Your small business probably does business with other businesses that outsource their HR and payroll management. One of the most common is an employer of record company that manages employee benefits for companies. You can use EOR services like these to help reduce fees, save time, and improve your cash flow.
In this article, we’ll go over some of the benefits of EOR services. We’ll also explain how to set them up, and select the best EOR for your company.
We’ll provide more detail about their services in the next article in this series.
Who Are The Employer Of Record Services?
Employer Of Record (EOR) services can be a way for your business to outsource parts of its payroll. They are companies that specialize in managing employee benefits, like health insurance and pensions. These companies can also handle tracking employee time and payroll taxes.
They are also called Payroll Service Providers (PSP), or Human Resources Service Providers (HRS), or Employee Benefits Administrators (EBA). These are the most common types of EORs that small businesses use.
The PSP has the knowledge and skills to work with the healthcare, pension, and employment law system. Many of these companies have expertise in tax management, retirement planning, and HR compliance. They also have the relationships to help manage your employee benefits.
(Some large companies use EORs for other companies that they own, like a subsidiary. But most small businesses use them.)
Larger businesses have corporate HR departments that handle these functions. Smaller businesses often don’t need this level of service, so they can outsource them.
How does EOR Service work?
EORs are hired by a business (employer). They get payroll services, or human resources services. The EOR operates a company that handles the employee benefits. These companies charge on an hourly basis or other fees.
Your EOR will handle:
- HR Services
- Tax Compliance
Many EOR companies have hundreds of clients. They offer services to nearly every type of company from small businesses to large corporations and government entities. Some offer services for sole proprietors and partnerships as well.
They may work with your employees, or they could be contracted to an insurance agency or pension administrator.
What Are Some of the Benefits Of Using EOR Services?
With these EOR companies, you can focus on running your business. They can help you keep costs down and reduce payroll taxes. You can also design an employee benefits package that fits your company and budget. Employee benefits are usually managed by the EOR all by themselves.
You don’t have to hire a bunch of extra staff to deal with payroll issues, either.
How To Select Your EOR In the first part of this series, we’ll go into how to select your EOR.
In the second part, we’ll go over more detail about their services.
We’re also going to provide a couple lists of Best Places To Find EORs in upcoming parts. We’ll also provide links to some forums where you can talk with other small business owners and ask questions.
- Staffing Costs Can Be Reduced. With an EOR, you don’t have to hire additional staff to deal with payroll and benefits issues. This could save your business money in the long run. Many EORs will provide a high quality service at an affordable rate, generally under $40 per employee per week when combined with a payroll provider or HR manager.
- Your Organization’s Cash Flow Will Improve.When you outsource your payroll to an EOR, you can get help managing employee benefits. Your EOR will handle everything from setting up new policies to processing your company’s payroll. You’ll also have the ability to negotiate better rates on the healthcare, health insurance, 401(k) and pension plans you offer.
- Time Can Be Saved With EOR Services. You don’t have to spend time negotiating benefits contracts with insurance agencies or employee benefit administrators. In fact, you can all but automate your benefits plan administration.
- EORs Are More Reliable. Your EOR will also help you manage your employee relations and comply with laws and regulations. They’ll save you time and enables you to focus on other things that are important for your business.
- Deductions Can Help Your Business. If you use an EOR Services for your hiring process, there are tax benefits available for the company besides just reduced overhead costs. Deductions can add up to a substantial amount. They range from 20% for the first 30 employees hired through an EOR up to as much as 35% if you hire part-time workers.
- EORs Handle All Or Some Of The Tax Compliance Process. Some EORs that provide HR services also do payroll and benefits tax compliance. This can help reduce your business’s tax liabilities.
If you’re providing healthcare benefits to your employees, you’ll need a service that handles claims processing. You’ll also want one that can negotiate better rates with your insurance agencies and human resources providers.
You should have payroll tax compliance services, as well. A good EOR will have the experience and expertise needed to help manage the compliance process for you.
You may be able to get more financial help from the government for hiring more employees if you hire them through an EOR.