How Does An Employer of Record Work?

by Grant Geraghty | Apr 16, 2020 | EOR

An Employer of record can help businesses access top-notch benefits assist them with various compliance worries.

The contract between your business and an employer of record distributes the employer responsibilities. By this contract, an employer of record will handle payroll administration and related tax filing, and provide HR support and access to benefits, while your company retains responsibility for day-to-day operations and management of your company’s employees. Through this sharing of employer responsibilities, your company can leverage economies of scale.

How Can An Employer of Record Help My Business?

While each company needs may differ, there are several main advantages that an employer of record can bring to the table.

Cost Savings on Employee Benefits and Hiring

By working with an employer of record, employees are generally grouped together form one large group. This means that the EOR can provide the employees access to health coverage and rates on par with those of a large corporation, even though they work for a much smaller operation. Additionally, most employer of record will provide HR support through employment-related paperwork.

Payroll

Think automated deposits, one-off payments, and more. EORs help administer payments to full-time and part-time employees (salaried and hourly), and sometimes vendors and contractors as well. In sum, they handle the end-to-end payroll administration processes, saving you on time and software.

Benefits

Employer of records help with different types of benefits administration, such as benefits onboarding, claims, and other benefits-related paperwork. They can help you access medical coverage for your team at affordable rates. That’s because the EOR model typically aggregates the employees of many businesses together to harness the buying power normally reserved for much larger businesses.

Compliance Support

An employer of record will support your employer-related compliance needs for payroll taxes, employee tax forms, and reporting forms.

Compliance support often includes:

New hire reporting
Workers’ compensation
W-2 and 1099 filings

Protect Against Risk

More than 33% of small businesses get fined every year for making payroll mistakes. And that's just for payroll! The reality is that compliance can be complicated and there is lots of paperwork to file and insurances to secure. While you can do this on your own, you probably didn't start your company to become a compliance expert and the cost of getting things wrong can be pretty high.

EORs are experts on employment-related compliance. They know the paperwork you need to file and, in certain cases, they can file it for you.

Time Saving

Running your own business can sometimes be a race against the clock. There's always more to do and not enough hours in the day to get it done. If you go for an EOR though, there's a lot they can take on from you when it comes to employment-related administrative work, which can often mean getting multiple hours back every day or week.