Introduction
When comes to an employer of record vs staffing agency, many companies get confused. While managing a team abroad, the basic demands of any business are cost-effectiveness, efficiency, and especially legal compliance. Additionally, complying with complex laws, hiring a team, and team management can be challenging for companies due to a lack of local knowledge. Small or mid-size companies often encounter these issues to limited resources while expanding into new countries.
In such a situation, two popular solutions are often considered—employer of record and staffing agencies. While both options serve the same purposes, they have different hiring processes, value propositions, scope, and functionality. Understanding the differences and choosing between these two can be challenging since both are potent options.
In this blog, we will explore both services individually and compare them to find out, which service would be the best match for you. We will measure how cost-effective, efficient, and legally compliant each solution can be.
Let’s quickly understand both the terms.
What is an Employer of Record?
An Employer of Record is an extension of your team organization that acts as the full-time employer for the team. The EOR takes care of payroll, benefits, taxes, and other HR-related operations on behalf of the foreign company. The most important factor is that the business can hire a team without establishing an entity.
Key Features of Employer of Record:
- An EOR’s primary operations include managing statutory benefits, taxes, and payroll.
- Assures compliance with local labor laws and regulations.
- Handles the administrative tasks, retirement plans, and insurance for employees.
- Allows businesses to hire in foreign territories without forming a legal company.
- Promotes permanent and long-term employment.
What is a Staffing Agency?
A staffing agency is an organization that helps businesses hire employees. It plays the role of an agent or middleman to connect candidates and employers of various industries.
Key Features of Staffing Agency:
- Identifies and evaluates candidates for clients
- Provides seasonal or temporary labor at short notice
- Handles temporary employees’ initial employment paperwork
After reading these definitions and key features you must have found some contrast between both services. Well, there is some visible distinctness but we will dig deeper into it. So, let’s understand the differences between both services.
Employer of Record vs Staffing Agency
When it comes to Employer of record vs staffing agency, both are helpful for businesses. But, it’s essential to recognize which services fulfill which requirements. Let’s break down the differences between both services point by point.
| Criteria | Employer of Record (EOR) | Staffing Agency |
| Scope of Services | Focuses on legal and administrative functions of employment; helps employers hire candidates without setting up an entity. | Sources and places candidates for contract, permanent, or temporary roles. |
| Legal Employer | Acts as the legal employer, handling payroll, taxes, compliance, and benefits; lets the client decide salary and policies. | May act as the legal employer only for temporary candidates; decides salary and policies for them. |
| Compliance Management | Ensures full compliance with tax regulations, labor laws, and benefits, especially for international hires. | Assists with initial compliance for temporary employees but does not handle long-term compliance. |
| Flexibility in Employment | Promotes cross-border hiring, remote work, and long-term employment. | Primarily addresses short-term, seasonal, or project-based staffing needs. |
| Cost Structure | Charges a monthly flat fee (USD 600-800 per person) based on employees and administrative responsibilities. | Charges one-time placement fees (20-30% of first-year salary) for permanent hires or hourly rates for temporary staff. |
| Who Should Hire What | Suitable for businesses expanding to new markets, recruiting remote teams, or setting up teams abroad without an entity. | Ideal for organizations with fluctuating workforce needs or those needing temporary/project-based staff. |
| Region | Best for companies expanding beyond local boundaries, especially in foreign markets. | Primarily caters to local businesses. |
Legal Employer
The employer of record acts as the legal employer of the candidate. The employer of record is responsible for payroll, taxes, compliance, and benefits so that the organization can focus on the core tasks. EOR let’s client decide the salary and employment policies.
Whereas, a staffing agency does not act as a legal employer for permanent candidates. If the candidate is temporary, the agency might be the legal employer for a limited duration. Also, the staffing agency decides the salary and employee policies of the candidate. Mostly, the on-location rules are followed for the employee.
Scope of Services
Employer of record focuses on the legal and administrative functions of the candidate. Whereas, a staffing agency is known for sourcing and placing candidates for contract, permanent positions, or temporary roles.
