An EOR is a third-party service provider who takes legal and administrative responsibilities for hiring and managing employment on behalf of another company. They offer services from hiring to termination and continued support along with legal considerations.
A staffing agency is a company that connects relevant talent with companies that are in need of it. They offer temporary, contract, project-based, and permanent hiring options. When a company fills in its requirements, a staffing agency finds, screens, and connects candidates with the company.
The differences between an EOR and a staffing agency are function, legal employer, payment, target audience, employee management, legal responsibility and compliance, employment type, cost structure, flexibility, and payroll and benefits.
The similarities between an EOR and a staffing agency are employment solutions, cost-effectiveness, legal support, payroll management, and time-saving.
What is an EOR?
An employer of record (EOR) is a third-party organization that takes legal and administrative responsibilities of working as an employer for another company. It allows companies to focus on day-to-day tasks while an EOR hires talent and manages employment tasks on their behalf.
An EOR manages hiring, payroll, employee benefits, legal compliance, contracts, and HR responsibilities to manage the professional relationships between the company and employees by working as a bridge.
How does an EOR work?
An EOR works as a third-party legal entity that hires and manages talent for companies within local or international localities while observing respective laws. When a company hires an EOR to hire talent on their behalf, the EOR looks for the right talent and hires them.
Moreover, the EOR manages their payroll, employee benefits, compliance, termination, and ongoing support related to any dispute. The company finds a suitable EOR, discusses its requirements with them, explores their services, and signs a mutually benefiting contract so that both parties are on the same page to manage the operations and company culture.
What is a staffing agency?
A staffing agency is a company that connects employers with employees while working as an intermediary body. Staffing agencies offer both temporary and permanent resources based on whether it’s a short-term position, project, or a long-term commitment. Employers looking for certain positions disclose the requirements to the staffing agency and they help them to connect with people who match the criteria.
How does a staffing agency work?
A staffing agency works by finding and connecting top talent with companies or employers with a similar vacant role. Usually, employers contact staffing agencies and fill in their requirements for either permanent or temporary positions.
The staffing agency then looks for the right talent, screens them, and conducts initial interviews. After assessing their skills and background, they connect the candidate with the employer for final reviews and selection.
What are the differences between an EOR and a staffing agency?
The differences between an EOR and a staffing agency are function, legal employer, payment, target audience, employee management, legal responsibility and compliance, employment type, cost structure, flexibility, and payroll and benefits.
Some of the main differences between an EOR and a staffing agency are listed below:
| Category | Employer of Record (EOR) | Staffing agency |
| Function | Employer of record offers complete employment services from hiring to termination while managing compliance, benefits, contracts, and payroll. | Staffing agencies mainly focus on connecting talent with employers while working as an intermediary body. They help companies find candidates for permanent or temporary roles. |
| Legal employer | EOR works as the legal employer for the company. | Staffing agencies only work as the legal employer for temporary staff. |
| Payment | They charge a monthly fee based on per employee. | They charge a placement fee or hourly charges for employees. |
| Target audience | Companies looking to expand locally or internationally who want the hiring process to be done on their behalf as per laws. | Companies who need a quick fill-in on the position or role for permanent, contract, or project-based ones. |
| Employee management | EOR managers complete employment whereas the company oversees day-to-day tasks. | The staffing agency manages the temporary employees while the company manages the projects. |
| Legal responsibility and compliance | EOR takes legal responsibility and compliance on the company’s behalf while taking care of tax filings, contracts, or labour laws. | Staffing agencies only take legal responsibility and compliance considerations for the temporary staff they hire. |
| Employment Type | Long-term on-site or remote hiring for the companies. | Temporary, project-based, or permanent roles. |
| Cost Structure | Monthly cost especially as per the employee salary. | Takes placement fee or hourly one for temporary employees. |
| Flexibility | Enable the company to hire locally and globally easily being the legal entity. | Offers quick hiring as per the role’s demand. |
| Payroll and benefits | Managed by the EOR including benefits, laws, and payroll. | Staffing agencies only manage payroll for the temporary employees they hire. |
- Function: An EOR and staffing agency, both serve different purposes and functions. While an EOR helps with comprehensive services from hiring to termination, allowing companies to scale efficiently, a staffing agency helps companies with urgent hiring and role filling.
- Legal employer: An EOR takes on all the legal responsibilities of the company’s employees ranging from labor laws to taxation and compliance, whereas a staffing agency manages legal matters for the temporary employee only.
- Payment: While an EOR charges a monthly fee like subscription charges for the comprehensive services they offer, a staffing agency usually charges a percentage or placement fee.
- Target audience: An EOR is ideal for companies who are looking to expand their operations especially internationally whereas a staffing agency is better for companies looking for urgent or specific hiring.
- Employment management: An EOR manages the company’s employment matters however the staff agency may manage employment matters for the temporary employees.
- Legal responsibility and compliance: An EOR takes full responsibility for legal adherence to labor laws, taxation, or employment benefits whereas a staffing agency handles compliance only for temporary workers.
