While Employer of Record (EOR) payrolling seems to be a commonplace practice by a majority of our clients, I’m often surprised to find that many people in our industry are still unsure as to what it is exactly. I’m even more surprised to find that when I speak with a company about their need for EOR payrolling services I’m told that they don’t use contractors, or don’t need to payroll contractors, only to find out that they indeed are already using such a service!
Why the confusion? EOR payrolling often flies under the radar. While internal employees may assume that the contractor in the neighboring department was sourced and hired through a staffing agency, that’s not always the case. EOR Payrolling is a service for hourly or project-based workers who are pre-identified by a corporation, but then outsourced to a third party provider to be on-boarded, paid and then off-boarded when the assignment has ended. The contracted firm is often referred to as the Employer of Record (EOR). The EOR is then also responsible for withholding taxes, payroll taxes and providing access to benefits. Another plus, since the EOR didn’t spend resources to recruit the talent, payrollees are processed at a significantly lower rate or mark-up than traditional staffing services.
WHO IS A PAYROLLEE?
Payrollees are hourly or project‐based employees brought on assignment for a defined period of time or scope of work. It could be as short as one week or as long as a year, sometimes longer. Some common labels applied to these individuals are contractor, temporary, freelancer, intern, and retiree. In many cases, payrollees are known to the company from a previous engagement or as former employees.
WHAT ARE SOME ADVANTAGES OF PAYROLLING?
Companies are relieved of the administrative burden of conducting new hire paperwork, including obtaining W‐4s, filing I‐9s, withholding payroll taxes and issuing W‐2s. Background checks, drug testing and company-specific pre-employment screening can also be conducted on behalf of the client.
Back Office Augmentation
Companies may not have the staff to on‐board an influx of project employees or summer interns, for example.
Companies want to avoid the risk of hiring temporary employees onto an internal payroll. Contingent labor comingled with regular salaried employees may demand the right to be entitled to the same lucrative benefits as salaried staff.
Sometimes it’s more cost effective to use a third party than to hire or utilize additional internal staff to process these employees. Companies look to avoid the costs associated with a higher incidence of unemployment insurance and workers’ compensation claims and other liabilities of adding these temporary workers to their internal payroll.
WHO CAN WE PAYROLL?
Think this service might be right for you and your organization, but not sure what specific types of contract talent your company could potentially payroll? You might be surprised. My favorite example of the broad range of possible uses for an EOR is the Fortune 100 insurance company that asked me if we could payroll their Magicians. Yes, Magicians and Cupcake Decorators and Pilates Instructors and Chess Club Leaders. These are just a handful of positions they staffed for at their Health Centers throughout the country. Some other examples I have come across recently, by industry, include:
Brand Ambassadors, Event Registration, Samplers, and Production Crew
Photographers, Product Stylists, and Copywriters
Call Center, Accounting & Finance, Graphic Designers, and Pilates Instructor
Buyers, Planners, and Designers
Analysts, Lab Techs, and Chemists
Make-up Artists, Skincare Specialists, and Fragrance Spritzers
Summer Interns, Administrative Staff that come back frequently, and Staff for special project.
As you can see, the possibilities are endless; we have even payrolled corporate pilots! If you’re interested in learning more about EOR payrolling and how your company can benefit please contact me at email@example.com