Compliance Management
The employer of record is responsible for full compliance with tax regulations, labor laws, and benefits. This is especially important for international hires. A staffing agency might assist with initial compliance for temporary employees but does not take responsibility for long-term compliance or benefits.
Non-compliance may cost you heavily so be wise while choosing your partner. Here is a famous quote about compliance.
Flexibility in Employment
EOR promotes flexible employment arrangements that include cross-border hiring, remote work, and long-term employment. Whereas a staffing agency mainly addresses short-term, seasonal, or project-based staffing requirements.
Cost Structure
The employer of record charges every month. The fees are based on the number of employees and administrative responsibilities. EORs normally charge a flat service charge between USD 600-800 per person monthly. This charge may also include avoiding local tax obligations and statutory deductions.
whereas staffing agencies charge placement fees based on a percentage of the hired candidate’s salary or sometimes a fixed price. The fees are one-time payments for permanent candidates or an hourly rate for temporary staff. Employers bear the cost regarding the employment and compensation of the hired candidate. Staffing agencies usually charge between 30% and 40% of the candidate’s first-year salary.
Who Should Apply What
The employer of record is best suited for businesses looking to expand into new markets, and recruiting remote teams for the long term. EOR is for those who need a fully fledged functional team in the target country. The one that represents the company as a brand in a foreign territory. Businesses looking to establish a team outside the country without a legal entity.
Whereas, a staffing agency is an ideal option for organizations with various workforce needs. Staffing agencies are for companies who are looking for individual contributors to their projects. Mainly businesses that require temporary staff or project-based candidates.
Region
The major difference between both services is that employer of record is helpful for companies that want to expand beyond boundaries in short, foreign companies. Whereas staffing agencies primarily work for local businesses.
Businesses often confuse these major differences with an employer of record and staffing agencies.
The quote clearly suggests the ability to decide which one is suitable for you is precious. But now, as we have provided all the information, let’s end this debate of employer of record vs staffing agency. Both services are useful and great at various functions they provide, what matters is the requirements of your business.
Why Employer of Record in India?
If you want to expand or form a sustainable team of skillful talents into new territories such as India, employer of record is a better option. To experience the benefits of Indian EOR, and mitigate all the issues regarding setting up a team in India, Remunance’s employer of record is among the best solutions.
How Remuance Can Be Your Success Partner?
It would be obvious if we say that Remunance is the best employer of record partner in the country but 104+ clients across 22 countries won’t lie about it. Remunance is an experienced and comprehensive Employer of Record service provider that has hired 1000+ employees to date.
Prompt response, global clientele, 360-degree support, and tech-enabled solutions make Remunance a trustworthy employer of record partner. Remunance’s team of experts and transparent solutions can keep your team operational while you can focus on your core tasks. Remunance understands the requirements of the customer and provides the best possible solution. Remunance is your long-term partner providing employee administration, IT support, Facilities Management, and concierge services.
We hope you have understood the difference between an employer of record and a staffing agency. So now if you want to rely on a service and forget all the worries regarding your team in India, choose Remunance as your employer of record partner.
FAQs
Can you use an Employer of Record (EOR) and a staffing agency together?
It is conceivable to use a staffing agency and an employer of record simultaneously. For example, the EOR manages payroll, compliance, and legal employer responsibilities, while a staffing agency may recruit employees for temporary or specialized roles. Companies that need fast staffing solutions and have entered new markets without having a local presence could profit from this combination of solutions.
Is a staffing agency more expensive than an EOR solution?
The requirements of the company decide the amount it costs to use a staffing agency compared to an EOR. The long-term expenses may increase due to the large markups that staffing firms may impose on recruitment services and temporary personnel. On the other hand, the employer of record solutions offers affordable assistance with payroll, compliance, and benefits and concentrates on continuous employment management. The employer of record solutions is typically less expensive than using a staffing agency for companies with long-term employment intentions
