Employer of Record vs. Staffing Agency - What are the differences?

In today’s day and age, organizations have no choice but to expand internationally. If the competition is increasing revenue by expanding into new markets, no business can afford to stay behind. 

However, global expansion comes with many different challenges for businesses. One of them is building a global team to support the business in all new markets and drive growth. 

Upon closer inspection, one realizes that there are actually two separate challenges when it comes to growing an international team, which are finding the right talent and then hiring them in compliance with all the applicable laws and regulations. 

Employer of Record services and staffing agencies help businesses solve both of these challenges. Nevertheless, their services are vastly different and shouldn’t be confused with one another. This blog post tells you what an Employer of Record is and does - and what not - and what the differences are between the EOR model and a staffing agency. 

Employer of Record (EOR) services and staffing agencies are commonly used by organizations that want to hire international talent. However, EOR and staffing firms have totally different roles and responsibilities in the recruiting and hiring process and don’t provide the same value to the business contracting their services. So, what do staffing agencies and EOR solutions offer in terms of services - and what not? 

Services offered by a staffing agency

Let’s start with staffing agencies. A staffing agency, sometimes also called international staff agency or staffing firm, is an organization that specializes in searching, vetting and recruiting candidates for businesses looking to fill a specific position. Businesses registered with the staffing firm can submit their job listings and the staffing agency will then proceed to find matching candidates.

Their core task hence consists of matching client businesses looking for short or medium-term (sometimes also long-term) staff with available workers who have the necessary skill set and experience. In detail, the services of a staffing firm include: 

• Advertising of open job position on behalf of their client

• Reviewing resumes and other application-related documents

• Vetting process of potential candidates

• Enabling contact between client business and potential candidates

Some staffing agencies also hire workers with specific skills (e.g. developers) and then lease them out to client businesses for special projects or assignments. In order to do so, however, they need to have the necessary labor leasing license, like the AUG in Germany. 

It should also be noted that the period during which the worker will be assigned to work for the client company is always limited. Labor leasing agreements can only be concluded for a definite term. Typically, they are short-term, extending to a couple of months. If a business wants to hire employees abroad via a third party on a permanent basis, the only way to do so is the EOR model. 

Services offered by an Employer of Record (EOR)

An Employer of Record (also known as EOR or EOR service) is a global employment solution which enables companies to compliantly hire employees abroad without having to incorporate in that jurisdiction. The EOR acts as the employee’s legal employer on behalf of the business contracting the EOR service. 

Meanwhile, the organization using the EOR service remains the employee’s de facto employer and is in charge of their workload, schedules and everything else that is related to the employee’s role and responsibilities at the company. 

EOR solutions provide a much greater value to a business than staffing firms, since they take over all the legal and administrative responsibilities that come with the employment. The services typically offered by an Employer of Record include:

• Performing employee background checks

• Drafting a localized employment contract 

• Hiring and registering employees

• Managing employee benefits

• Processing payroll

• Handling payroll taxes and social security contributions

• Organizing visa and work permits 

• Providing legal advice

• Maintaining employee records

• Terminating employees

In contrast to staffing firms, though, EORs neither take care of staffing nor sourcing. They don’t proactively search for potential job candidates that match the business’s open position. The business therefore needs to find a matching candidate before contracting the EOR service. 

Another major difference between EOR and staffing firms is the duration of the employment arrangement. As said before, staffing agencies usually focus on finding and providing workers for short-term projects and assignments or as a temporary replacement for a business’s permanent employee who is absent for a longer period of time, e.g. during parental leave. An Employer of Record, on the other hand, is a compliant solution to hire full-time talent permanently.

Interested in knowing more about different international hiring solutions? Then check out this blog post where we tell you all about the differences between PEO and EOR.

Both EOR and staffing services free up time and resources in the client company. Even though they do so in two very different ways. A staffing agency simplifies international recruiting by giving organizations access to a specialized talent pool. An EOR, on the other hand, takes the compliance burden off HR and payroll teams, leaving them more time to focus on business growth.

An Employer of Record further speeds up the actual hiring and onboarding process and increases efficiency thanks to their expertise and the fact that the client business doesn’t need to set up a legal entity. The latter not only saves businesses time, but also a lot of money. 

While staffing firms offer businesses a greater flexibility through short-term employment arrangements and the possibility to fill vacancies on very short notice, EORs guarantee full compliance with local laws and provide organizations with an easy way to enter new markets without making heavy upfront investments and taking financial risks.

Employer of Record

• Speeds up the hiring process

• Ensures compliance with local laws

• Saves businesses time and money

• No need to set up a legal entity

• Increases efficiency

• Easy way of expanding into new markets without risks

• Decreases workload of internal HR and compliance team

Staffing Agency

• Gives organizations access to a specialized talent pool

• Short-term employment offers flexibility

• Speeds up the hiring process

• Allows businesses to fill last-minute vacancies

• Often specialized in a particular industry

As we have seen, EOR services and staffing firms fulfill different purposes when it comes to finding and hiring new talent. Therefore, the cases in which to use each solution differ.

Working with a staffing agency can be a good option for businesses which: 

• Have set up their own legal entity in a new market and need help finding and recruiting talent in a specific industry 

• Would benefit from creating a talent pool of workers with a specific skill to hire on short notice 

• Regularly have special projects they need qualified workers for

• Need to fill positions in line with seasonal demand

An Employer of Record is the best solution for businesses which: 

• Are looking for a compliant way to build and scale their global team

• Want to convert international freelancers to full-time employees

• Have found the perfect candidate for a remote position and want to hire them on a permanent basis

• Need a compliant way to enable employee relocation 

• Are in the transition phase to becoming a remote-first organization and want to hire the best talent anywhere in the world

• Want to test a new market before setting up a legal entity and need a local team to do so

Planning to take your business international? Here you read how an Employer of Record simplifies global expansion.

At Lano, we work with a global network of experienced Employer of Record partners who allow you to build and scale your international team in record time. Hire and onboard remote employees in over 170 countries worldwide in only a few days and offer them localized, competitive benefits packages. 

Put compliance on autopilot and easily manage your entire global team via one smart platform. Book a demo today to learn more about how Lano makes hiring global talent easier than ever before.