EOR vs. Staffing Agency: which hiring solution is best?
In today’s world, businesses keep looking beyond their local markets to hire top talent – and many are doing it remotely. But that isn’t the easiest task. Hiring and employing in another country deals with different local regulations, tax requirements, and compliance laws (to name a few requirements). And there are many options available.
The main ones are EOR or Staffing Agencies. Each model is different, so you must weigh all their pros and cons. And that’s what you’re about to find out.
What You’ll Learn:
EOR vs. Staffing Agency: what is what (and what to consider)
What’s an Employer of Record (EOR)?
How does a staffing agency work?EOR vs. Staffing Agency: the main differences
Role and responsibilities
Compliance and legal responsibilities
Hiring needs
Cost structureSo, how do you choose the best fit?
When to choose an EOR
When to choose a Staffing AgencyIn the end, which is right for you? EOR or Staffing Agency?
EOR vs. Staffing Agency: what is what (and what to consider)
There’s a lot to consider when hiring and employing abroad. First, consider your business goals – do you want to expand to other countries or save money when employing a team?
This question is crucial because your choice will shape your strategy.
Expanding Your Business: If growth, establishing a long-term presence in other countries, and valuing your team are your priorities, an Employer of Record (EOR), like BRIDGE IN, is the way to go. An EOR ensures compliance, quality talent, and sustainable growth.
Cost-Saving Approach: If your focus is cutting costs and starting small, a staffing agency might seem appealing. However, this often comes with trade-offs, including lower service quality and a transactional, short-term approach.
The right solution depends on your long-term goals: are you building something meaningful or settling for short-term gains at the risk of long-term success? Let’s dive deeper to find out what fits your business best.
What’s an Employer of Record (EOR)?
An Employer of Record (EOR) allows companies to employ workers in different countries without establishing a local legal entity. In short, an EOR becomes your staff’s legal employer, acting as an intermediary. This entity handles everything for you, from onboarding to payroll, while ensuring full compliance with local labor laws.
But don’t rush your decision.
Though EORs offer a common service package, some stand out by adding other (super) useful services – at BRIDGE IN, we also take care of equipment, travel, and expense reimbursement, to name a few perks.
Despite those, these are the main services you should be looking for in an EOR:
Onboarding and offboarding employees
Managing payroll and tax filing
Handling benefits administration
Drafting employment contracts
Ensuring legal compliance with local employment laws
But beware, those aren’t mandatory in all EORs, as each company decides what to offer. So it all depends on your business needs.
An Employer of Record is beneficial if you want to expand into a new market for the first time while saving time and money. It’s the ideal option to employ up to 6 people without dealing with heavy bureaucracy or opening up a company.
Needless to say, partnering up with an EOR saves you a lot of money in corporate taxes, government fees, and ongoing accounting fees, among others – regardless of the country you expand into.
How does a staffing agency work?
Before knowing that, let’s focus on two often mistaken terms: Temporary Work Agency and Staffing Agency. And though they seem similar, some differences separate them:
Temporary Work Agency: it primarily focuses on providing workers for short-term or temporary positions, often for specific projects, seasonal work, or to cover absences (like maternity leave). These workers are typically employed by the agency and assigned to client companies for a set period of time.
Staffing Agency: this is a broader term. Staffing agencies provide workers for temporary, temp-to-permanent, and permanent positions. Depending on the client's requirements, they can recruit employees for both short-term and long-term needs.
These companies work as intermediaries, too, between employers and employees. Check their most common services:
Writing and posting job descriptions
Screening CVs and conducting interviews
Matching leading talent with business projects
If you’re focusing on temporary roles or managing seasonal hiring needs, maybe a temporary agency can help you – but know that once you employ a worker, the relationship between you (the business owner) and the agency ends there.
EOR vs. Staffing Agency: the main differences
There’s something you can’t deny by now: both EORs and Staffing Agencies can help businesses employ abroad. So, it all comes down to what your needs and goals are in the long run.
Why? Because both models are (so) different.
Role and responsibilities
EOR: Acts as the full legal employer, handling everything from recruitment to payroll, HR tasks, and benefits.
Staffing Agency: It specializes in finding and lending qualified candidates for a variety of needs, whether it's for specific projects, temporary assignments, or permanent positions.
Compliance and legal responsibilities
EOR: Takes on all legal responsibilities. It ensures compliance with local labor laws and employee contracts. It can also offer guidance on tax fillings.