- Employment type: An EOR offers employment management for long-term full-time employees whereas a staffing agency provides short-term or project-based placements.
- Cost structure: EOR has a fixed and decided monthly fee whereas a staffing agency decides the percentage or placement fee based on employees.
- Flexibility: While an EOR offers the company the flexibility to expand in new markets, a staffing agency offers quick access to specific talent to manage a workforce.
- Payroll and benefits: An EOR handles payroll and benefits for all employees of the company whereas a staffing agency manages these services for temporary employees only.
What are the similarities between an EOR and a staffing agency?
The similarities between an EOR and a staffing agency are employment solutions, cost-effectiveness, legal support, payroll management, and time-saving.
Some of the similarities between an EOR and a staffing agency are listed below:
- Employment solutions: An EOR and staffing agency both offer employment solutions to help companies get the best talent while they manage their day-to-day tasks, easily allowing companies to scale efficiently. The company communicates its requirements with the EOR or staffing agency, which then manages the hiring and employment management part accordingly.
- Cost-effectiveness: Working with a staffing agency or EOR is both cost-effective solution to hiring and managing employees. Moreover, it takes off the burden from the company while hiring entities looking for talent globally or locally as per requirements. Creating an internal department for these tasks might be a bit effective as the company will have to hire individuals for various employment management roles. The EOR or staffing agency on the other hand does it all within a defined package.
- Legal support: The staffing agency and EOR both offer compliance regulations and legal support as per labor laws or any tax regulations. They focus on helping companies manage any risk associated with employment factors. Otherwise, the company will have to hire an internal legal team to oversee the legal matters.
- Payroll management: Staffing agencies and EOR both offer payroll management services to the employees they hire, giving companies stress-free management while the employees get paid timely and efficiently. The company does not have to manage the monthly calculations and timely delivery or any disruption like delays and deductions as it is all managed by the EORs or staffing agency. However, the staffing agency only manages it for temporary employees.
- Time-saving: A staffing agency and EOR both aim to offer time-saving solutions for the company so that they can focus on day-to-day operations, while the EOR or staffing agency manages the intricate tasks associated with hiring and employment on the company’s behalf. The company management does not have to be involved in managing the employee matters as they get handled by the EOR or staffing agency they are working with.
What are the benefits of using an EOR?
The benefits of using an EOR are global expansion, no employment burden, legal compliance, time efficiency, comprehensive services, and hiring flexibility.
Some of the main benefits of using an EOR are listed below:
- Global expansion: EOR helps businesses to scale and expand globally with ease by managing the hiring and employment in foreign lands as per their laws and regulations. EOR acts as the legal entity managing the global hiring operations whereas the company focuses on managing day-to-day tasks.
- No employment burden: EOR takes the employment and HR administrative burden from the company by managing everything from finding, and hiring to termination and post-support processes. This way the internal teams are free to manage the operations while EOR manages the employees.
- Legal compliance: An EOR works as a legal entity offering compliance with local laws to manage taxation, payroll, and local labor laws. They help the company avoid any risk of being associated with legal violations.
- Time efficiency: Working with an EOR is highly time efficient for the company as the EOR quickly manages the employment processes, speeding up the operational processes for the company as they are focusing on scaling and expanding day-to-day operations.
- Comprehensive services: An EOR offers comprehensive services ranging from hiring to termination, and payroll management benefits or legal considerations while offering HR administrative duties for the company and employee as well.
- Hiring flexibility: EOR enables companies to try out new markets and hire talent from any area without having a physical presence there. With an EOR flexibility hiring global talent, there is no need for a company to have a permanent office over there.
What are the benefits of using a Staffing agency?
The benefits of using a Staffing agency are a larger talent pool, hiring specialists, cost-effectiveness, and low hiring risks.
Some of the main benefits of using a Staffing agency are listed below:
- Larger talent pool: A staffing agency is connected with a large pool of talented individuals looking for a job. Companies working with a staffing agency get access to that extent of talent and relevant candidates as per the requirements. Their database of screened professionals and companies helps both entities to get connected easily.
- Hiring specialists: Staffing agencies are hiring specialists offering various hiring solutions like temporary roles, project-based roles, or permanent hiring. Companies simply share their hiring requirements with the staffing agency while the agency connects them with the right talent as per requirements.
- Cost-effectiveness: Working with a staffing agency is cost-effective for companies, unlike hiring a whole internal team. The staffing agencies provide the hiring, screening, and initial interview services so that the company does not have to take responsibility for the temporary employees.
- Low hiring risks: Companies working with staffing agencies face fewer hiring risks as the agency is responsible for screening and initial assessment to make sure that the company only receives the best talent they’re looking for. The staffing agency does not carry forward with an employee that does not fall within the company’s defined criteria or if it seems like a mismatch.
What are the drawbacks of using an EOR?
The drawbacks of using an EOR are limited control, potential higher costs, overreliance, and less sense of belonging.
