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Recruitment Agency vs Employer Of Record: What’s best for your business?

An Employer Of Record (EOR) and a Recruitment Agency or Staffing Agency might appear similar, but they’re two different services, each offering a unique set of human resource support. An EOR manages payroll and compliance for your global workforce, while a recruitment agency manages the discovery and placement of new employees within your workforce.  

In this guide, we will look at the differences between an Employer Of Record (EOR) and a Recruitment Agency, and their role when a business outsources parts of its workforce management process.

Key Takeaways

1. Recruitment Agency: They will hire for you – both locally and internationally, reserve the right to direct employees in specific ways, and may even terminate employment. 

2. Employer Of Record (EOR): An EOR may or may not provide staffing services, and will manage termination at the direction of a client company. An EOR is primarily positioned to manage payroll, grant equity, administer insurance benefits and other perks. 

3. The Difference: Recruitment agency relationships are short-term and specific to new or project-based staffing needs. In an EOR partnership, the international recruit remains an employee of the EOR company, while the relationship between EOR and the client company continues.

What is an Employer Of Record (EOR)?

An Employer Of Record is an organisation that serves as an employer for tax, payroll and compliance purposes, while an employee performs work for a different company.

The Employer Of Record is responsible for tasks and functions such as:

  1. Processing payroll and issuing payments

  2. Depositing and filing taxes in accordance with local laws

  3. Compliantly managing unemployment and workers’ compensation insurance

  4. Human Resource operations and employee onboarding 

  5. Issuing tax forms

  6. Conducting pre-employment checks

  7. Administering benefits and perks

  8. Offboarding employees and terminating employment contracts

Companies looking to expand their hiring options without setting up local entities often partner with an Employer Of Record to ensure they comply with applicable legal and financial regulations. In most cases, this becomes the first step to fully entering a new market.

What are the benefits of partnering with an Employer Of Record (EOR)?

Using an EOR is also an effective way to outsource HR functions, such as payroll and benefits administration. The company pays the EOR a standard rate for every hour an employee works. In exchange, the EOR handles all HR tasks.

01. Reduced payroll costs:
There are many benefits of using an EOR. The biggest being – the primary company doesn’t have to manage payroll and HR issues. This allows them to save time and reduce the number of tasks they’re responsible for. This is a game-changer for smaller businesses dreaming of expanding to new places. Imagine a local cafe owner wanting to open a branch in another State. With an EOR, they can focus on their latte art instead of paperwork.

02. Reduced compliance costs:

EORs stay up-to-date with foreign laws, ensuring you don’t unintentionally break any rules! They are also responsible for staying current with employment regulations that vary by state or country. This reduces the need for the company to learn and comply with new laws in multiple regions.

03. One point of contact for your local team:
Instead of multiple entities or subsidiaries, an EOR takes over payroll, HR, recruitment, and employee onboarding. It is a full-service HR and payroll solution, leaving you to focus on your core business.

04. Simplified payments:
Imagine running a global team and getting just one neat invoice at the end of the month? An EOR ensures no more sifting through multiple bills or dealing with currency conversions every week.

05. Global Payroll Comparison:
With an EOR like Horizons you can access a payroll cost calculator that enables businesses to calculate the total cost of an employee, including wages or salaries, taxes, benefits, and other associated costs. The calculator considers various factors, such as insurance premiums and retirement contributions to come up with a figure that can help companies and their employees review potential payroll costs.

What is a Recruitment Agency or Staffing Agency?

A recruitment agency or staffing agency is often brought on board to perform a specific set of staffing services, including discovery, recruitment, and placing employees in a particular project or new role within a company. Staffing companies generally work with these groups of employees:

01. Temporary workers

02. Temp-to-hire, contractors and freelancers

03. Permanent employees

Typically, a business contacts a recruitment agency and explains what they need with regards to manpower. The agency then uses that information to source, shortlist and present the best candidates suited for the client company’s requirements. Payments are usually made once a new hire has been onboarded. 

What are the benefits of using a Recruitment Agency for your staffing needs?

01. Cost Efficiency:

Think of it this way – instead of investing time and money in the hiring process, the recruitment agency does the heavy lifting. It’s like outsourcing your hiring while cutting overheads.

02. Quick Staffing for Short-Term Needs:

Do you have a big holiday season coming up or a short-term project? The agency’s got you covered with the right talent when needed.

