In a general sense, the Employer of Record is simply the entity that serves as the employer for tax purposes while the employee performs work for a different company.  The Employer of Record, often referred to as the W-2 Employer of Record because they are responsible for issuing W-2s to the employee, shoulders the responsibility for all the traditional employment tasks and liabilities.

When applied to a contract staffing situation, the Employer of Record serves as the legal employer for a contractor. This responsibility often falls to a third party known as a contract staffing back-office. In other situations, a recruiter can take on the employment tasks and liabilities.

If you decide to add contract staffing to your business model, one of the first things you need to do is determine who will serve as the Employer of Record for your contractors: you or a contract staffing back-office.  If you decide to do it yourself, you need to make sure you have the time and resources to get set up (which typically takes up to six months) and to handle the following ongoing tasks:

  • Payroll processing and funding
  • Tax deposits and filings
  • Employment contracts and paperwork
  • Maintaining Certificate of Insurance
  • I-9 and E-Verify
  • Unemployment insurance
  • Workers' Compensation
  • Background checks and drug screenings
  • Benefits administration
  • (health, dental, vision, life,
  • Employee terminations
  • Employee issues
  • And more

If you do not feel comfortable taking on these responsibilities, a contract staffing back-office not only takes them off your shoulders but also can have you up and running within hours, not weeks or months.

Whether you chose become the Employer of Record for your contractors or outsource those responsibilities, make sure they are handled correctly because there can be consequences at the state and federal level.

Debbie Fledderjohann is the President of Top Echelon Contracting, Inc.

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