What is “Employer of Record” for Recruiters?
When discussing contract staffing, you may hear the phrase “Employer of Record” and wonder what it means.
In general, this phrase refers to the entity that is the employer of a worker for tax purposes when that worker performs services at a different company. You may hear it more specifically referred to as the W-2 Employer of Record. That’s because this entity must issue W-2s to the employee. This entity also assumes responsibility for all of the traditional employment tasks and liabilities.
In a contract staffing situation, the Employer of Record is the contractor’s legal employer. This may be you as the recruiter. You can also outsource this responsibility to a third party known as a contract staffing back office.
Employer of Record for Recruiters
When you add contract staffing to your business model, one of the first things you need to determine is who will be the Employer of Record for your contractors. Are you going to do it? Or are you going to outsource it to contract staffing back office?
If you choose the “do it yourself” route, be aware. You’ll need significant time and resources to get set up (which can take several months) and to handle the ongoing tasks:
- Background checks and drug screenings
- Time sheet collection and tracking
- Payroll processing and funding
- Tax deposits and filings
- Employment contracts and paperwork
- Maintaining a Certificate of Insurance
- I-9 and E-Verify
- Unemployment Insurance
- Workers’ Compensation
- Contractor insurance package and benefits administration (health, dental, vision, life, 401k)
- Employee terminations
- Employee issues
Seem overwhelming? Remember, you don’t have to take on these responsibilities. A contract staffing back office can assume the tasks and liability. Not only that, but they can also have you up and running within hours, not weeks or months. You can IMMEDIATELY start accepting contracting job orders without any upfront financial investment or additional overhead.
Whether you become the Employer of Record for your contractors or you outsource those responsibilities, make sure they’re handled correctly. If not, you could face consequences at the state and federal level.