Employer of Record vs Staffing Agency: Which Hiring Solution Is Right for Your Business?
You need to hire a project coordinator in Colombia. Do you call a staffing agency or an Employer of Record? Most business owners get these two mixed up, and choosing the wrong one costs thousands in wasted recruitment fees, compliance penalties, or hiring delays that stall growth. Here’s the confusion: both services help you hire people. But they do completely different jobs. A staffing agency finds candidates. An Employer of Record employs them legally. One handles recruitment. The other handles payroll, compliance, benefits, and everything that comes after you say “you’re hired.” Understanding this distinction matters because the hiring model you choose determines your costs, compliance risk, speed to hire, and long-term team stability. This guide breaks down exactly what each service does, when to use which, and how Viva Global’s hybrid approach gives you the best of both worlds without the limitations. What Is an Employer of Record (EOR)? An Employer of Record is a third-party organization that becomes the legal employer of your workers in countries where you don’t have a legal business entity. Think of it this way: you want to hire a bookkeeper in Mexico, but you’re a U.S. company with no Mexican subsidiary. Setting up a legal entity in Mexico costs $15,000 to $50,000 upfront, takes 3 to 6 months, and requires ongoing corporate maintenance, local accounting, and annual compliance filings. That’s prohibitively expensive for hiring one or two people. An EOR solves this. Viva Global becomes the legal employer of your Mexican bookkeeper for employment law purposes. We handle everything on the employer side of the relationship: employment contracts compliant with Mexican labor law, monthly payroll processing, income tax withholding and remittance, mandatory benefits administration, and ongoing HR compliance. You manage the bookkeeper’s day-to-day work, assign tasks, review deliverables, and integrate them into your team. We carry the employment liability and administrative burden. What an EOR handles for your international hires: One of the most common misconceptions is that EORs and staffing agencies do the same thing. In reality, they serve very different purposes. The EOR model exists specifically to enable international hiring without the complexity and expense of establishing foreign legal entities. What Is a Staffing Agency? A staffing agency specializes in finding and placing candidates into open positions. They’re recruiters focused on the front end of hiring: sourcing talent, screening resumes, conducting initial interviews, and presenting qualified candidates for your final selection. Staffing agencies play a pivotal role in the job market, assisting companies in filling temporary, part-time, or full-time positions and helping job seekers find employment opportunities that match their skills and career goals. When you engage a staffing agency, they handle the recruitment process so you don’t have to. This includes advertising your open position, tapping into their candidate network, screening applications, conducting preliminary interviews, and negotiating offers on your behalf. What a staffing agency does: What a staffing agency does NOT do: Once you hire the candidate, the staffing agency’s job is done. They don’t become the legal employer. They don’t process ongoing payroll. They don’t handle benefits administration or compliance. Those responsibilities fall on you as the hiring company, unless you partner with an EOR to manage the employment side. Staffing agencies shine when you lack internal recruiting capacity, need to fill positions quickly, or want access to specialized talent pools. But they’re not an employment solution. They’re a recruitment solution. The Key Differences: EOR vs Staffing Agency Let’s clarify exactly where these two models diverge. Legal Employer Status Employer of Record: The EOR is the legal employer on paper. They appear on tax forms, employment contracts, and government filings. Your worker is legally employed by the EOR, even though they perform work exclusively for your company. Staffing Agency: The agency is NOT the legal employer for permanent placements. They find candidates, but once hired, you become the employer (or you use an EOR to assume that role). For temporary placements, some staffing agencies do act as the employer during the assignment, but this is limited to short-term contracts. Scope of Responsibilities Employer of Record: Comprehensive employment management throughout the worker’s entire tenure. Onboarding, payroll, benefits, compliance, HR support, and offboarding. The EOR is involved from day one until the employment relationship ends. Staffing Agency: Recruitment only. Their involvement begins when you have an open position and ends when a candidate accepts your offer. Ongoing employment management is not their responsibility. Timeline and Duration Employer of Record: Designed for long-term employment relationships. The EOR model works best when you’re building a stable, dedicated team that you plan to retain for months or years. Staffing Agency: Can support both temporary and permanent placements. However, for permanent hires, the agency’s role is transactional and concludes at the point of hire. Compliance and Risk Management Employer of Record: The EOR assumes legal liability for employment compliance. EORs are responsible for ensuring that all legal and regulatory requirements are met in the country where the employee is based, reducing risk for your company. Misclassification, payroll tax errors, benefits violations, these risks transfer to the EOR. Staffing Agency: Limited compliance involvement. They may verify that candidates meet job requirements and have work authorization, but they don’t manage ongoing compliance obligations. That burden stays with you. Geographic Capabilities Employer of Record: Purpose-built for international hiring. EORs maintain legal entities or partnerships in dozens of countries, enabling you to hire globally without setting up your own foreign subsidiaries. Staffing Agency: Most staffing agencies operate domestically or regionally. While some have international reach, their focus is finding candidates, not managing cross-border employment compliance. Numbers You Should Know Cost Comparison: EOR vs Staffing Agency Let’s talk numbers. Which model actually costs less? The answer depends on your hiring scenario, but here’s how the economics typically play out. Employer of Record Costs EOR services operate on a subscription model. You pay a monthly fee per employee, which covers all employment-related services. Typical EOR pricing structure: For example, if you hire a $30,000 annual salary project coordinator through
