Close this search box.

Current Region & Language

People2.0 branded globe with hands

4 Benefits of Using an Employer of Record (EOR) Provider

The process for hiring full-time employees is relatively straight forward: internal or outsourced recruiters find qualified talent, the company interviews them and extends an offer, and the candidates becomes employees of the organization they’re working for.

However, with the ever-increasing rise of the gig economy, the ways in which we hire and employ talent have shifted dramatically. When it comes to contractors and temporary workers, organizations that require these types of talent no longer have to serve as the employer of record (EOR)—meaning it’s up to the firms and recruiters that place them to take on that responsibility.

What is an Employer of Record (EOR)?

Simply put, an EOR is the entity that serves as the employer for tax purposes, while an employee performs work for a different company. The EOR (often referred to as the W-2 EOR because they are responsible for issuing W-2s to the employee) shoulders the responsibility for all the traditional employment tasks and liabilities.

Some of the major responsibilities an EOR takes ownership of include processing and funding payroll, facilitating onboarding and time collection, providing employee benefits (e.g. health, dental, 401k etc.), and ensuring compliance with local and federal laws, among other things.

Items Self-Service EORs Need to Consider

Given that serving as the EOR can make you legally vulnerable, a good best practice is to create a new corporation (e.g. LLC or S-Corp) solely dedicated to the contract-recruiting side of your business. That way, in the event that something was to happen (e.g. a lawsuit brought against you or your employee), your direct-hire business or other personal assets are not also attacked. Further, you’ll want to make sure that you carry the appropriate insurances and licenses (as required by law), including worker’s compensation, auto coverage, criminal insurance, etc.

From a monetary standpoint, you’ll also want to make sure you have a strong payroll business build out that appropriately tracks and manages time, a way to process payroll, and funding to front payroll and payroll taxes. Without these items in place, you could end up improperly paying employees, or be left holding the bag should one of your clients place a claim against an employee, or file for bankruptcy/insolvency.

Benefits of Outsourcing EOR Responsibilities

Whether you’re considering placing contract, starting your own business, or already running your own successful staffing and recruiting firm, there are several benefits that come from outsourcing to an EOR provider, including:

1. Growing your business via expanding your placement capabilities– For those who do not currently offer contract placements, but are looking to make an average of $15K a year for every contract they place, choosing an EOR with wide-ranging geographical coverage is key. While one-third of U.S. workforce is expected to shift to contingent roles by 2026, the staffing industry is also seeing continuous year-over-year global growth. The more areas you have access to when placing contract, the more likely clients will want to partner with you to meet their talent needs.

2. Ensuring proper worker classification, insurance, and licenses– EOR providers can serve as a one-stop shop for all of your compliance, insurance, and licensing needs. They can help you avoid taxation penalties by ensuring your workers are properly classified, and absolve you of insurance and licensing issues.

3. Guaranteeing your contractors are paid accurately and on-time– To avoid any payment issues that could result in losing clients and candidates, consider outsourcing your EOR responsibilities. Not only will they process timecards and payroll for you, but several of them offer funding options to help make sure you have the working capital necessary to pay the workers you place in a timely manner.

4. Reclaiming your time– The responsibilities that come from being the established EOR demand a lot of your time and resources. By handing off the administrative and back-office duties to a trusted partner, you can refocus on doing what you do best: finding top talent, offering top-notch customer service, and growing your business!

Considering placing contract, or looking to outsource your EOR responsibilities in order to reap the benefits listed above? Learn more about how People2.0 can help you can better your contingent-placement business by visiting our services page.

Related Posts