As a small business, it can be difficult to manage payroll and HR services, without taking focus away from the core of your business. If you don't have extensive experience in financial recordkeeping, it can be difficult to manage accounting and tax preparation. Since the consequences for mistakes in these areas can be complex, risky, and expensive, it's often in a business's best interest to outsource payroll, HR management services, and employee benefits to a dedicated company, so that you can focus on the business itself, without the employer minutiae.
EORs and PEOs
Employer of record services, also known as professional employer organizations, can help take the weight of these responsibilities off of your shoulders. These organizations offer outsourced HR management services, such as payroll, benefits, worker's compensation, recruiting, and training and development. Employer of record services do this by hiring a client company's employees, thus becoming their employer of record for tax and insurance purposes. This practice is known as joint-employment or co-employment.
One area where this is a particular problem is when a U.S. business is looking to hire Canadian employees. There are a number of different laws and regulations between the two countries, and it can be intimidating for a small business in the U.S. to have to deal with and understand these differences. However, an employer of record in Canada can legally be the employer of these Canadian employees, in the eyes of the Canadian government, and they will handle any necessary payroll and benefits responsibilities.
Portable Employer of Record
Management and taxation responsibilities can be particularly difficult for those taking on independent work arrangements. A portable employer of record is ideal for independent contractors and freelancers, acting as an umbrella employer for self-employed professionals, in return for a small percentage fee on revenues earned. Portable employer of record services can take on handling such responsibilities as invoicing and collecting, credit checks, medical, dental, and life insurance, withholding for income taxes and self-employment taxes, and 401(k) and other retirement plans.
Strength in Numbers
A big advantage of employer of record services is that they have a huge employee count, which then allows them to negotiate benefit plans for more favourable rates than a small business could get on its own. These services save you the time and money of hiring a payroll processing service, an HR department, and negotiating a benefit plan. You get all those things in one with a professional employer organization.