Employer of record vs staffing agency: what’s the difference?

Trying to make sense of the international hiring scene can be a real headache for businesses looking to broaden their horizons. Things get even trickier when you don’t have a business presence in the area you’re aiming to operate in. That’s when you really need to know the difference between an employer of record (EOR) and a staffing agency — and figure out which makes the most sense for your business plan.

Let’s break it down.

An EOR is your ticket to hassle-free international hiring. It’s perfect for companies that want to hire internationally but don’t have a legal entity in the region. EORs manage everything from onboarding to payroll, benefits, and even offboarding, letting you focus on your core business.

On the other hand, a staffing agency is a go-to resource for sourcing talent. These professionals are the ones who scour the market, find the best candidates for your open roles, and then deliver these potential hires to you on a silver platter.

But here’s the kicker: these two aren’t competitors. Instead, they’re more like teammates. Depending on your business objectives, you may need one or both to help make your international hiring process a breeze.

In this article, we’ll give you a full understanding of each of these services so you can decide which solution would best suit your company’s needs. Bear in mind that this article isn’t about comparing two equal services. A staffing agency focuses on talent acquisition, while an EOR provides a much more comprehensive offering.

Let’s dive in.

What is an employer of record (EOR)?

An EOR is an organization that serves as the legal employer of an employee who performs work for a different company. They step into your shoes and become the official employer for tax purposes — even though the employee is performing work for your company, not the EOR.

That means the EOR is the employer that’s recognized by government bodies and is responsible for all the paperwork that comes with this title.

But it doesn’t mean the EOR takes over your business. You maintain control over your company’s daily operations and direction. What the EOR does is take the administrative burdens and risks off your plate so you can focus on doing what you do best.

The EOR is responsible for tasks such as the following:

• Processing payroll: They ensure that your employees get paid on time, every time.

• Filing taxes: They deal with all the paperwork that comes with tax time, making sure everything is above board.

• Compliance with local labor laws: If you’re hiring internationally, they will navigate the local labor laws for you. This includes everything from overtime pay to holiday leave.

• Providing employee benefits: They can manage and provide employee benefits, depending on the arrangement.

• Managing employment contracts and documentation: They keep all employment records, from contracts to performance reviews, in order.

Who is an EOR for?

An EOR is primarily designed for businesses that have set their sights on expanding their workforce in regions where they don’t currently have a legal entity. The following businesses might find an EOR service particularly beneficial:

Companies expanding globally

If you’re looking to expand your business into new international markets, an EOR can be your ticket to hassle-free employment in these regions. They know the lay of the land and can take care of all the administrative hurdles that come with global expansion.

Startups and small and medium-sized enterprises

Startups and small and medium-sized enterprises (SMEs) often have to juggle a million tasks at once, and international hiring might just be one more ball in the air. An EOR can catch that ball and run with it, handling all the nitty-gritty details of hiring and payroll. EOR services let these businesses focus on their core operations instead.

Companies seeking flexible workforce solutions

With an EOR, companies can hire employees internationally to create a flexible workforce, and even manage a remote staff more effectively. Innovative companies know that a global flexible team is advantageous in today’s dynamic work environment.

Businesses hiring remote workers

An EOR can help manage the complexities that come with hiring employees who might be based anywhere in the world. They take the headache out of dealing with employment laws and tax regulations in various countries.

If a business already has its own entity in a foreign country, it might not need to have an EOR on its team. Since they have the capacity to navigate the local employment laws and regulations on their own, employing an EOR might not add significant value. But for those venturing into new territories, an EOR can be a real game-changer.

What is a staffing agency?

A staffing agency is a company that helps connect businesses with qualified workers on either a temporary or permanent basis. Their primary role is sourcing talent, which is crucial for businesses looking to fill their open roles with the best fit.

A staffing agency typically has an extensive database of candidates. These third parties handle the recruitment and hiring process from start to finish, saving businesses valuable time and resources.

A staffing agency usually takes care of the following:

Discovery

They identify the needs of your business and the specific roles that need to be filled. They work to understand not just the job description but also your company’s culture and values to find the perfect match.

Recruitment

Staffing agencies manage the recruitment process, which can include advertising the job, screening applicants, conducting initial interviews, and shortlisting candidates. They have the expertise and resources to find potential employees who not only have the skills and experience required but also align with your company culture.

Placement of employees

Once candidates have been identified and interviewed, the staffing agency facilitates the hiring process. They communicate with the selected candidates, negotiate terms, and help with the onboarding process.

Companies that need help sourcing more talent

Businesses often have various roles to fill, but finding the right talent can be time-consuming and challenging. A staffing agency has a large database of candidates and the expertise to place job applicants in suitable roles, relieving businesses of this arduous task.

