<span id="hs_cos_wrapper_name" class="hs_cos_wrapper hs_cos_wrapper_meta_field hs_cos_wrapper_type_text" style="" data-hs-cos-general-type="meta_field" data-hs-cos-type="text" >The Difference between an Employer of Record and a Payroll Company (Updated 2020)</span>

For business owners looking to simplify their payroll process, turning to a third-party provider can make sense. For many international employers, the right provider offers a variety of valuable services. There are several options. You could hire a professional employer organization, an employer of record (EOR), or even a payroll company.

If you’re just starting to research your options, you might have a few questions. What does an EOR do? What about a payroll company? What’s the difference between the two of them, and which one is the right choice?


This guide will help you weigh those options and make the smartest decision for your business.


Employer of Record vs. Payroll Company


There are quite a few differences between EORs and payroll companies.

What is an EOR? An employer of record helps you hire, retain, and pay your employees. The expert team at the EOR will take over many of the HR tasks associated with managing your international employees.


Payroll companies offer some similar services but usually focus on software solutions for payroll. They may offer assistance with some HR tasks, but their expertise is often payroll-centered.


A Different Purpose


An EOR offers fairly comprehensive HR services for business owners looking to expand into the US.


An EOR can help an international business by filling out paperwork, helping business owners save time on tasks that would otherwise interfere with revenue-generating activities.


Additionally, an EOR helps you stay on top of payroll-related tasks. Beyond the EOR’s expertise on payroll, your business will also benefit from their experience and insight with the US labor market.


Benefits of Working with an EOR


When your business partners with an EOR, you free up time and still get effective administration of employee benefits, payroll, compliance monitoring, and workers’ compensation. Sending these tasks to a third-party provider comes with plenty of benefits, including cost savings.


You can also benefit from the EOR’s ability to onboard quality talent quickly. This allows you to stay competitive, even in the tightest labor markets.


By contrast, a payroll company understands that excellent service and peace of mind are valuable to businesses. They specialize in easy set-up and effective solutions for payroll. They may offer some add-ons as well, such as benefits administration.


Working with the EOR is often a more flexible solution, as you can readily access all the services you need. Some EORs allow you to work with a variety of providers in their network to offer you more complete support.


A Dedicated Team


Payroll companies benefit international organizations looking for support and software to assist with payroll. An EOR offers you a personal touch to your payroll support. In most cases, the EOR will assign a dedicated account specialist, which means you can trust you’ll consistently receive the same quality service.


Business needs vary depending on the company. Not every enterprise has the same needs when it comes to payroll.


While payroll companies offer a variety of packages, you may find the EOR has more customizable and flexible services. When you work with an EOR, you get a true partner that understands what you need and ensures accuracy every step of the way.


Divvying Up Liability


When you partner with an EOR, you maintain authority over your company’s hiring decisions. The EOR adds value to the process by giving you access to a skilled expert who can handle the paperwork.


One of the main differences between EORs and payroll companies is actually liability and responsibility. While payroll companies give your business the tools to make paying employees easier, only an EOR will take on the majority of legal responsibility.

An EOR will ensure all international employment decisions correspond with government regulations, offering peace of mind.


If you need simple payroll solutions, a payroll company could be your best bet. If you’re looking for even more help in your HR department, it’s time to get in touch with an EOR.


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