Why do Companies Partner with Employer of Record Firms?



Employers of record or “EOR” firms act as a surrogate employer for their customers. EORs fulfill the legal obligations required of an employer for tax and regulatory compliance purposes while the employee performs work for the EOR client. An employer of record handles the payroll processing, e-verify forms, unemployment insurance, onboarding/off-boarding, taxes, I-9s, worker compensation, background checks, drug screenings, benefits administration, terminations and any other worker-related issues. Corporations and other organizations continue to seek money-saving strategies, and by hiring an EOR firm, many are achieving significant savings of money and time.

For some EOR customers, it also comes down to cost avoidance. If a workforce management staff is not fully engaged with handling payroll services on a daily basis, there is a heightened risk of errors and inefficiency in their processes. A staff lacking the experience and expertise to properly handle the sometimes-complex tasks associated with workforce management can quickly run afoul of laws and regulations that ultimately cost the company money.

By partnering with an EOR firm, companies save time and mitigate risk. With the complexity inherent in managing disparate payroll laws across multiple states, companies must ensure the business processes and technologies they engage are flexible enough to be fully compliant. Moreover, they must make sure their personnel are fully trained and knowledgeable about the differing laws enforced across multiple states. The cost to maintain professionals on staff to address these thorny and time-consuming issues can be prohibitive.

EOR firms help companies stay focused on their core business by taking the burden off the shoulders of internal staff. Every minute a company spends learning to deal with these tangential tasks of payroll, benefits, tax, safety compliance, etc., is a minute they are losing focus on their core business. The negotiated fees charged by EOR firms typically cover the cost of health benefits, payroll taxes, and other associated activities.

EOR firms help companies save money by:

  • Decreasing the weekly payroll processing workload.
  • Minimizing time and effort spent learning and complying with federal, state and local taxes, insurances, employment/benefits law, and other requirements for payrolling employees – nationwide or internationally.
  • Simplifying expense reimbursement for contingent employees.
  • Lowering workers’ compensation insurance and benefits costs.
  • Reducing the unexpected/hidden costs associated with hiring and termination.

To sum up, EOR firms assume the many liabilities and responsibilities for companies they work for. By eliminating the time spent on paperwork and other administrative duties, companies can focus on their core day-to-day operations and focus on making a profit. Making a profit is the bottom line objective of every company, and by utilizing the services of an EOR firm companies gain peace of mind, secure in the knowledge that their EOR is expertly managing the workers they need to help their businesses be competitive and successful.

Want to learn more about how an EOR can deliver these benefits to your organization? Ask your nextSource representative for details specific to your unique requirements.