What is an employer of record? EOR vs. PEO vs. staffing agency vs. payrolling
On this page
An employer of record (EOR) is a company that legally employs a worker on behalf of another business: it issues the employment contract, runs payroll, withholds and pays employment taxes, carries workers' compensation and provides any benefits, while the client directs the work. "Employer of record" is a commercial label rather than a defined category in federal tax law; the IRS looks at who the common-law employer is, and lets responsibility shift only in limited cases such as an IRS-certified PEO. Some states regulate the arrangement under their own names: as of October 2026, Florida licenses "employee leasing companies" and South Carolina licenses "professional employer services."
This page explains what an EOR does, how it compares with a PEO, a staffing agency and payrolling, what the state rules behind common searches say, and when recruiters use one. Pricing and contracts for payrolling, the closest US cousin, are covered in payrolling services explained.
Not legal or tax advice. This summarizes the IRS and state statutes linked below as of October 2026. Who is the employer for tax, wage-and-hour, discrimination and benefits purposes can differ; confirm your arrangement with counsel.
What does an employer of record do?
- Employs the worker on paper: the offer letter or employment agreement, the Form I-9 and, where required, E-Verify.
- Runs payroll: pays wages on the state's schedule, withholds income tax and the employee share of Social Security and Medicare, and pays the employer taxes.
- Registers as an employer in the state where the worker works, for unemployment insurance and withholding.
- Carries workers' compensation for the worker's actual duties.
- Provides benefits and leave that the law or the agreement requires.
- Ends the employment when the engagement ends, including final pay under state rules.
What the EOR does not do is choose the worker or supervise the work. The client did the recruiting, or a recruiter did it for the client, and the client directs the job. That split is the whole point of the arrangement, and also its main legal risk.
EOR vs. PEO vs. staffing agency vs. payrolling
| Employer of record | PEO | Staffing agency (temp) | Payrolling | |
|---|---|---|---|---|
| Who finds the worker | The client | The client | The agency | The client |
| Who is the formal employer | The EOR | Shared: co-employment with the client | The agency | The payrolling firm |
| Which workers | Selected workers, often where the client has no entity | All or most of the client's workforce | Workers the agency assigns | A small number of client-chosen workers, usually temporary |
| How long | Ongoing or project | Ongoing | Assignment | Assignment or project |
| Typical use | Hiring in a new state or country; converting a contractor to W-2 | Outsourcing HR, payroll and benefits for the whole company | Filling roles the client cannot fill itself | A known person needs to be put on payroll quickly |
The American Staffing Association's definitions describe payrolling as a staffing firm placing on its payroll workers recruited or hired by the client, usually temporary and a small share of the client's workforce, and a PEO as an arrangement in which a business places all or most of its workforce on the firm's payroll. In US practice, "employer of record" overlaps heavily with payrolling; outside the US it usually means employing someone in a country where the client has no legal entity.
What does US tax law say about who the employer is?
The IRS page on third party payer arrangements and PEOs (updated October 9, 2026) sets out the default: when a business outsources payroll to a PEO, the common-law employer "generally remains responsible for paying taxes and filing returns." The main exceptions are:
- Certified PEOs. Under Internal Revenue Code section 3511, a CPEO is treated as the employer for the wages it pays to worksite employees, which can relieve the customer of liability for those taxes. PEOs apply through the IRS CPEO program.
- Designated agents. Treasury regulation 31.3504-2 lets a payer be designated to perform an employer's tax duties for the wages it pays.
For a staffing or payrolling firm that actually hires the worker, controls payment of wages and is the employer in its contracts, the firm is normally the employer for payroll tax purposes. For an EOR that only processes payroll for someone else's employees, the client may still be liable. Ask any provider in writing which it is.
