Employer of Record vs Staffing Agency: What’s the Difference?

When discussing this with our clients, we often see confusion about the different terms “Employer of Record” (EOR) and “Staffing Agencies”.

Both terms relate to the employment and management of workers, but serve distinct roles and offer different services:

Employer of Record (EOR)

Definition

An Employer of Record is an organization that takes on the formal responsibilities of employing an individual on behalf of another company. This means the EOR handles all legal, HR, and compliance issues associated with employment, including payroll, taxes, benefits administration, and employment contracts.

Liabilities and Responsibilities

The EOR assumes the legal responsibilities of an employer, including compliance with local and national employment laws, tax withholdings, and contributions. They also ensure that employees are legally eligible to work and that all employment-related documentation is handled correctly.

Use Cases

Companies often use an EOR when they want to employ someone in a different jurisdiction or country without setting up a local entity. It’s also used to quickly onboard talent, manage part-time or contract workers, or outsource the administrative burden of employment.

Benefits

Using an EOR allows companies to expand their workforce internationally without the need for a local presence or a deep understanding of local employment laws. It simplifies the hiring process and reduces the administrative load on companies.

Staffing Agencies

Definition

Staffing agencies are organizations that match employers with employees. They are primarily focused on recruitment and the temporary placement of workers. Staffing agencies can supply temporary workers, temp-to-hire, and permanent placements.

Liabilities and Responsibilities

While staffing agencies take care of finding and vetting candidates, the degree to which they take on employer liabilities can vary. In temporary placements, the staffing agency is usually the official employer and handles payroll and taxes. However, for permanent placements, the hiring company typically assumes full employer responsibilities after the placement is made.

Use Cases

Companies use staffing agencies when they need to fill vacancies quickly, especially for temporary positions or project-based work. They are also useful for companies looking to fill specialized positions and want to tap into the staffing agency’s network and expertise.

Benefits

Staffing agencies allow companies to fill positions quickly and with qualified candidates. They reduce the time and resources needed for recruitment and are particularly useful for temporary or project-based positions.

Key Differences

Scope of Services

EORs are focused on employment logistics, compliance, and administration, while staffing agencies concentrate on recruitment and placement.

Employment Relationship

EORs become the legal employer of the worker, handling all associated responsibilities. Staffing agencies may act as the employer for temporary positions but are intermediaries for permanent placements.

Use Case

EORs are ideal for companies looking to hire in different jurisdictions without establishing a local entity, whereas staffing agencies are sought for quick, efficient hiring and specialized recruitment needs.

In summary, while both EORs and staffing agencies play vital roles in the employment ecosystem, their primary functions, responsibilities, and benefits to companies differ significantly.