In a typical contract staffing situation, a company utilizes the services of a worker for a specific amount of time and outsources the employment of that worker to a third party. That third party is often referred to as the Employer of Record and serves as the W-2 employer for that worker. As the Employer of Record, the third party takes on the legal liability and the responsibility for the following employment tasks:
- Payroll processing and funding
- Tax deposits and filings
- Employment contracts and paperwork
- Maintaining Certificate of Insurance
- I-9 and E-Verify
- Unemployment insurance
- Workers’ Compensation
- Background checks and drug screenings
- Benefits administration
- (401k, health, dental, vision, and life insurance for contract employees)
- Employee terminations
- Employee issues
So just who is the Employer of Record in a contract staffing situation? Well, it can be one of two parties. In some situations, the recruiting firm that placed the contractor is set up to handle all the “back-office” tasks listed above and is willing to take on the responsibilities associated with being the Employer of Record.
Many recruiters, however, find that taking on the employment tasks is tedious, complicated, and risky. Instead, those recruiters choose to pass the employment liability and responsibilities to a contract staffing back-office.
If you are interested in making contract placements, deciding whether you will become the Employer of Record or whether you will outsource it to a contract staffing back-office is the first, and perhaps biggest decision you will have to make. Before deciding to go it alone, make sure you are in a position to handle all the tasks and liability that come with employing contractors.