Employer of record rules in Florida and South Carolina
Searches for "employer of record Florida" and "South Carolina employer of record" usually come from businesses checking whether the provider must be licensed. Both states regulate the leasing or PEO model by statute.
| State | What the law regulates | Key requirements | Source |
|---|---|---|---|
| Florida | Employee leasing: a leasing company assigns its employees to a client and shares direction and control with the client. Temporary help arrangements are excluded. | License from the Board of Employee Leasing Companies; application fee of up to $250; net worth of at least $50,000 for an initial company license; written notice to each worker of the relationship. A licensed company "is the employer of the leased employees" and is responsible for reemployment assistance taxes and workers' compensation. | Fla. Stat. 468.520, 468.524, 468.525, 468.529 |
| South Carolina | Professional employer services: long-term arrangements in which employment responsibilities are shared with the client and assigned employees make up a majority of a worksite's workforce or a specialized group. Temporary employees are excluded. | "A person may not engage in or offer professional employer services in this State without holding a license." Application fees of $100 per controlling person and $200 per PEO, or $300 per PEO group; background checks of controlling persons. Licensed by the Department of Consumer Affairs. | S.C. Code Title 40, Chapter 68 |
Notice what both statutes leave out: ordinary temporary staffing. A staffing agency that hires its own temps and assigns them is regulated, if at all, under the state's employment agency rules instead; see Florida and South Carolina staffing license guides. Other states register PEOs or treat leased workers differently for unemployment insurance; the Mississippi guide, for example, covers how that state handles leased workers and temps.
When do recruiters use an employer of record?
- The client is not set up in the worker's state. Hiring a remote employee in a new state means registering for unemployment insurance and withholding there; an EOR or payrolling firm that is already registered avoids that for one hire.
- The worker is in another country. This is the most common use of the term outside the US: the EOR employs the person under local law where the client has no entity.
- A contractor should be an employee. If a client was about to pay someone as a 1099 contractor and the work looks like employment, an EOR puts the worker on W-2. See worker misclassification for staffing agencies.
- Direct sourcing. Contingent workforce programs that recruit through their own talent pools need someone to employ those workers; see VMS vs. MSP vs. direct sourcing.
- Speed. A short engagement can start before the client's own HR onboarding would finish.
Some contingent workforce vendors bundle the role: as of October 2026, Magnit lists employer of record services alongside its VMS and MSP, and Beeline offers employer of record and agent of record services through MBO Partners by Beeline. Staffing agencies with multi-state payroll can offer the same service as payrolling.
What should you check before using one?
- Who the employer is, in writing, for payroll taxes, workers' compensation, I-9 and E-Verify, and whether the provider is an IRS-certified PEO.
- State licensing of the provider where the worker works, if the state licenses leasing or PEO services.
- Workers' compensation class code that matches the actual duties, not the job title.
- Who handles workplace issues: harassment complaints, safety, accommodations and termination decisions. The client directs the work and can still be a joint employer; see joint employer liability for staffing agencies.
- Benefits and leave the worker is entitled to under state and local law.
- Conversion terms if the client later hires the worker directly.
- Price: a markup on pay or a flat fee, and what it includes. The cost structure is worked through in payrolling services explained.
Questions people ask
What is an employer of record?
An employer of record is a company that legally employs a worker on behalf of another business. It issues the employment contract, runs payroll, withholds and pays employment taxes, provides workers' compensation and any benefits, and handles employment paperwork, while the client business directs the worker's day-to-day work.
What is the difference between an EOR and a PEO?
A PEO enters a co-employment arrangement covering all or most of a client's existing workforce and shares employer responsibilities with the client. An employer of record usually employs selected workers, often in a state or country where the client has no entity, and is the worker's formal employer. In US tax law the client generally remains responsible for employment taxes when it uses a PEO, unless the PEO is IRS-certified.
Do employer of record companies need a license in Florida?
If the arrangement is employee leasing under Florida law, yes. Florida Statutes chapter 468, part XI, requires employee leasing companies to be licensed by the Board of Employee Leasing Companies, and section 468.529 says a licensed employee leasing company is the employer of the leased employees. Temporary help arrangements are excluded from the definition. Check with the Department of Business and Professional Regulation which category your arrangement falls into.
Does South Carolina regulate employer of record or PEO services?
South Carolina requires a license from the Department of Consumer Affairs to engage in or offer professional employer services, under S.C. Code section 40-68-30. The statute defines those services as long-term arrangements in which employment responsibilities are shared with the client, and it excludes temporary employees.
When would a recruiter use an employer of record?
Typically when a client wants to hire someone in a state or country where it is not set up as an employer, when a client-chosen contractor needs to be put on a W-2 instead of paid as a 1099 contractor, or when a contingent workforce program needs an employer for workers it found through direct sourcing.