An Employer of Record (EOR) is a legal entity that refers to a third-party organization that handles your workforce’s employment. An EOR is an employee’s legal employer and provides Payroll Services for the employee. This can help you avoid out-of-state business registration issues and reduce the risks that come with hiring temporary staff. We are now seeing more and more businesses hiring EORs because of the overall benefits they provide.
Having an Employer of Record is the most sensible choice for startups and small businesses because they can get slowed down by the administrative and HR tasks required for legal compliance. Most of these emerging businesses don’t have a permanent workforce and often hire temporary employees or remote workers, or sometimes even independent contractors. To do this, they need a streamlined system to manage their staffing while being compliant.
EORs also come in handy for larger organizations that have plans to expand operations to other states or territories. Having an EOR eliminates the complicated task of registering your business in every location you operate.
How Does an Employer of Record Work?
Since the Employer of Record acts as the employees’ legal employer, employees sign their employment paperwork with the Employer of Record instead of your organization.
Under this setup, the Employer of Record manages the HR administrative work on your behalf. However, the EOR does not have control over your business’ daily affairs. As the employees’ functional supervisor, it is still up to you to decide your day-to-day operations. You have complete visibility and decision-making capability over each employee’s work schedule and assigned daily tasks. By partnering with an EOR, you are delegating the HR duties for those employees, such as payroll processing, benefits, timekeeping, and compliance matters.
Your EOR already acts as a centralized employer, whether you are working from a single area or multiple locations. Because of the flexibility offered by EORs, many organizations turn to an Employment of Record as an employment partner.
Why Should Your Organization Partner with an Employer of Record?
There is a myriad of benefits that your business can enjoy when you choose to partner with an EOR. The main thing you benefit from is streamlining and simplifying administrative matters in your organization. This is ultimately the primary goal behind using an EOR service.
Other benefits include:
Avoiding employee misclassification.
When another entity acts as your Employer of Record, you leave the full legal responsibility regarding employee benefits and records such as compensation, taxes, ACA compliance, and W2 processing and distribution to them. Hence, you can avoid any confusion by correctly classifying employees and avoid any risks and associated costs of misclassification. This is also a win-win situation for your temporary and contract workers because they have a dedicated team to work with while engaging with your organization.
Free up your time to focus on other crucial business tasks.
Let’s face it, running a business takes up a lot of time. By partnering with an EOR, you can free up your schedule and invest more time in other relevant aspects of your organization. You don’t need to worry about tax penalties, delayed payroll
Of course, the key here is to select a highly competent and reputable organization to serve as your EOR. You should choose carefully when selecting an EOR.
What Is the Difference Between an Employer of Record and a Professional Employer Organization?
Have you heard about Professional Employer Organizations (PEOs) that provide similar services to an Employer of Record, and you are wondering how an EOR is different from a PEO? Well, a PEO performs the same tasks as an EOR, however, a PEO acts as a co-employer, where an EOR serves as the only legal employer.
When mitigating and managing employment risks, you share the liability with your PEO. However, EORs fully cover all risky areas of employee relations. EORs have in-depth knowledge of federal, state, and local labor regulations. This is why they are better equipped to take full legal responsibility for the employees. Also, because of this arrangement, EORs are better equipped to handle temporary, part-time, and contract workers.
Finally, PEOs usually do not take on small businesses or startups as clients. EORs are generally more flexible in accepting emerging businesses as clients. This is why smaller businesses gravitate more toward EORs than PEOs.
If you are a business leader whose goal is to scale up your business in other vital areas and are primarily looking to engage with temporary workers, then an EOR is your best bet.
DO YOU NEED TO PARTNER WITH AN EMPLOYER OF RECORD?
ACS Professional Staffing is a reputable staffing agency that can act as your EOR and partner in scaling your business. More than just payroll processing, our staffing agency is equipped to be your organization’s one-stop shop in all aspects of employee matters. Take your business to the next level. Reach out to us today!