What is an Employer of Record? Everything you need to know about EORs in the US
What is an employer of record (EOR)?
An employer of record (EOR) is a third-party organization that serves as the legal employer for workers. The main purpose of an EOR in the US is to help international companies reduce the time and risk associated with managing their own workers in the US. This is especially important for small to medium-sized recruitment companies that don’t have the resources or expertise to handle the complex and ever-changing employment regulations in the US.
An EOR is responsible for all aspects of employment:
- Onboarding
- Compliance with local laws
- Timekeeping
- Payroll
- Taxes
- Employee Benefits
- Offboarding
Essentially, the EOR handles all the legal and administrative aspects of employment, while the workers themselves perform their duties for the end customer.
Advantages of using an EOR in the US
International recruitment companies can benefit from working with an EOR for a variety of use cases. A common reason to work with an EOR in the US is to hire contractors quickly and compliantly without a US entity. EOR’s are also a great option for international recruitment companies that are expanding into new states or into the US for the first time, where they may not have the knowledge or resources to comply with local employment laws and regulations.
Relieve legal burden
Working with an EOR allows international recruiters to tap into the US talent pool without having to stress over the challenges that US compliance presents. Employment laws in the US vary state-to-state and are always evolving. It can be hard to keep up! An EOR ensures compliance with all local and federal laws in the US, such as the Fair Labor Standards Act (FLSA).
How an EOR helps with US compliance
Using an EOR can also help to mitigate the risk of misclassifying workers as independent contractors. This is a particularly important issue in the US, where federal and state laws have specific criteria for determining whether a worker is an employee or an independent contractor. By using an EOR, international recruiters can confidently hire in the US knowing that all workers are classified properly and will receive the appropriate compensation, benefits, and protections under the law.
Learn more about US worker classification
Relieve administrative burden
EORs in the US streamline administrative tasks related to payroll, taxes, and employee benefits for US workers that would otherwise be time-consuming and complicated for an international recruitment company to tackle by themselves. The EOR handles all paperwork, including tax withholding and employee benefits enrollment, freeing up the recruitment company to focus on finding top talent. By outsourcing these administrative tasks, recruiters can also reduce the risk of errors and omissions that could result in legal implications.
Things to consider before working with an EOR
The cost
The total cost of working with an EOR can depend on a variety of factors, such as how many employees you employ through the EOR and what type of workers they are, the EOR’s pricing structure and the tailored services your recruitment company needs.
EORs commonly charge a fixed monthly fee per worker or a percentage of payroll, but some EORs in the US may use other methods. It’s important to be aware of all fees before working with an EOR to ensure that it makes financial sense for your recruitment business.
The team and support model
As an international recruitment company looking to work with an EOR in the US, it’s important to find a support team of US recruitment and compliance experts who are knowledgeable and willing to help answer all questions throughout your journey of hiring in the US.
Working with a trusted EOR is crucial because they act on your company’s behalf for your US workers; handling their contracts, compliance, payroll and employee benefits.
Disclaimer: This post is provided for informational purposes and should not be considered legal advice, the final word on this topic or a political opinion.