Employer of record – What it is and why it matters

No matter what industry you work in, chances are at some point you’re going to hear someone use jargon in conversation that you’re not familiar with. When it comes to staffing this is absolutely true. Exhibit A: employer of record.

When you work for a staffing company or temp agency, you are working for that company even though you’re contracted to work for someone else. Therefore, for tax purposes, the staffing company is your “employer of record”. The employer of record handles almost all of the HR functions such as contracts, payroll, tax deposits and filings, and other personnel paperwork. Unemployment insurance and workers’ compensation are also handled by the employer of record. If necessary, the employer of record also manages benefits, disputes, drug screenings, background checks, and hiring/firing of employees.

There’s a lot of crossover in the vocabulary used by human resources, recruiters, and staffing professionals. That being said “employer of record” really only ever comes up when working with a temp agency or staffing company. This is because staffing agencies hire candidates with the purpose of contracting them out to other companies. So while you’re working for Corporation A, you’re actually employed by Temp Agency X. While this distinction doesn’t make that much of a difference in day to day operations, it’s very important when it comes to your benefits, taxes, and pay.

The term “employer of record”, is becoming more common in the lexicon of workers as staffing and the gig economy grows. Several major staffing companies have created apps to improve user experience for their clients and candidates. But one app stands out as being even more significant. Uber has recently branched out from employing drivers with their new service called Uber Works. The app connects job seekers with jobs posted by staffing companies. In practice, this is no different from the apps staffing companies produce. But in reality, the Uber name and the reach it has makes a huge difference. Expect to see this trend continue as companies find new ways to capitalize on technology to increase efficiency and candidate experience.

If you’re curious about staffing & recruiting and would like to learn more, visit our resources pages where you’ll find FAQs, guides, resume samples, and much more.