What Is An EOR?

“EOR” stands for Employer of Record. An EOR typically provides back-office services such as outsourcing of employee on-boarding, time entry, payroll processing, benefits administration, HR compliance, and Workers’ Comp for a contingent workforce. Independent recruiters and staffing firms can outsource these responsibilities once a candidate has been found to fill a job order, thereby lifting the significant administrative burdens these responsibilities represent. 

An EOR can help employ temp and contract workers in all fifty states by covering their Workers’ Comp in the state where they are working while withholding state taxes in the state in which they live. An EOR can help navigate ever-changing state and federal employment laws making sure you are compliant with current regulations. The EOR can offer benefits including health care mandated by ACA compliance. An EOR becomes legally responsible for paying all employees on a timely basis while withholding all state and federal taxes. The EOR will issue a W-2 at the end of the year.

Other employment business models include “PEO” (Professional Employer Organization) and “ASO” (Administrative Services Organization). One key feature of a PEO is that a PEO hires ALL your client’s employees and becomes the employer of record for tax and insurance purposes, becoming a co-employer with the client company. Like an EOR, a PEO covers insurance and taxes under their umbrella while the client company continues to have control over the employee’s daily responsibilities. An ASO is similar to a PEO and EOR in that the ASO also handles all the back-office services. The difference is taxes and insurance are filed under the client company’s EIN (Employer Identification Number). 

Independent recruiters and staffing firms focused on direct hires have the potential to increase their business by expanding into the temp and contract market without having to add internal staff to cover the administrative burden. An EOR can save you money by protecting your in-house unemployment rating since any unemployment claim is filed against the EOR. Another benefit is the ability to expand into other states where the recruiter may not be set up to do business.

An EOR can help you grow your business, increase your profits, and save you valuable time.