What is an EOR and Who Needs One?
Published October 9, 2019
This week, Staffing Industry Analysts’ word of the week is employer of record, or EOR for short. What is an employer of record? What role does it play in the broader enterprise workforce management strategy and is it something your organization needs to consider?
Let’s explore what an EOR is, what it does, and how it can be leveraged to maximum effect as part of an enterprise workforce management operation.
The Staffing Industry Analyst lexicon defines an EOR like this:
“An employer of record serves as an employer for tax purposes while an employee performs work for the client, such as a staffing firm or other business. An employer of record handles all personnel functions, including payroll processing and funding; tax deposits and filing; and employment contracts and paperwork. Maintaining a Certificate of Insurance, I-9, and E-Verify forms; unemployment insurance; and workers’ compensation are done. An employer of record also performs background checks and drug screenings; administers benefits; terminates employees; and may handle worker issues.”
Simply explained, an EOR effectively assumes the mantle of “employer” to your contingent employees (with all the legal commitments that entails) and “leases” them back to you to work on your behalf so that you can retain control over the workers’ activity. You may ask, “Why not just hire contingent resources on your own without the assistance of an EOR?”
There is an expanding array of worker types/classifications and increasing complexity when it comes to managing both a full-time and contingent workforce, each with its own often disparate management challenges. An EOR provides a safe and compliant means for an organization to access and leverage contingent talent of all types. More than ever, enterprise organizations are turning to teams of project workers, SOW arrangements and independent contractors to perform critical but non-core functions. Keeping abreast of the regulatory constraints and tax implications that apply to each of these different contingent worker classes is far more complicated than it is with a regular W-2 wage-earning workforce. To keep HR departments from becoming swamped, many companies rely on an EOR partner.
The EOR’s entire model is predicated on their ability to stay abreast of the nuances and rapidly evolving laws/regulations governing all types of contingent worker classification. They’re experts in ensuring proper payroll, tax, benefits and other administrative processes are observed and enforced. Since the EOR shoulders the bulk of the legal burden in this regard, as the “employer” of the resources ultimately serving the business needs of the hiring organization, they significantly reduce the risks of leveraging an array of contingent worker types. This enables a large enterprise to more easily, safely harness the awesome competitive and productivity-boosting power of a contingent workforce.
For enterprise organizations seeking to expand into new localities across the globe, engaging a local EOR is especially useful because they typically have in-country legal presence and the wherewithal to source and manage local talent while remaining compliant with local regulations/laws. They can even help with visa and/or sponsorship applications This provides quick and lower risk access to new markets for companies seeking to set up operations there.
For more on the benefits of engaging an EOR for your enterprise needs, contact the experts at People 2.0 at contact us today!