Some of the main drawbacks of using an EOR are listed below:
- Limited control: The EOR works as a legal entity that manages the employees. This might result in less control for the company over employee decisions and management. To avoid this, work with an EOR that keeps matters transparent and communicates the ongoing processes to help you stay in the loop.
- Potential higher costs: Extensive services increase the potential costs associated with working with an EOR. Getting services from an EOR is often costly, especially for small-sized businesses or start-ups. To ensure that you receive services, make sure to communicate your budget and ask for any hidden costs or potential high-end pricing.
- Overreliance: Companies have to depend on EORs for their employment and compliance matters. Any delay or inefficiency from the EOR’s end results in operational disruptions for the company. Try to be involved to some extent and maintain transparent operations so that you are not overly reliant on you for all operations.
- Less sense of belonging: Employees hired through a third-party service might feel less sense of belonging within the company and a loss of connection especially in terms of hierarchy and conflict resolution. Make sure that the processes are kept transparent and that employees receive a welcoming environment in order to eliminate the sense of non-belonging and confusion.
What are the drawbacks of using a staffing agency?
The drawbacks of using a staffing agency are high costs, limited hiring control, risk of mismatching, and quality control risk.
Some of the main drawbacks of using a staffing agency are listed below:
- High costs: Staffing agencies are often costly especially for small businesses or start-ups because they usually charge 10 to 20% of the employee’s monthly salary or a certain amount for every placement. To avoid extra costs while working with the staffing agency, make sure to discuss the price structure and cost beforehand.
- Limited hiring control: Staffing agencies handle the majority portion of the hiring process for the company resulting in less control for the company over processes like screening and initial assessments. To avoid this, make sure to have an open discussion with the agency to keep things as transparent as possible so that the company is kept in the loop during the hiring process.
- Risk of mismatching: Staffing agencies are usually unaware of the company’s internal culture and their main focus is on the requirements highlighted by the company. Sometimes intricate matters are overlooked and it results in a mismatch between the candidate and the company. While working with the staffing agency, make sure you deliver every detail clearly in terms of requirements to make sure there is no risk of mismatching.
- Quality control risk: Staffing agencies often focus on filling the position quickly rather than bringing top-quality candidates every time. This results in inconsistency of quality while hiring candidates through a staffing agency. Make sure to get the staffing agency enough time to find and screen top-quality candidates if that’s a priority.
What do you consider when choosing between an EOR and a staffing agency?
When choosing between an EOR and a staffing agency, make sure to consider the following aspects:
- Your company requirements and goals whether you are looking for global expansion or temporary role filling. Choose an EOR when you want to expand your operations globally or need remote hirings, while choose a staffing agency when you need to fill in quick or specific roles.
- The budget you want to allocate for outsourcing your requirements. Both EOR and staffing agencies have different pricing models and you will have to consider your budget bracket and the cost they are offering. Before choosing between an EOR and staffing agencies, make sure to go through their budgeting and pricing models to see if it aligns with your needs.
- The level of transparency and open communication offered by an EOR and staffing agency. Operational matters tend to get disrupted when there is a lack of transparency with other teams. While choosing between both, make sure to ask how they plan on managing and communicating the operations while keeping you in loop.
- Check the services offered by both, an EOR and a staffing agency to compare which one offers more benefits as per your requirement. Both have different suites of services and you need to choose one that has a more fitting suite as per your needs.
Is an EOR more beneficial than a staffing agency?
No, an EOR is not more beneficial than a staffing agency as it entirely depends upon your requirements and the services offered by the entity. If you’re looking to expand globally, you might benefit from an EOR whereas if you’re looking for filling roles, you will benefit from a staffing agency.
When to use an Employer of Record?
Use an employer of record when you are planning on expanding your business to global markets, want to focus more on day-to-day operations, or want to hire remote employees from various locations.
When to use a staffing agency?
Use a staffing agency when looking to hire contract or project-based employees or need urgent hiring to be done.
Does an EOR provide employee benefits?
Yes, an EOR provides employee benefits like healthcare, insurance, leave management, or tailored benefits as per labor laws and company jurisdiction.
Do staffing agencies provide employee benefits?
Yes, staffing agencies provide employee benefits however, the extent of benefits varies based on the type of hiring. They offer benefits like health and leave management to temporary or contract-based employees. For permanent employees, the hiring company is responsible for providing the benefits.
What are the legal implications of an EOR?
The legal implications of an EOR include assurance of compliance with local labor laws, policies, and taxation, bringing down risks, managing contracts, and elimination of any potential legal violation. The EOR legal implications are vast in contrast to a staffing agency.
What are the legal implications of a staffing agency?
The legal implications of a staffing agency are managing compliance, risks, and legal activities mainly associated with temporary or contract-based employees.
Does EOR secure confidential information?
Yes, an EOR secures confidential information as they have to follow critical data privacy and protection laws when they start working with any company. Compliance and legal regulations demand that the EOR keep the company’s sensitive data secure.
Can you hire international workers without an EOR?
Yes, you can hire international workers without an EOR however it involves challenges like setting up an international office, following compliance with the laws of that country, and managing funds transfer.
