Recruitment and employee management functions are integral to any company’s functioning. Therefore, a company may sometimes prefer to get additional assistance from an employer of record or a staffing agency.
However, there are a few instances where people usually confuse the two and use them synonymously. While that is not the case, it is necessary to draw clear lines between their fundamental meaning and roles when defining their participation with the client.
This article will discuss some of the significant differences between the functioning and role of an employer of record and staffing agency in enabling their client company to achieve their respective goals. But before we focus on the differences between an employer of record in staffing agencies, let us first revisit their respective meanings for a clear understanding.
What is an Employer of Record?
An employer of record is a third-party organization responsible for hiring and paying an employee on behalf of its client company by taking responsibility for executing formal employment functions. Getting assistance from an employer of record allows a company to efficiently engage with its workers and better look after the legal aspects.
Therefore, it becomes easier for the client company to manage its recruitment, payroll, taxation, and other similar functions exceptionally well without taking many loads. An employer of record facilitates businesses to onboard employees and start global operations without setting up a local entity.
What is a Staffing Agency?
Synonymously referred to as a search and recruiting from/service, a staffing agency is an organization that works as a mediator between companies and prospective job candidates. By working with a staffing agency, the client company can proficiently connect with numerous hiring managers to find the right people for a specific job opening. Therefore, it makes the recruitment process smooth and comparatively better if the company cannot find suitable candidates on its own.
Differences between Employer of Record and Staffing Agency
Now that we are aware of the fundamental meaning of an employer of record and staffing agency, let us now discuss the main differences between them. Here are the three main points that distinguish the functioning and other aspects of an employer of record and staffing agency –
1) Roles and responsibilities:
The first and most crucial difference between an employer of record and a staffing agency depends on the roles and responsibilities. Staffing agencies or employment agencies arrange for candidates as per the skillset demanded by the client company. Candidates hired by staffing agencies are not permanent employees but temporary workers on agency payroll.
On the other hand, an employer of record is mainly responsible for managing employment matters such as benefits, administration and taxes, payroll, day-to-day activities, and maintaining employee records.
Since an employer of record is mainly responsible for reviewing compliance and tax laws, the client does not have to worry about any of these matters. It is because they know a team of qualified professionals is caring for them.
However, there are cases where a staffing agency also works with an employer of record. Still, it is possible only if the requirement needs a diverse availability of purposes in the workplace. Therefore, an employer of record and a staffing agency has different roles and responsibilities that differentiate the two in terms of their role while working with the client.
An employer of record and staffing agencies also differ based on the client company’s benefits. For instance, getting the right assistance from an employer of record allows a company to save immensely on its time and focus on the cost-effectiveness of outsourcing the fundamental human resource functions, payroll, workers’ compensation, compliance matters, and employee benefits. Moreover, the money a company saves by outsourcing these functions can be used to expand the business, arrange for a steady income, or pursue any other purpose.
In such cases, it is comparatively easier to onboard great talent, especially when a company is taking their assistance from an employee record. Therefore, it becomes easier for client companies to ramp up staff, and it helps to arrange top-quality workers in foreign locations.
On the other hand, staffing agencies usually do not have the resources to manage human resource training, accounting and payroll skills, risk management, compliance knowledge, and employee benefits background to fulfill the employer’s demands. Since there is a significant difference between the benefits the client can expect from an employer of record and staffing agencies, the two are different in terms of the benefits they provide.
The basic functioning of an employer of record and staffing agency also depends on their respective objectives. For example, if we talk about the purpose of an employer of record, they usually look after compliance, taxation, employee benefits, and contracts of their client company. An employer of record, in such cases, is usually responsible for handling all the personnel functions, including tax deposit and filing, payroll processing, and taking care of employment contracts and related paperwork. These functions also include arranging for employee insurance, performing e-verification, unemployment insurance, and workers’ compensation.
In addition, an employer of record is also responsible for conducting background checks and drug screening during the recruitment process and providing administration benefits, including termination of employees and handling worker issues. On the other hand, staffing agencies usually look after the recruitment process by assigning them their specific roles, managing during seasonal work and special projects by filling out the requirements for the temporary skills shortage. Therefore, they are mainly responsible for fulfilling employee requirements of a client company.
In a nutshell, we can say that the roles and responsibilities of an employer of record and a staffing agency are far different. While an employer of record provides diverse solutions to its clients, a staffing agency provides relatively lesser but essential services to its clients. Therefore, play an important role in streamlining recruitment and employee management, although there are significant differences in how they function and the services they provide.
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