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What is an EOR & How Do You Know If You Need One?

Jan 26, 2016 9:58:55 AM


The Employer of Record or EOR service has been gaining in popularity among organizations fielding a contingent workforce. You may have heard the term a lot recently and you may be wondering, “What is an EOR and do we need one for our workforce management program?”

As we defined in an earlier post on EOR services, what we refer to today as Employee of Record service may be more widely recognized by the outmoded term, “payrolling”. What began as a simple means for easing the burden of benefits and compensation administration for “contract workers” (the predecessors of today’s contingent workforce), then matured alongside the increasingly dynamic utilization of non-employee labor. The practice of payrolling was embraced by staffing agencies as a means for maintaining compliance with IRS and other regulatory guidelines governing the provision of compensation and benefits to non-employee labor of all varieties – independent contractors, contingent workers, temps, etc.

Today, the practice of payrolling has expanded to include the entire outsourcing of HR through such constructs as the Professional Employment Organization (PEO) which assumes the entirety of the HR function for its customers. The Employer of Record stands somewhere between the PEO and the in-house HR/benefits department and is being leveraged to address many challenges facing companies using a wide array of non-employee labor.

It is fairly simple to determine when your organization may benefit from an EOR arrangement to manage contract staffing. Particularly, if your organization intends to ramp up usage of contract workers but doesn’t have the bandwidth to adequately manage the following HR-related tasks for the influx of new contractors, the use of an EOR can help ensure compliance with all required regulatory, tax and business-rules-based concerns. These things are critically important to a successful contract worker program.

  • Payroll processing and funding
  • Tax deposits and filings
  • Employment contracts and paperwork
  • Maintaining Certificate of Insurance
  • I-9 and E-Verify
  • Unemployment insurance
  • Workers’ Compensation
  • Background checks and drug screenings
  • Benefits administration (health, dental, vision, life, 401k)
  • Employee terminations
  • Employee issues

Adding to HR headcount in order to manage a newly expanded contract workforce can add significant costs to an HR department. And if cost savings and efficiencies are among the reasons why you may be considering adding contract workers to your workforce mix, then it seems counterproductive to add full time resources to HR. In these cases, the EOR is definitely worth consideration.

To read more on this subject, turn to nextSource for expert guidance and visit our employer of record page.

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Topics: Blog, EOR Services

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