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What are the benefits of working with an employer of record?

Posted on May 25th, 2016 Read time: 3 minutes

Peter Limone, CPA, CGMA – President and CFO and contributing author Karen Fisher, CSP.

As the U.S. economy continues to slowly rebound from the effects of the Great Recession, many organizations will be looking to add to their payrolls in 2016. If you’re unsure whether to hire a permanent employee, you may consider temporary help or a temp to hire arrangement. There’s an economical alternative to using a staffing agency which is an employer of record, also known as a payrolling service. These companies provide their services at a lower cost than staffing agencies because they typically do not provide recruiting services.

In my experience many businesses are not aware of the benefits of working with an employer of record. Here are some reasons why a company would want to partner with an organization of this kind:

 

Time savings: On-boarding of employees has become a time consuming process. Besides the employment application, there are requirements such as I9s, E-Verify, Drug Screening, Background Checks, W4s, and State Tax Forms to name a few.  Each of these processes may have specific requirements mandated by law.  As an example, do you know how long and employer has to complete form I9? Currently it’s within three days of the hire date.  More information can be found on Department of Homeland Security Website. On-boarding also involves tracking the employee to determine when they become eligible for benefits such as 401K plans or medical insurance plans. An employer must always be careful to follow rules within the 401K plan, a potential side effect is losing the plan’s qualified status.  The Department of Labor has a great website listing your responsibilities as an employer providing 401K benefits.

 

Compliance management: There are a number of laws that must be followed at a local, state and federal level when hiring employees. In addition, many of these guidelines can be fluid and change constantly. Partnering with a payrolling company that is well-versed in payroll and employment law alleviates a company’s human resources department from having to stay updated on any new changes to these critical rules and regulations. Imagine if your business is all within the state of Florida but you want to expand to Georgia or Alabama.  Are you or your HR department familiar with employment law in these states?  An employer of record can help you transition into those states by providing payroll and benefits until you are ready to take over managing employment within those states. This arrangement can be in place for just a few weeks or a few months depending on your time schedule.

 

Employee benefits administration: In addition to payroll concerns, companies are also responsible for ensuring that these individuals have benefits that are adequately maintained and meet their individual needs. However, when working with an employer of record in many instances they have the ability to negotiate lower rates than a company can secure by themselves. Given the changes to the Affordable Care Act, partnering with an employer of record may be a wise investment.

These are just a handful of benefits that a company can see simply by outsourcing a small portion of their back office support needs. For organizations looking to lower overhead and operate on a much higher level of efficiency, utilizing payrolling services could help in achieving this worthwhile goal.

 

An experienced employer of record can help you avoid expensive issues that may arise with your contract or contingent workers. Reach out to the friendly experts at Innovative Employee Solutions for further assistance today! – See more at: Innovative Employee Solutions.

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