Three Differences Between an Employer of Record and a Staffing Agency

August 17, 2023

When it comes to the world of employment, there are various ways in which companies find and engage workers. Two common entities that facilitate this process are employers of record (EORs) and staffing agencies. An EOR and a staffing agency are similar at first glance, but they are two separate services. The three differences between an employer of record and a staffing agency are the employment relationship, legal responsibilities, and length of engagement. 

1.   Employment Relationship

A staffing agency acts as an intermediary, connecting job seekers with employers. They take charge of recruiting, screening, and interviewing candidates before placing them in temporary, contract, or permanent positions. Once placed, the employee works directly under the employer's supervision and direction.

An employer of record, on the other hand, assumes the legal responsibility of being the employer. They handle payroll, benefits, taxes, compliance, and other administrative tasks related to employment. The employee works under the direction and control of the employer but is technically employed by the EOR.

2.   Legal Responsibility

Staffing agencies facilitate the employment process but do not bear the legal responsibility for the employee. The employer-employee relationship is primarily between the employer and the employee. The staffing agency acts as an agent, managing the administrative aspects of the employment arrangement while the employer retains legal responsibility.

An employer of record takes on the legal obligations associated with employment. They become the official employer of the employee and handle tasks such as payroll taxes, benefits administration, workers' compensation, and compliance with labor laws. The employer still maintains responsibility for day-to-day work supervision and performance management.

3.   Length of Engagement

Staffing agencies are commonly utilized for temporary or contract placements. They assist in finding suitable candidates for short-term positions, project-based work, or seasonal employment. The duration of employment depends on the agreed-upon terms between the employer and the staffing agency.

An employer of record can be engaged for various employment scenarios, including temporary placements. However, they are not limited to temporary work. EORs often manage longer-term or ongoing employment arrangements, particularly when companies want to outsource administrative tasks or deal with employees in different jurisdictions.

Understanding the distinctions between an employer of record and a staffing agency is crucial for both employers and employees. Staffing agencies act as intermediaries, matching job seekers with employers on a temporary or contract basis. On the other hand, employers of record assume legal responsibility and manage administrative tasks associated with employment.

By recognizing the roles and responsibilities of each entity, businesses can make informed decisions about the most suitable approach for their workforce needs. Whether it's temporary staffing through an agency or outsourcing employment administration to an EOR, choosing the right solution can help streamline processes and ensure compliance with labor laws and regulations.

Whether you are looking for a staffing agency that can help with your current staffing needs, an EOR to handle the onboarding, HR and back office support for your expanding business, or you need a mix of both, Headway has you covered. Our customized solutions are tailored to meet your exact needs wherever you are in your journey.  Let us know how we can help! Book a meeting today!