What is an Employer of Record? (EOR) Meaning and Significance
If you're looking to swiftly engage workers but find the associated costs, risks, and responsibilities of direct employment overwhelming, understanding the 'Employer of Record (EOR)' meaning could be worthwhile. When time is limited to navigate complex employee compliance, considering the EOR option to engage your staff could be a strategic choice for your business.
What is an Employer of Record?
An employer of record is a company that employs workers on another organizations behalf. Once a worker has been selected, the EOR becomes the legal employer by taking on the responsibilities of back-office employment tasks.. Meaning an EOR manages the legal obligations surrounding payroll, tax withholding regulations, paid leave laws, and employee benefits dependent on what area you are employing staff in.
The employer of record handles the following tasks on behalf of the organization using their service:
Creates and issues employment contracts
Onboards new workers
Conducts background checks
Provides benefits and insurance plans for workers, including healthcare
Completes and stores Form I-9's
Manages and keeps on top of changes in federal, state, and local income taxes
Deducts payroll taxes
Gathers and stores workers timesheets
Processes and deposits payments to workers
Responsible for employment compliance
What are the benefits of using an Employer of Record?
Understanding 'What is an Employer of Record' and grasping the 'EOR meaning' is invaluable for businesses due to the benefits utilizing EOR services entail.
Reclaim Operational Time Spent on Backoffice HR
Using an employer of record is extremely beneficial for businesses as it enables you to directly focus towards daily operations and business expansion. This approach saves time typically consumed by grappling with and managing complex HR tasks when employing workers in a unfamiliar area.
Streamline Employment Compliance Management
The EOR takes the responsibility of complying with payroll tax laws and processing your employee’s payroll and benefitssparing you from the intricacies of calculations. An EOR s lessens the legal and compliance employment issues that may arise when employing workers in different areas Nevertheless, the business that hires the worker remains responsible for their day-to-day operations, schedules, and ensuring workplace safety.
Efficient Workforce Expansion
If you want to expand your business to the US or globally, you likely need to hire employees in your chosen area to build your presence and offering. You could choose to set up your own legal entity to hire them, but you will then have to figure out all the tax and legal obligations and liabilities that come with that.
On top of this, you would need to keep on top of the employment laws where you worker is based, have compliant HR policies and be equipped to answer their questions, and have robust payroll and tax deduction processes.
If you use an Employer of Record, you won't need to establish your own entity or have a local presence in every place you hire in. This eliminates the need to navigate and keep up with frequently changing state employment laws. It also cuts down costs and headaches you would experience if you took on the legal back-office tasks that come with employing workers alone.
With the increased popularity of remote work enhancing the possibilities of hiring talent from any country, using an Employer of Record allows you to seamlessly and quickly add new staff to your team.
Leverage Cutting-Edge HR Platforms with an Employer of Record
If you use Employer of Record services, a big benefit is that you can utilize their HR tech platforms that help speed up HR processes. As Employer of Record’s have experts in the fields of payroll, benefits management, HR, and more, you can lean on them for support.
For example, clients of PGC who use our Employer of Record USA solution, can access Precision. This is a workforce management platform that simplifies onboarding, offboarding, and employment compliance which is a main feature of an EOR.
Employer of Record for small companies
An EOR is a good option for small businesses as is saves them time and money spent managing complex HR tasks or hiring an entire internal back-office team to complete these processes for them.
Employer of Record for companies expanding to or within the US
Utilizing an EOR service is a great option for international companies expanding to the U.S. who are unaware of how US employment works. Additionally, many domestic US businesses that need to place workers in a new state utilize an EOR as they realize how complex and time-consuming this can be.
If these companies use an EOR they don't have to set up an entity if they wish to do business within the US or a different state. As the EOR is the employer, they don't have to register in each state before employing workers, meaning the EOR takes care of the complex paperwork, allowing you to onboard quickly and hit the ground running.
When companies are employing different types of workers, performing different types of work or working hourly, in different states an EOR is most likely the best solution and the lowest cost option.
Employer of Record for staffing companies
EOR's are particularly well suited to start-up staffing companies. Many staffing companies utilize an employer of record so they don't have to run their own internal back-office for their various workers. The EOR handles the staffing agency’s payroll taxes, deposits the workers, and takes on all the complex employment responsibilities.
Why should you use an Employer of Record?
Regardless of your type of business, you need to make sure your employees are classified correctly, being taxed correctly, paid on time and accurately, receiving benefits, and all their employment issues are addressed and resolved.
If you don't have the time to manage all these HR processes by yourself or lack the funds to hire an internal team to take control, utilizing an EOR takes this responsibility off your shoulders.
Using an EOR's employment expertise ensures you remain 100% compliant when engaging workers and means you don't have to worry about keeping up to date with ever-changing federal and state compliance updates.
Any other questions on EOR meaning?
Understanding the EOR meaning can often lead to plenty of questions, revolving around understanding and utilizing an Employer of Record. Queries such as exploring EOR advantages, contractual arrangements, account management, worker insurances, and much more often arise.
Crafting appropriate US employee benefits, and the steps involved in implementing an EOR in the US, can often seem overwhelming. To uncover more about what is an Employer of Record and to address these FAQs, you can find everything you need to know here.
Curious about the meaning of an EOR, and how an employer of record can help your business?
Interested in hearing more and seeking clarity on 'What is an Employer of Record' or 'EOR meaning'? Discover how PGC does it, with our EOR USA service including onboarding processes, employee benefits and much more. Find out how an EOR could transform your business and set you up for success in the US. Contact us to discover the advantages that await your workforce.
Disclaimer: The information provided here does not, and is not intended to, constitute legal advice. Instead, the information and content available are for general informational purposes only.