Most Asked Questions About Employer of Record Services

As the rising number of remote workers leads to more online collaboration, the workforce has significantly evolved, and the hiring process is changing. For this reason, company owners hire employer of record services to free up more time for managing their core business.
Employer of record services

Frequently Asked Questions About Employer of Record Services – Answered!

What Is an Employer of Record?

An employer of record (EOR) is a third party that acts as a go-between for an employee and the client company. Moreover, the EOR becomes the legal employer for the company and manages its workforce. Businesses hire and contract with EOR service providers to outsource HR services such as payroll, employee compensation, employee benefits, and compliance.

Why Do Companies Use Employer of Record Services?

Improve Resource Management

Unless a business makes the best use of its resources, it won’t remain sustainable for the long term. However, managing resources can be challenging when business owners hire full-time staff to handle payroll. They’ll have to sacrifice a significant portion of their company’s money to operate the payroll department. Many business owners who try to handle this task themselves or work with small teams end up compromising the quality of the work and facing hefty fines.

Since an EOR offers proven experience, they can help mitigate these losses. Consequently, business owners save up to 35% on their payroll because they won’t have to use a traditional staffing firm. The EOR also provides self-serve tracking and reporting. For this reason, the client company gets real-time visibility and information access while eliminating the need to spend costly hours on timesheet submission and approval.

Besides processing payroll, including all applicable tax withholdings, the EOR handles employment agreements, worker eligibility, and statutory enrollment documents. They also incorporate the company’s policies into the onboarding process. These policies include non-disclosure agreements, background checks, and drug screenings.

Stay Compliant with Legislations

Companies are required to account for rules governing overtime, vacation pay, workers’ compensation, and more. Furthermore, those working on a national level often experience difficulty keeping track of the guidelines that differ from state to state or province to province.

Federal taxing authorities, such as the Internal Revenue Service (IRS), frequently update their regulations. As a result, non-specialists struggle to stay up-to-date with each new policy. Unfortunately, making mistakes on payroll or taxes can lead to steep penalties, significantly impacting the company’s ongoing sustainability.

Since an EOR service provider is well-versed in the existing policy, they help eliminate the legwork for business owners. Furthermore, the EOR ensures that all applicable tax withholdings are accurate as they process payroll.

Prevent Employee Misclassification

A company that relies upon independent contractors to complete its day-to-day operations must avoid misrepresenting its workers’ status. Otherwise, it will face steep penalties that often incur interest and expose itself to potential lawsuits and investigations into the misconduct.

An EOR service provider exists to help business owners stay compliant and minimize the risks associated with their contingent labor requirements. They ensure proper employee classification to eliminate any possibility of paying harsh sanctions that make a devastating dent in the client company’s finances.
Employer of record services

Learn More About Employee of Record Services!

ClearPath is a leading certified woman-owned Human Resource Outsourcing company focusing on the contingent labor market. We’ve been providing contractor management and payroll solutions for more than 25 years. Our team of experts serves clients throughout the United States and Canada. Get in touch with us today to learn more about what we can do for your business.