When it comes to hiring and managing talent, companies have various options to choose from. Two common solutions that often come up are an Employer of Record (EOR) and a Staffing Agency. While both serve the purpose of connecting businesses with workers, there are significant differences between the two. Understanding these distinctions is crucial for organizations looking to make informed decisions about their workforce strategy. In this blog post, we’ll delve into the differences between an Employer of Record and a Staffing Company to help you determine which option aligns best with your company’s needs.
What is an Employer of Record?
An Employer of Record, often abbreviated as EOR, is an outsourcing solution that takes care of all employer-related responsibilities for a company’s contingent workforce. Essentially, an EOR becomes the legal employer of the workers, handling tasks such as payroll, insurance, benefits, and compliance matters. These EOR solutions are typically employed in direct sourcing models, which are when organizations directly source and hire their own talent rather than using recruitment or staffing agencies.
What is a Staffing Agency?
Staffing Agencies, also known as Recruiting companies or employment agencies, are organizations that are paid to attract and hire talent for third party client organizations. Those clients pay them to find talent for their organization, rather than recruiting and hiring talent themselves. Staffing companies specifically specialize in hiring temporary employees, for which they operate as the employer while they work for the client organization they have been assigned to. This is very similar to the description of EOR above, however, the main difference is that the staffing agency recruited the talent and also operated as the employer.
How do Staffing Agencies and EORs work together?
Interestingly enough, any staffing agency can operate as the “employer of record” for the temporary staff that they place, if they have the right infrastructure. This just means they operate as the legal employer for staff they find and place at client organizations. However, many staffing firms lack the infrastructure, expertise, or desire to be the EOR for their staff. This might be the case due to lack of capital, or a belief that the risk and time of being the EOR is not the best decision for their business. So what do staffing agencies do if they cannot be the EOR?
Many staffing agencies decide to partner with an EOR platform like FoxHire, which operates as the EOR and outsourced back office on their behalf. This allows recruiting and staffing agencies to operate as the front office, spending all their time finding candidates and selling new clients. EOR platforms offer a number of different solutions in order to take the burden and work of being the EOR for contracted staff off the plate of the staffing agency.
EOR Platform Services:
- Payroll Funding
- Payroll Administration
- Workers Compensation
- Health Benefits
- 401(k) Retirement Plan
- Time Keeping
- Back Office Software
- Compliance Practices
- And more…
In many cases a Staffing Firm and the Employer of Record for contracted staff are one in the same. The term “Employer of Record” simply means the legal employer of a given worker. However, there are solutions providers like FoxHire that offer EOR services, which may also be named as an “Employer of Record”. This is especially true when staffing agencies partner with EOR platforms. As a client of a staffing firm or an EOR, it is important to understand which organization is going to be the legal employer, and which organization is going to be finding talent for your organization. Ensuring the proper division of duties and communication channels between organizations is key to having a good partnership with agencies and EORs.