Employer of Record vs. staffing agency: what’s the difference?

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• Employer of Record (EOR) takes on full legal responsibility for employing staff, including compliance, payroll, benefits, and contracts.
• Staffing agencies focus mainly on sourcing and placing candidates, often on a temporary or project basis, without assuming employer responsibilities.
• Choosing between an EOR and a staffing agency depends on business goals.  Organisations need to decide if they require a long-term compliant hiring solution or short-term recruitment support.

Expanding into new markets or hiring talent from overseas can yield a myriad of opportunities. Without the right support, these exciting possibilities can be undercut by an array of daunting challenges. These include navigating compliance, managing global payroll, and meeting HR requirements across borders.

Two common solutions that businesses often consider are Employer of Record (EOR) services and staffing agencies.

Both can support recruitment and employment. However, their functions, responsibilities, and benefits differ significantly. Business leaders can make strategic choices about which solutions works best for them by gaining an understanding of these key differences.

What is an Employer of Record?

An Employer of Record (EOR) is a third-party organisation that legally employs workers on behalf of another company. The EOR becomes the legal employer. It handles employment contracts, payroll processing, tax compliance, statutory benefits, and HR administration. The client company retains day-to-day control of the employee’s work. Meanwhile, the EOR assumes full responsibility for legal compliance and risk management.

An EOR is particularly valuable for companies hiring across international borders. For example, if a UK business wants to hire employees in Spain, but does not have a legal entity there, an EOR can employ the workers locally. This eliminates the need for the company to establish its own subsidiary, saving time, money, and administrative burden.

Key responsibilities of an EOR include:

• Drafting compliant employment contracts
• Managing employee payroll and tax contributions
• Administering statutory and supplementary benefits
• Ensuring compliance with local labour laws
• Handling terminations in line with local legislation.

An EOR enables businesses to expand globally, hire international talent quickly, and reduce legal risks.

For more information, visit our Ultimate guide to Employer of Record.

What is a staffing agency?

A staffing agency, also known as a recruitment agency, helps businesses find, screen, and place candidates into roles. Staffing agencies typically maintain a pool of talent and can provide workers on a temporary, contract, or permanent basis. Their primary role is recruitment. They source qualified candidates and conduct initial interviews. Agencies then match the workers to the employer’s requirements.

Unlike an EOR, a staffing agency does not usually take on the role of legal employer for permanent staff. However, for temporary assignments, the agency may technically employ the worker and then contract their services to the client business. This is common in sectors like healthcare, hospitality, and IT, where temporary or project-based work is frequent.

Key responsibilities of a staffing agency include:

• Advertising job roles and attracting candidates
• Screening CVs and conducting interviews
• Shortlisting candidates for client review
• Negotiating job offers on behalf of employers
• Providing temporary workers directly employed by the agency.

Staffing agencies are ideal for organisations seeking quick access to talent or short-term recruitment solutions.

Key differences between an Employer of Record and a staffing agency

Although both EORs and staffing agencies play an important role in employment, their functions differ in fundamental ways.

Legal responsibility

EOR

Acts as the legal employer of record, assuming responsibility for compliance, payroll, tax, and benefits.

Staffing agency

Acts as a recruitment partner, with legal responsibility only when supplying temporary workers.

Scope of services

EOR

Provides ongoing HR and compliance support for employees, including onboarding, benefits management, and terminations.

Staffing agency

Focuses on sourcing, screening, and placing candidates, leaving HR responsibilities to the employer.

Geographic reach

EOR

Enables global hiring without establishing local entities, making cross-border expansion simpler.

Staffing agency

Usually operates within a defined local or regional market and may lack global compliance expertise.

Employment duration

EOR

Suited for long-term employment arrangements and permanent roles.

Staffing agency

Best for temporary, seasonal, or project-based roles.

Cost structure

EOR

Charges a service fee per employee, often as a percentage of payroll or a flat monthly fee.

Staffing agency

Charges placement fees, typically a percentage of the employee’s salary, or hourly mark-ups for temporary staff.

When should you choose an Employer of Record?

An EOR is the best choice for organisations that:

• Want to expand into new international markets without setting up a local entity
• Need to hire full-time or long-term staff overseas
• Prioritise compliance with employment laws, tax regulations, and benefits
• Aim to reduce legal risks and administrative burdens
• Want to access international talent quickly and efficiently.

For example, a UK software company looking to hire developers in Germany and Brazil could partner with an EOR. The EOR would employ the developers in compliance with German and Brazilian labour laws, manage payroll and benefits, while the UK company directs the employees’ work.

Read some examples of organisations that successfully expanded abroad using Mauve’s EOR solution here.

When should you choose a staffing agency?

A staffing agency is most suitable for organisations that:

• Require temporary or contract workers for projects or seasonal demand
• Need to fill roles quickly within their home country or local market
• Lack in-house recruitment resources to source and screen candidates
• Are seeking specialist talent through a recruiter’s established network.

For example, a UK retail chain may use a staffing agency to supply temporary staff during the busy Christmas period. The agency provides vetted workers who are available to start immediately, meeting the company’s short-term staffing needs.

Employer of Record vs. staffing agency: which is right for you?

The choice between an Employer of Record and a staffing agency depends on your organisation’s objectives. If your priority is compliance, global expansion, and long-term employment, an EOR is the right solution. If you require short-term recruitment support or need to fill roles locally at speed, a staffing agency is the better option.

In some cases, companies may use both. For example, a business could rely on a staffing agency for temporary workers while using an EOR to manage permanent employees abroad. Understanding your workforce strategy will help determine the most effective approach.

How Mauve Group can help

At Mauve Group, we have almost 30 years of experience supporting businesses with global expansion and international hiring. Our Employer of Record services enable organisations to hire employees in over 150 countries compliantly and efficiently.

From global payroll and benefits to local employment law compliance, Mauve ensures a seamless hiring experience. Whether you're entering a new market or scaling your global workforce, Mauve provides the expertise and support to help your business grow confidently.

Frequently Asked Questions

1. Can an Employer of Record also recruit candidates?

Some EOR providers also offer recruitment support, but their primary role is legal employment and compliance. If recruitment is required, businesses may need to combine EOR services with a staffing agency.

2. Is an Employer of Record only for large companies?

No. Small and medium-sized enterprises (SMEs) often benefit from EOR services, as they can hire globally without the costs of setting up international subsidiaries.

3. Can a staffing agency handle international hiring?

Generally, staffing agencies are focused on local or regional recruitment. For international hiring, especially where compliance is critical, an EOR is the more reliable option.