Employer of Record (EOR) vs Staffing Agency: Which Is Right for You?

Imagine your company lands a major project in Portugal. You need skilled professionals to be recruited and onboarded fast, but you do not have a legal entity in the region. Navigating local labor laws as an international business is like walking in a minefield. 

You have two options:

1. Partner with a staffing agency that can fill your open positions quickly 
2. Engage an Employer of Record (EOR) to handle hiring, compliance, and payroll on your behalf

At first glance, both paths seem to solve the same problem: Hire people quickly. But under the hood, they serve entirely different purposes. Choosing the wrong one from the employer of record vs staffing agency can cause unnecessary work permit delays, costly setbacks, compliance risks, and roadblocks to scale.

A thorough understanding of the options and their differences is necessary to make the right choice. This blog will help you do that.

What is an Employer of record (EOR)?

Let’s revisit the example of hiring from Portugal. Assume you want to hire a software developer from Portugal. Instead of the longwound process of setting up your business in Portugal, you choose to partner with an EOR. 

The EOR becomes the developer’s official employer on record, on paper. The EOR will be responsible for handling payroll, benefits, taxes, and local compliance. Your business will be responsible only for managing their work like any other team member.

Benefits

• Stay compliant without any doubts about local labor laws since the EOR ensures compliance
• Hire internationally easily without setting up a legal entity
• No need to manage HR admin processes like payroll, contracts, and benefits etc.
• Scale fast globally by entering new markets quickly and legally

While these benefits are promising, there are some drawbacks associated with EOR as well.

Drawbacks

• You do not “own” the employee contract: The EOR is the legal employer, not you
• You pay for convenience. EORs charge a service fee on top of the employee’s salary
• May not be ideal for deep team integration: The third-party setup can make the employee feel distant from your organization

What is a Staffing Agency? 

Staffing agencies work by finding the talent, placing the workers, and may even manage their contracts or time tracking, if required. You get the talent you need fast and without hassles, but the agency is often the one in charge of employment.

Benefits

• Agencies have a bench of available candidates ready to deploy. This drastically reduces deployment time
• They handle recruitment, screening, and onboarding which significantly cuts down hiring workload
• Staffing agencies are great for filling short-term or temporary resource needs

Drawbacks

• Operational fees and markups can add up quickly to your HR costs
• Less control over who gets placed since candidates are matched based on availability, not always culture fit
• Hires through staffing agencies may not stick around or feel invested in your business

Employer Of Record vs Staffing Agency

While both EORs and staffing agencies help companies build their teams, they serve different purposes and operate under different models. 

Here’s a side-by-side breakdown to help you understand when to use each. Also, what to expect in terms of control, compliance, cost, and fit.

Particulars	Employer of Record (EOR)	Staffing Agency
Definition	A third-party service that becomes the legal employer of your workers in another country or region.	A recruitment firm that sources, screens, and places candidates for short or long-term roles.
What is it used for?	Hiring full-time or long-term international employees without setting up a local entity.	Quickly filling temporary, contract, or project-based roles with external talent.
Major benefits	Ensures local compliance, manages payroll and benefits, enables global hiring at speed.	Offers fast access to talent, saves internal hiring time, and provides flexibility.
Expected drawbacks	Higher service fees, less direct control over employment contracts, limited long-term integration.	Placement costs can be high, less cultural alignment, possible short-term mindset.
Best suited for	Companies expanding globally or hiring remote employees where they lack a legal presence.	Companies needing quick staffing for seasonal work, short-term projects, or gaps.
Pricing model	Typically a flat monthly fee per employee or percentage of salary.	Often a markup on hourly rates or a one-time placement fee.

Understanding the Legal Implications of EOR and Staffing Agencies

When you are hiring talent domestically or internationally, legal responsibilities can make or break your workforce strategy. EORs and staffing agencies handle these obligations differently as we have seen with the table. 

Even the slightest misunderstanding of these nuances can lead to compliance headaches, tax missteps, or even legal penalties.

Legal responsibilities of entities under each model

Employee of Record (EOR)	Staffing Agency
The EOR becomes the legal employer on paper which makes them responsible for complying with labor laws in the employee’s location.	In most cases, the staffing agency is the legal employer for temporary or contract workers.
Everything, including contracts, worker classification, terminations, benefits, and working conditions, is their ownership.  Your company retains control over the employee’s day-to-day tasks, but the EOR is the one that handles the legal obligations related to the employment.	They manage legal contracts, employment status, and benefits. However, if you directly hire a candidate through the agency, the legal burden transfers to your company.  Directly hired candidates become your responsibility along with local labor law compliance in their employment.

