The contingent, or contract, workforce refers to workers who are not permanent company employees but work on a temporary or contractual basis. This group includes freelancers, independent contractors, consultants, and other non-employee workers who provide services to companies for specific projects or time periods. According to Forbes (The Freelance Revolution is Ahead of Schedule, October 8, 2022): “Two thirds of freelancers are satisfied with their career, work-life balance, and compensation. Forty percent of full-time employees in the US have a side-gig.”
As businesses increasingly turn to contingent workers to fill specific skills gaps or to provide short-term solutions, the employer-of-record (EOR) service has emerged as a key player in supporting this trend. An EOR is a third-party service provider responsible for managing timekeeping, payroll, taxes, insurances, benefits, and other administrative tasks associated with the contract worker. The EOR becomes the legal employer while the contract worker is on an assignment with the client company. Any Workers Comp claims which arise are handled by the EOR and it is their WC rating that is affected in the event of a claim.
One of the key benefits of using an EOR is that it allows companies to effectively manage their contingent workforce without taking on the legal and administrative burdens of hiring and managing these workers directly. This includes compliance with labor laws, payroll taxes, and providing workers with access to insurance and benefits packages that may not be available to them as independent contractors. The EOR will stay current with labor-related rules and regulations in local jurisdictions regardless of the location of the worker. Recruiters in one state can easily place workers for a client in another state, without having to register in the state where the worker is located.
Another benefit of using an EOR is that it allows companies to quickly and easily scale their workforce up or down as needed without going through the time-consuming and costly process of hiring and training new employees. This can be particularly valuable in industries that experience fluctuations in demand or in situations where companies need to quickly bring in specialized talent for specific projects. Contingent labor working under the umbrella of an EOR gives the client company flexibility in staffing while avoiding the cost of a bad hire. The option for a direct-hire after 60 to 90 days can be left open if the candidate is a good fit for the job. The recruiter can earn a “conversion fee” which would equal the regular direct-hire fee minus any profit that has been earned while the contractor was on assignment. If the applicant does not work out there is no further cost to the client company. This benefit of providing the client company with a means of “trying out” the worker without incurring significant costs or risks of a bad hire can be valuable in view of the rampant exaggeration of worker skills common in the labor market today.
The use of EORs and contingent workers is on the rise, driven partly by the growing popularity of the gig economy and the increasing demand for flexible, on-demand talent. As companies turn to contingent workers to meet their workforce needs, the employer-of-record service will likely continue to play a vital role in ensuring that both companies and workers can benefit from this alternative way of working. For further information concerning EOR services, contact Angela Alberty of myBasePay at 713-748-9612 or at angela@mybasepay.com.
