Contractors are becoming more popular when hiring (especially when hiring internationally). Many people these days would prefer to work for themselves, so the market is saturated with incredible talent, but how do you decide between an EOR vs contractor?
What is an employer of record (EOR)?
An Employer of Record is a service that takes on the responsibility of being the official employer for tax and legal purposes. The EOR handles tasks such as payroll, benefits administration, taxes, and compliance with employment laws.
What is a contractor?
A contractor, or ‘freelancer’, is an individual hired to perform specific tasks or provide services for a defined period. Contractors are not typically considered employees and are responsible for managing their own taxes, benefits, and other employment-related matters.
EOR vs contractor
EORs and contractors are two different methods of hiring someone to work for your company without them being an ‘employee’. The key differences are:
- When you hire an EOR your business will be responsible for covering the costs of taxes, benefits or any other legal obligations for your employee (even if the EOR is the one processing this). A contractor will handle this themselves and comes out of the money you pay to them directly.
- A contractor will usually be ‘self-employed’ or ‘freelance’. This means that they are doing work for your business, but they are not one of your employees. Whereas with an EOR the employee is still considered to work for your business. This can be significant when deciding on working hours, contract terms, and the exclusivity you have with them.
- Contractors usually only work with companies for a set period, whereas an employee through an EOR is more likely to be on a permanent contract.
How to choose between an EOR vs contractor
It really comes down to what your business actually needs. If you’re looking for someone for a specific project, or to cover a busy period then it might be worth considering using a contractor, however, if you’re looking to expand your company permanently then an EOR might be a better option for your business.
Look at a few things when making your decision:
- Length of employment – If you only need someone for 2 months then a contractor might be easier than setting up an EOR service.
- Is the expansion of your company to a new country a trial? If you’re not sure that you’re going to fully expand to the new territory it could be considering trialing it with a contractor before properly hiring.
- Cost – EORs cost include services on top of everything else you’ll usually pay in payroll. However, contractors often charge more for their time than a traditional employee might, so work out which one is the most cost-effective for your business
- Nature of work – most of the time when working with a contractor they’ll mostly work on their own initiative and with their own methods that they’ve developed. If the project you’re working on needs close supervision and specific methods, or you need to be in control of how the work is done and what the employee is doing then an EOR might be a better fit.
- Scalability – if you think that your company demand might fluctuate rapidly then a contractor could work better for you. Because they’re not an employee, if something changes you don’t need to suddenly make them redundant, and if you get more work that needs to be done then you can hire additional contractors.
- Country – The criteria for an employee vs contractor can vary per country so it is importation to seek guidance from a local employment law specialist.
So that’s it, everything you need to know about EOR vs contractor. If you need more information on how an EOR vs contractor works then please get in touch with us today or find out more about our EOR services.