Companies with high-volume hiring needs

For companies experiencing rapid growth or those with a large number of vacancies, a staffing agency can be a lifesaver. They can manage the logistics and demands of high-volume hiring, making the process smoother and more efficient.

Businesses looking for specialized skills

Some roles require very specific or niche skill sets. Staffing agencies often have specialized recruiters who are familiar with various industries and understand where and how to find the right talent for these unique positions.

Companies that need temporary or seasonal staff

Some businesses have cyclical workloads or need additional help during peak periods. Staffing agencies can quickly provide temporary or seasonal staff, helping those businesses timely adjust their workforce to meet temporary demands.

Advantages of using an EOR

Using an EOR brings a host of advantages to companies, especially those aiming to expand into new territories or manage a remote workforce. These advantages include the following:

Ensures compliance with labor laws

Navigating the maze of laws and regulations in different regions can be daunting, especially when it comes to local labor and tax laws. EORs are there to put your mind (and legal team) at ease. EORs ensure compliance with complex laws, providing peace of mind for businesses.

Handles various HR tasks

An EOR is a one-stop shop for a host of HR-related tasks, from onboarding and localized contracts to payroll benefits and equity incentives. This allows companies to delegate these critical but time-consuming tasks.

Reduces legal and financial risks

EORs help to reduce the legal and financial risks associated with hiring and employing staff, particularly in foreign jurisdictions.

Saves on costs

Using an EOR can help companies save costs on managing payroll taxes and other employment-related costs. Operating in a foreign country can cost businesses a lot of money when they try to do it themselves without local knowledge. In comparison, Remote offers comprehensive EOR services under a flat fee that can save companies significant costs. These savings can then be channeled into business growth and development.

Offers flexibility and speed

Companies can hire and onboard employees in new markets quickly and efficiently without needing a legal entity in that region. This agility can provide a competitive advantage in today’s fast-paced business environment.

Ultimately, the benefits of using an EOR are numerous. Working with an EOR can also ease the burden of global expansion and remote workforce management for businesses.

Advantages of using a staffing agency

Let’s now look at the benefits of using a staffing agency.

Manage hiring administration

Hiring involves a great deal of administrative work, from processing resumes to managing application documents. A staffing agency takes care of all those tasks, freeing up your team to focus on strategic business activities.

Access to larger talent pools

Staffing agencies typically have access to diverse talent pools. They can provide businesses with candidates who possess specialized skill sets that might be hard to find through traditional hiring methods.

Expertise in recruitment

Staffing agencies are specialists in recruiting. They have the experience and knowledge to identify the right candidates quickly and efficiently, saving businesses significant time and effort in the hiring process.

A staffing agency is just the first stage in sourcing talent. But the ideal candidate may be in a country in which you don’t have a legal entity. In this case, you’d still need an EOR.

EOR vs. staffing agency: why the former comes out on top

We’re seeing more and more globally distributed teams due to the many benefits of global expansion. In fact, 44% of companies are increasing their international hiring.

Newsroom —

2 min

Remote Workforce Report 2023: The Rise of Distributed Teams

Introducing the most comprehensive research conducted on remote teams and distributed hiring to date. Read the full report from Remote to see what companies and employees around the world are thinking and doing about the new world of work.

If you’ve got your sights set on global talent to fill a position, a staffing agency can be invaluable for the initial stage of the employment process. These organizations are great for sourcing talent and can take the time-consuming task of sifting through resumes and conducting initial interviews off your plate. 

But talent sourcing is just the tip of the iceberg when it comes to the overall hiring process, especially when you’re considering international hiring. What happens when the ideal candidate is located in Brazil, but your business only has a legal entity in Canada? How do you navigate the complex labyrinth of international employment laws, payroll, benefits, tax compliance, and more?

This is where an EOR, like Remote, has a significant edge over a staffing agency.

Leave the legal stuff to us

The last thing you want to worry about is navigating complex legal and administrative hurdles. And that’s where Remote comes in. We understand the challenges you face when venturing into new markets, and we’re here to make your journey smoother, easier, and worry-free.

With Remote as your EOR, you can leave the legal tasks to us. We specialize in providing comprehensive HR solutions for companies like yours, letting you focus on what you do best: growing your business and seizing new opportunities.

Remote takes care of the entire employment life cycle and provides a holistic solution to your international hiring needs. We’re here to reduce your administrative burdens, mitigate legal risks, and offer greater flexibility and cost efficiency.

Get started with Remote’s EOR services today.

Hire and pay your global team with maximum speed and safety

Start onboarding employees and contractors in minutes with Remote, G2’s top-ranked multi-country payroll software.

Get started nowSchedule a demo