When Should You Use an Employer of Record vs. A Staffing Agency?

Two common solutions for managing workforce needs are using an employer of record (EOR) or a staffing agency. But which solution is best is not always clear-cut.

Both offer distinct advantages and are usually best suited for specific situations.

In this article, we’ll explore the advantages of each. We’ll also cover when it’s best to use an EOR and when using a staffing agency makes more sense.

What’s the Difference Between an Employer of Record and a Staffing Agency?

Before we delve into the decision-making process, let’s clarify what an employer of record and a staffing agency are:

Employer of record (EOR)

An EOR is a service provider that takes on the responsibility of being the legal employer for your workers. The EOR focuses on the tasks and liabilities that come once an employment offer has been made and accepted. These include handling administrative tasks like background screenings, onboarding, timesheet management, and benefits enrollment.

Using an employer of record ensures you are compliant with all relevant payroll and tax laws. Here are the responsibilities you can delegate to an EOR:

• Processing payroll
• Issuing employment contracts
• Issuing salaries and payments
• Issuing tax forms
• Depositing and filing taxes
• Managing unemployment insurance
• Managing workers’ compensation insurance
• Employee onboarding
• Conducting pre-employment checks
• Administering employee benefits (e.g. health insurance)
• Terminating employees

Companies often work with employers of record to ensure that they can comply with all necessary legal and tax laws and labor regulations—especially when hiring international employees.

Staffing agency

A staffing agency is responsible for sourcing employees. They create job postings, find and interview potential candidates, and negotiate offers. Their primary role is to help companies find and access suitable talent to fill their open positions. As such, staffing agencies usually do not assume employment-related liabilities.

Staffing firms can help you find temporary, temp-to-hire, and permanent employees. You work with them by contacting them and explaining what you need, and the agency then uses that information to source quality candidates who meet your requirements.

In summary, an employer of record is usually more focused on functions that occur after an employment offer has been made and accepted by an employee. On the other hand, a staffing agency is usually only involved before a new employee has accepted an offer.

Despite the difference in their roles, some companies use one vendor to fulfill both their staffing and employer-of-record needs. Others source candidates in-house and then hand them off to an employer of record for management.

What Are the Benefits of Using an Employer of Record?

Working with an employer of record can help your company manage your employees. The benefits of working with an EOR include:

Reduced liability

An employer of record assumes employment-related liabilities on behalf of your company. These include legal compliance, payroll taxes, and benefits administration. As a result, they help your company mitigate risks and ensure your compliance with the local labor laws, tax regulations, and employment requirements where your employees reside.

This reduces the risk of penalties or legal issues.

International expansion

An employer of record handles legal compliance, payroll processing, and other employee management activities in different countries. As such, working with an employer of record allows you to expand your operations without establishing multiple legal entities in different regions. This means hiring international talent—with all its benefits—becomes possible for companies who otherwise wouldn’t be able to easily hire outside the US.

What Are the Benefits of Using a Staffing Agency?

Working with a staffing agency, on the other hand, can relieve you from the responsibilities that occur during the recruiting and hiring process. They work with you to find the professionals you’re looking for and ensure the best placement for your open roles. Here are some benefits of  working with a staffing agency.

Access to a wide talent pool

Staffing agencies have access to a diverse pool of candidates, including job seekers and those with specialized skills. They simplify the work required to source candidates that meet your needs and requirements by posting job descriptions, reviewing resumes, and interviewing candidates on your behalf.

Flexibility and scalability

While staffing agencies have years of expertise and experience in sourcing perfect candidates, they are also flexible and able to adjust their workforce according to your fluctuating business demands.

They can quickly provide contract or temporary workers to fill your short-term needs or project-based roles. They can also often supply you with temporary workers who are on the staffing firm’s payroll, eliminating the burden of HR-related tasks for your temporary workforce.

Working with a staffing agency also allows you to hire on demand, especially when you need a position filled as soon as possible. Some staffing agencies can get you an employee within one business day, which is quick considering the time it usually takes to hire an employee through an in-house HR department.

When Should You Use an Employer of Record?

Now that you know the differences between an employer of record and a staffing agency, you might be wondering when you should work with one or the other.

Use an employer of record when you want to:

Outsource administrative tasks

An employer of record’s services includes handling the administrative tasks of managing your employees. They handle all the intricacies of payroll, benefits enrollment, onboarding, and payroll and tax laws compliance. By delegating these tasks to an employer of record, you can ensure accurate compliance, reduce risks, and save time and money.

Navigate complex employment issues

Managing a workforce requires you to understand employment laws and regulations, which can be complex and technical if you don’t have experience with them. An employer of record will possess extensive knowledge and expertise in employment laws, regulations, and HR practices, ensuring you can comply with what is required and effectively manage your employee base.

This is, of course, especially true when you need to navigate the employment laws of a foreign jurisdiction when hiring foreign employees.

When Should You Use a Staffing Agency?

If you’re more interested in sourcing employees to fill your open roles, you need to work with a staffing agency.

Use a staffing agency when you want to:

Save time in recruitment

The hiring process is time-consuming and expensive. That’s why most companies opt to outsource the hiring process to staffing agencies. With extensive experience and knowledge in the field, staffing agencies can handle complex and tedious recruitment tasks like resume screening, candidate sourcing, and initial interviews.

You delegate these time-consuming tasks to them so that you can focus on the core areas of your business while leaving the hiring process to experts.

Increase the chances of successful hires

Staffing agencies have access to specialized talent that they usually will have already pre-screened and vetted. Their streamlined processes will mean they can quickly find a candidate with all the requirements you’re looking for. 

Working with a staffing agency will increase your chances of finding a suitable candidate that’s a perfect match for your company, thereby reducing the chance (and cost) of bad hires. You can rest assured that you’ll get successful hires who will be valuable resources for your organization.

Final Thoughts: Employer of Record vs. Staffing Agency

An employer of record and a staffing agency undertake important roles in employee hiring and management. Depending on what you need help with, engaging the services of one or the other will provide your business with significant value.

You don’t have to limit yourself to one or the other; you can opt to hire both if you need both of their specialized expertise. It may be that you can find one provider who can fulfill the roles of an EOR and a staffing firm.

Near can provide the best of both worlds as we can provide top recruitment services and act as an EOR by handling payroll and other HR responsibilities for you when you hire from Latin America.

We specialize in finding highly skilled professionals from Latin America to help you grow your team while saving on payroll costs. We can find you talent with the skills, experience, and expertise you need without the need to work with an EOR as well.

To learn more and to get a list of candidates you can interview for free, fill out this form today.