Employer of Record (EOR) Vs Staffing Agency

Download our ebook, "Hiring Across Borders With an Employer of Record," to learn how to easily and compliantly hire international talent.
Employer of Record (EOR) Vs Staffing Agency
Written by
Mayank Bhutoria,
July 3, 2024

Key Takeaways

Companies striving for global expansion face a critical challenge in the realm of human resources operations: effectively managing their workforce while ensuring compliance with several regulations. To address this challenge, they often partner with workforce management solutions.

Traditionally, organizations  have turned to staffing agencies to manage their global workforce, contributing to the staggering $593 billion in revenue generated by the global staffing industry in 2023. However, there’s a new player on the scene: Employer of Record (EOR) services.

While staffing agencies excel in talent acquisition, EORs offer distinct advantages for global expansion. This blog will explore the key differences between these services to guide you toward the best solution for your business goals.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a service provider responsible for being the official employer of a company’s employee(s).  An EOR handles various HR tasks on behalf of the client, including payroll management, benefits administration, compliance with employment laws, and other administrative duties related to HR. 

With these essential functions taken care of by EORs, companies can focus on running their business smoothly.

What is a Staffing Agency?

A staffing agency is a firm that specializes in recruiting temporary or permanent employees for client companies. These agencies maintain a database of job seekers and match them with job openings from client companies based on skill sets, experiences, and other criteria. 

Staffing agencies handle the recruitment process from start to finish, including job advertisements, screening candidates, conducting interviews, and facilitating the hiring process. Once a candidate is selected, the staffing agency manages the administrative tasks associated with employment, such as payroll processing and benefits administration, on behalf of the client company.

Staffing agencies act as intermediaries between employers looking for candidates to fill vacancies and job seekers looking for employment opportunities.

Employer of Record Vs Staffing Agencies: What’s the Difference?

Understanding the critical difference between an EOR and a staffing agency is crucial if you’re looking to hire employees internationally. Below are the key differences.

Employer of Record (EOR) Staffing Agencies
Legal Responsibility Assumes full legal responsibilities as an official employer for employees, handling all employment-related legal obligations, including:
  • Payroll processing
  • Benefits administration
  • Compliance management
  • Employee onboarding
  • Acts as an intermediary between employer and employee, handling:
  • Recruitment process
  • Job Ads
    Screening applicants
    Initial interviews
    Shortlisting candidates
  • Employee placement and onboarding
  • Employment Structure Employees work for the client under the EOR’s payroll and are subject to its policies and regulations, providing a more structured and consistent employment experience. Client companies retain legal responsibility for employment matters, while Staffing agencies facilitate recruitment and hiring processes. In the case of temporary employment, the employment structure depends on the contract.
    Scope of Services Offers a comprehensive workforce management solution. Primarily focuses on recruitment and placement services.
    Global Hiring Facilitates global hiring by managing legal and administrative requirements, including work visas, tax compliance, and cross-border payroll processing. Typically operates on a regional scale, with limited international recruitment and hiring capabilities.
    Employee Benefits Provides access to comprehensive employee benefits, enhancing employee satisfaction and retention.
  • Health insurance
  • Retirement plans
  • Other perks
  • May offer limited or no employee benefits, depending on the arrangement with the client companies.
    Cost Difference Generally involves a higher upfront cost due to the comprehensive nature of services provided but offers long-term value and cost-savings by streamlining HR services and reducing administrative burden. Employs a variable cost structure based on employee placement, depending on factors such as skill levels, experience, and duration of employment.
    Client Relationship Establishes a direct relationship with the client companies, serving as a strategic partner in managing HR needs and providing ongoing support and guidance. Acts as a service provider to client companies, with a focus on fulfilling specific requirements rather than long-term partnerships or collaborations.
  • Manages payroll processing
  • Handles tax withholding
  • Ensures accurate and timely payments
  • Handles compliance with payroll laws and regulations
  • Handles payroll processing for employees placed with client companies
  • May not assume full responsibility for tax withholding and compliance, depending on the contract
  • Which business should opt for which service? Preferred by businesses aspiring for global expansion. Preferred by businesses requiring flexibility in workforce management.

    EOR Vs Staffing Agency: How to Decide Which One to Partner With?

    Choosing between an EOR and a Staffing Agency is critical and can significantly impact the business's success. Both offer distinctive advantages and cater to different requirements, making it essential to evaluate the factors that matter most to the organization carefully. 

    Below are some key considerations when deciding whether to partner with an Employer of Record or a Staffing Agency. 

    1. Global expansion support

    EORs extensively support businesses to expand globally. They deeply understand labor laws, tax regulations, and employment standards. With their expertise, EORs can handle the complexities of entering new markets, ensuring compliance with local regulations and mitigating the associated legal risks. They also offer tailored solutions to address cultural differences, facilitating smoother market entry and operations.

    While staffing agencies can assist in hiring global talent, their support will be restricted to recruitment and placement services. They lack the comprehensive knowledge and resources to handle international expansion's legal and administrative aspects. Staffing agencies can help source candidates from various locations but may not offer the strategic guidance and compliance expertise needed for a successful global expansion.