03. Rapid Placements:

Imagine having an urgent position to fill and completing it within a day! That’s the agency magic.

04. Streamlined Onboarding:

Hiring an agency means no more diving into the complexities of explaining taxes, benefits, or workers’ compensation. The agency handles the employment contract, letting your HR focus on what they do best.

05. Flexible Hiring Solutions:

Whether you need help often or just once in a blue moon, they’re your go-to for short-term associations.

Should you leverage an Employer Of Record (EOR) or a Recruitment Agency?

An EOR like Horizons offers a comprehensive HR solution for global companies, handling payroll, benefits, and international compliance. Additionally, Horizons provides a 24-hour recruitment service for various employment needs. Whether you’re looking to hire contractors, freelancers or full-time employees, you can leverage an EOR like Horizons to compliantly recruit and correctly classify international talent

In contrast, recruitment agencies are best suited for immediate, short-term hiring needs. While they are efficient for specific tasks, they might not provide a holistic approach like an EOR.

The bottom line? As a growing global business, you must understand your tools. While both services have their merits, with an EOR like Horizons, you’re getting the deluxe edition – the powerhouse that can rally the troops when you’re in a pinch. It’s like having your cake, eating it, and getting a second slice just because!

Can you partner with an EOR and a Recruitment Agency together?

Using an Employer Of Record like Horizons has some advantages over a staffing agency. EORs allow businesses to avoid many risks associated with direct hiring or using a staffing agency, while also offering the same benefits, if not more. 

Suppose an employee is terminated or quits unexpectedly. In that case, this risk is eliminated when using an EOR service because the service is responsible for terminating the employee in their system, so there would be no unemployment claim filed against the business by default. 

Additionally, by partnering with a Recruitment Agency the business could still be held liable for any wage and hour violations committed by its direct hires. In contrast, since EORs take on full responsibility for each worker’s wages, hours, and employment taxes, this risk is significantly reduced or even eliminated altogether.

Using Horizons’ recruitment services can be a valuable add-on benefit that most other EORs don’t provide. Horizons is one of the few providers that caters to recruitment in-house and continues to manage your workforce as an EOR – all this and more as your single point of contact. 

EOR like Horizons
Recruitment Agency
Pre-Employment Checks
Benefits Administration
Insurance Management
ESOPs Management
Worker Reclassification
Risk Management
Global Payroll Comparison

EOR vs Recruitment Agency: What's best for your business?

If you are a growing company that urgently needs a new set of employees for a project, a recruitment agency would be a great fit because they usually have ready-to-deploy workers or can swiftly find them for you.

On the other hand, if you already possesses a solid team or have their hiring needs covered, perhaps through an in-house recruiter or an external agency, and EOR could help you scale faster and compliantly. An EOR like Horizons takes over payroll and compliance duties, allowing your company to stay laser-focused on its primary operations.

An Employer Of Record is the better choice for:

International expansion

If your company wants to expand into new countries and hire foreign workers, an EOR is the right choice. They can help simplify the process by managing local employment requirements, compliance, payroll, and tax obligations.

Risk mitigation

If you want to transfer employment-related risks and liabilities – an EOR can assume those responsibilities. This includes mitigating potential legal and financial risks, workers’ compensation and unemployment claims. 

A Recruitment Agency is the better choice for:

Direct supervision

Hiring candidates through a recruitment agency may be more suitable if you prefer to have complete and direct control over the workers day-to-day activities, which includes reporting structure, work assignments, goals, and schedules.

Project-based hiring

If you have short-term staffing needs, require specialised skills or want to assess a candidate’s performance before making a long-term commitment, a staffing agency can provide flexibility in hiring and workforce management.

Still wondering if recruiting top global talent across industries with an EOR is the next step for your company? Seek guidance from the experts at Horizons.

Frequently asked questions

Yes. In addition to international payroll solutions and Human Resource Management, Horizons can recruit and hire employees for your business. This way, we become the ‘Employer of Record’ for your workforce abroad.

Yes. Employee leasing companies are the predecessors to Employers Of Record. They become the legal employer for workers but do not usually recruit employees or administer benefits, insurance and other perks.

A subsidiary could be required when a business seeks to enter into long-term local contracts.  If the business is large enough, it may even prefer to employ staff and manage payroll, taxes and compliance. We can provide further advice on these situations.