcing and sales.

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HR leaders also frequently turn to EORs. For example, if an HR manager needs to onboard remote contractors in several states, partnering with an EOR avoids setting up entities and ensures payroll and benefits are handled correctly.

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Staffing agencies themselves sometimes use both models. They may continue to recruit candidates for their clients, but outsource the employer role to an EOR. This keeps their back office lean while still giving clients nationwide reach.

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Compliance and Risk: The EOR Advantage

Compliance is where the differences between EORs and staffing agencies are most apparent.

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Worker misclassification is one of the largest risks employers face. Misclassifying an employee as a contractor can result in IRS penalties, lawsuits, and back taxes. By serving as the employer of record, an EOR assumes that liability and ensures the worker is classified correctly.

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Co-employment is another issue. Staffing agencies can create risk when workers are employed by both the agency and the end client. An EOR eliminates this confusion by serving as the sole employer, shielding both the recruiter and the client from legal exposure.

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Payroll compliance is another area where EORs shine. Each state has different rules for unemployment insurance, workers’ comp, and paid leave. An EOR makes sure that employees are paid correctly and in line with every jurisdiction’s regulations.

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Finally, benefits compliance under laws like the Affordable Care Act can become complex as headcounts grow. EORs handle benefit administration so that companies remain compliant while still offering attractive options to workers.

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When to Use an Employer of Record vs Staffing Agency

An EOR is the right choice when you already have talent identified and need a legal structure to employ them. They are especially useful for multi-state hiring, risk management, and situations where HR or recruiters want to focus on sourcing while outsourcing payroll and compliance.

A staffing agency is the right choice when you do not have talent lined up and need support with recruiting. They are best suited for roles that are difficult to fill or for employers that prefer to outsource the sourcing process entirely.

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Why Many Businesses Use Both

Many organizations find that the best solution is to combine the two. A staffing agency may source and recruit the candidate, while the EOR becomes the legal employer. This partnership gives companies access to talent and the assurance that workers are employed compliantly.

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Why Choose FoxHire as Your EOR

FoxHire is a U.S.-focused Employer of Record that supports recruiters, staffing agencies, HR teams, and contingent workforce managers. Unlike staffing agencies, FoxHire does not source talent. Instead, we work behind the scenes to handle employment, compliance, payroll, and benefits for contract workers in all 50 states.

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FoxHire Differentiators:

• Flat, transparent pricing (no hidden fees)
• Compliance-first approach across all states
• Dedicated support and fast onboarding
• Works invisibly so you keep client control

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Final Thoughts

When comparing employer of record vs staffing agency, the decision comes down to your needs. If you need help finding talent, a staffing agency is the right partner. If you already have talent and need a compliant way to employ them, an EOR like FoxHire is the smarter choice.

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For many businesses, the best answer is both: staffing agencies to source, and an EOR to employ. That combination delivers speed, flexibility, and peace of mind.

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