Staffing Agency: Though it helps find the ideal candidates, the employer is responsible for the worker’s employment – including legal compliance, payroll, and HR needs. Not to mention that workers’ final salaries are lower due to the fees these agencies charge (much higher than EORs).
Hiring needs
EOR: It’s the best option to create a long-term presence in a new country without setting up a legal entity.
Staffing Agency: Best suited if you’re focused on temporary or short-term hires (though it can support long-term hires, too).
Cost structure
EOR: It normally charges a fee per employed worker, depending on the total of hires and the services included.
Staffing Agency: The cost structure is much more complex in this case. Here’s how it works:
Markup on hourly rates, from 25% to 100% (for temporary and contract workers): the agency charges the client company a markup on the hourly wage paid to the temporary or contract worker. The staffing agency pays the worker a base hourly wage and then bills the client at a higher hourly rate. For example, if the agency pays the worker $20 per hour, it might bill the company $30 per hour. The difference (in this case, $10) is the agency’s fee, which covers recruitment, payroll, taxes, and other administrative costs.
Direct Hire Fees (for Permanent Placements): a one-time fee (ranging from 15% to 50% of the employee’s annual salary) that the agency charges when placing a candidate in a permanent role with the client company. That fee is usually a percentage of the hired candidate’s first-year annual salary. The company pays this fee after the candidate is hired.
Temp-to-Hire Fees (for Temp-to-Perm Placements): for positions where a temporary worker transitions into a permanent employee, there’s often a fee charged for converting the temp into a permanent hire – similar to the one for direct hire, though often reduced depending on the length of the temp period. The client may pay a prorated fee based on how long the worker has been with them as a temp. The longer the temp worked, the lower the fee, or in some cases, no fee is charged after a set period (e.g., 90 days).
Retained Search Fees (for Executive or High-Level Placements): a specialized model for high-level roles (e.g., executives), where the agency charges an upfront retainer fee to conduct an exclusive search (from 25% to 35% of the executive’s annual salary). The client company pays part of the fee upfront (retainer) and the rest upon successful placement. The agency is dedicated to finding a highly qualified candidate within an agreed timeline.
Recruitment Process Outsourcing (RPO) Fees: for large-scale or ongoing recruitment needs, some companies outsource their entire hiring process to a staffing agency, which charges a service fee for this management. Fees can be based on the volume of hires, monthly retainer fees, or a cost-per-hire model. They highly vary depending on the scale of the hiring needs and the complexity of the roles, but fees are often calculated based on the number of hires made.
Other Fees that Can Be Included: Contract Buyout Fees - if a client wants to hire a temporary worker full-time before the end of the contract, they may need to pay a buyout fee.
Now that you know the main differences, it’s time to choose the best model for your business – between an EOR and a Staffing Agency.
So, how do you choose the best fit?
You’ve probably heard this a million times, so here it goes one more: it depends.
You must analyze your business and understand its needs. You should also consider where you’ll expand to, how many people you want to employ, and for how long.
Let’s make it easier for you.
When to choose an EOR
An Employer of Record saves overseas hiring by being cost-efficient and relatively fast when employing – especially when compared with opening an office in a foreign country. You should pick this model if you:
Want to hire in a new country but don’t have a local legal entity (and don’t plan to do it in the near future).
Need long-term employees and a lasting partnership to manage HR, payroll, and compliance (and most fiscal and legal matters, too).
Don’t have the time to deal with local legal obligations, especially in a country you don’t know.
An EOR is more than just a company helping you recruit and employ. It’s an ongoing solution for all your employment needs in a brand-new country.
When to choose a Staffing Agency
In turn, a Staffing Agency is the better option if you:
Want a short-term or temporary solution, such as filling seasonal roles or getting an extra hand for a new project.
Want assistance sourcing the right talent for your business needs.
Have an oriented budget for one-time fees (like recruitment ones) rather than ongoing services.
When choosing between an EOR or a Staffing Agency, choose the latter if you know employees will work for a short period.
In the end, which is right for you? EOR or Staffing Agency?
Again: it depends.
Both have pros and cons, as you’ve already understood. So, it all depends on your business goals.
If you want to establish a long-term presence in a new country and could use some support with legal and fiscal matters, payroll, and HR management, then an EOR is the solution for you – besides, it lets you hire without an office.
However, a Staffing Agency is the right answer if your priority is filling short-term roles or managing temporary staff.