    2. Legal and compliance expertise

    EORs specialize in legal and compliance matters, ensuring that client companies comply with local employment laws and regulations. They assume legal responsibility, reducing the risk of non-compliance and legal liabilities. EORs stay updated about regulation changes and provide expert guidance on complex legal issues.

    Staffing agencies may provide basic compliance support to verify the candidates’ work authorization and background verifications. However, they do not offer comprehensive support, and the ultimate responsibility for compliance rests with the client.

    3. Administrative efficiency

    EORs streamline the HR processes by managing global payroll, benefits administration, and other administrative tasks for client organizations. They leverage technology and automation tools to improve accuracy and efficiency, reducing the client’s administrative burden. Doing so frees up valuable time and resources for their clients, allowing them to focus on their core business activities.

    While staffing agencies facilitate recruitment, the administrative responsibilities ultimately lie with the client. The client organization manages payroll, benefits, and other HR functions, which can be time-consuming and resource-intensive.

    4. Flexibility and scalability

    EORs can accommodate changes in the workforce needs, quickly onboard new employees, or adjust staffing levels to meet the dynamic requirements of the business. They offer customized solutions tailored to the client organization’s needs and unique growth requirements. 

    Staffing agencies offer flexibility in hiring temporary or contract workers for short-term projects or seasonal requirements. However, they might not provide the same level of scalability for long-term workforce planning or comprehensive HR support,

    5. Long-term vs short-term needs

    EOR services are ideal for businesses with a long-term growth objective and needing stable and compliant workforce management. They provide continuity and consistency in HR processes, supporting sustained long-term business operations. 

    Staffing Agencies are well-suited for short-term or project-based staffing needs, offering flexibility in scaling the staffing levels up or down based on short-term demands.

    6. Cost considerations

    While EOR services might involve a higher upfront cost than staffing agencies, they offer greater value by taking on legal and administrative responsibilities. They help mitigate compliance risks and potential penalties, resulting in long-term cost savings for the client organization.

    Staffing Agencies go for a variable cost structure depending upon the kind of hire, which might be lower compared to the cost of EORs. However, client organizations might incur additional costs for in-house HR administration and compliance management when using staffing agencies.

    How to Choose the Right Employer of Records for Your Global Expansion?

    An adept EOR provider ensures compliance with intricate labor laws and tax regulations across diverse jurisdictions, minimizing legal risks abroad. Leveraging the expertise of an EOR can lead to cost efficiencies compared to maintaining an in-house HR team in each region of operations, allowing organizations to allocate resources more strategically. 

    Moreover, businesses can also focus on core activities and strategic goals. So, choosing the right EOR service provider is crucial for businesses venturing into international expansion. Here are a few critical criteria to check while selecting an EOR service provider:

    1. Global compliance capabilities

    • Evaluate the EOR’s capabilities to handle the complexities of global compliance requirements. 
    • Look for an EOR provider who thoroughly understands international labor laws, tax regulations, and employment standards across different countries.
    • Ensure that the EOR has an established set of processes and procedures to maintain compliance and adapt to regulatory changes proactively. This involves staying updated on evolving laws and regulations in each country where the business operates.

    2. Reputation and expertise

    • Extensively research the reputation and expertise of the EOR service provider.
    • Consider their track record, experience in specific industries, and successful partnerships with similar businesses.
    • Look for client testimonials, case studies, or client references demonstrating the EOR’s reliability, professionalism, service quality, and client satisfaction.

    3. Technology and support infrastructure

    • Assess the technological infrastructure and support capabilities of the EOR service provider. 
    • Look for EORs that leverage advanced HR technology platforms and automation tools to streamline processes and improve efficiency.
    • Ensure the EOR offers comprehensive support services, including payroll processing, benefits administration, compliance management, and employee support.
    • Evaluate the accessibility and responsiveness of their support teams to address concerns promptly.

    4. Cost analysis

    • Conduct a thorough cost analysis to understand and compare the pricing structures, service fees, and other additional costs.
    • Consider factors such as scalability, customization options, and other services the EOR provider offers. This helps in assessing the overall cost-effectiveness of their services.
    • Look for transparency in pricing and clear communication regarding fees and charges.

    5. Client reference and testimonials

    • Request client references and testimonials from current and past clients.
    • Speak to other businesses that have worked with the EOR provider to gain insights into their experience and satisfaction level.
    • Understand the EOR’s performance, responsiveness, and communication. Hearing firsthand accounts from their clients can provide valuable insights into what it’s like to partner with the EOR provider.

    Take Your Next Step

    Ready to streamline your global expansion with confidence? Partner with Gloroots, your trusted EOR service provider. With our unparalleled global compliance capabilities, industry expertise, and technological infrastructure, we support your international growth journey at every step. 

    Contact us today to learn more about our services and how Gloroots can empower your business in your global expansion.

    Ready to take your hiring global? Let’s talk.
    Our experts have got you covered. 

    Join our monthly newsletter

    Stay informed with the latest insights on managing global teams, delivered straight to your inbox.

    Download free ebook now

    Gain exclusive access to expert-driven strategies and insights for effective global hiring.

    Enter a valid work email address!
    Thank you! Your submission has been received!
    Oops! Something went wrong while submitting the form.

    Thank you for downloading!

    Enjoy discovering new insights in your expert guide to global hiring!

    Closing in 5 sec