Employer of Record in Contract Staffing
In the context of recruitment agencies offering contract staffing services, the employer of record takes on the role of the official employer for contract employees. This responsibility is often delegated to a third-party entity referred to as a contract staffing back office. Recruiters have the option to manage these back office duties themselves or to outsource them to a contract staffing back office provider.
When deciding to incorporate contract staffing into your recruitment business, you must determine who will assume the role of the employer of record for your contract workers. If you opt to handle the back office tasks internally, it's crucial to ensure you have the necessary time and resources to do so effectively.
Alternatively, if you prefer not to manage the back office functions yourself, you can enlist the services of a contract staffing back office provider. The employer of record will then take charge of payroll funding for staffing agencies (recruiters), remit payments to workers, and manage all aspects related to payroll and employment obligations.
Employers of record (EORs) aren't exclusive to recruiting firms; they can also be utilized by other types of businesses. When a business intends to hire an employee from a foreign country but lacks a legal entity in that particular location, an EOR can step in. While the employee still remains part of the business, the employer of record takes responsibility for handling payroll and HR matters specific to the local country.
This arrangement empowers businesses to expand their global presence without the need to establish a local entity or navigate the complexities of local employment laws and taxation. Given the growing prevalence of remote work practices, global EORs are becoming increasingly indispensable within the global employment landscape for companies seeking to hire talent from anywhere.
Whether you're a recruiting agency specializing in contract staffing or a business leader planning to hire internationally, it's imperative to ensure proper employee classification, accurate compensation, and effective management of employment-related issues. Otherwise, non-compliance can result in legal ramifications at both state and federal levels.