Taxes, payroll contributions, and contract management

Employee of Record (EOR)	Staffing Agency
The EOR handles all payroll processing, tax withholdings, employer contributions, social security payments, and statutory benefits complying with statutory regulations.	Agencies typically manage payroll and taxes for temporary workers under their employment.
They also manage employment contracts, ensuring alignment with local legal practices and protecting you from non-compliance.	However, for direct hires, your HR and finance teams must handle payroll setup, tax registration, and contract generation—especially when hiring internationally without a registered local legal entity..

Risk management

Employee of Record (EOR)	Staffing Agency
EORs significantly aim to reduce legal, compliance and payroll fraud risks. They serve as a compliance partner, helping you avoid misclassification issues, tax errors, and regulatory violations.	Risk levels vary based on hiring methods. While agencies take on liability for workers they employ, your company could still be exposed to co-employment risks if the worker operates under your direct supervision.

Cost Analysis: Employer Of Record vs. Staffing Agency

Setting legal benefits and drawbacks aside, cost is a critical factor when deciding between an EOR and a staffing agency. 

Here’s a breakdown to help you see the bigger picture.

How EORs usually price their services

• Flat monthly fee per employee: $500–$1000/month depending on the location, role, and complexity, or 
• Percentage of employee’s gross salary: in the range of 10%–15%

How staffing agencies typically price their services

• Markup on hourly wages: In the range of 25%–40% depending on industry, skill level, and region, or
• One-time placement fee: For direct hires, typically 15%–30% of the candidate’s annual salary.

Understanding EOR and staffing costing with a real-world example

Let’s say you want to hire a mid-level software developer in Vietnam with a gross monthly salary of $2,500.

Below is a simplified cost comparison to show how the pricing model works for each service:

Employer of Record (EOR) Pricing

Particulars	Cost in USD
Gross monthly salary	$2, 500
EOR service fee (assuming 12% of salary)	$300
Mandatory employer contributions (assumed)	$400
Total Monthly Cost	$3,200

Staffing Agency Pricing

Particulars	Cost in USD
Gross monthly salary	$2, 500
Agency markup (50%)	$1,250
Total Monthly Cost	$3,750

From the above, we can see that there is a $550 pricing difference between both the models.

Staffing Agency $3750 (-) EOR $3,200 = $550.

If you choose an EOR service, annually this translates into $6,600 cost savings. It is obvious that EOR would be an ideal choice if you want long-term and cost-efficient hiring.

However, there could be business instances where a staffing agency would give more benefits. In such instances, using a hybrid model, a combination of both EOR and staffing agency would be ideal.

If you are not sure which would be the best EOR for your business, try Tarmack. It can help you hire talent from 140+ countries, ensure complete compliance, and adopt a tech-driven approach to payroll and hiring processes. 

Want to See Exactly How Much You Can Save? 

Use our Employer Cost Calculator to compare costs and discover the best payroll solution for your business.

Click here to Calculate

Can an EOR and a Staffing Agency Be Leveraged Together?

While EORs and staffing agencies are often seen as separate solutions, they can actually complement each other in certain workforce strategies. Companies that operate in fast-moving industries, expand across borders, or manage seasonal demand often benefit from using both models in tandem.

Here are a few scenarios where combining an EOR and a staffing agency creates a more agile, cost-efficient hiring strategy:

1. Rapid international hiring (EOR) + local short-term hiring to tide over demand spikes (staffing agency)

Let’s say your company is expanding into Vietnam and needs to build an on-ground team quickly. You use an EOR to compliantly hire full-time employees in Vietnam without opening a legal entity. 

At the same time, you experience a temporary spike in customer service requests in your home market. To manage the surge, you partner with a local staffing agency to quickly place temporary agents for a three-month window.

Use this approach when you need:

• Speed and flexibility in high-volume roles
• Compliance and continuity in long-term international hiring
• A hybrid workforce model tailored to different needs

2. Strategic recruitment via agency, long-term employment via EOR

In some cases, a staffing agency acts as the recruiter, helping source and vet candidates in a new market. Once you’ve selected the right talent, the EOR steps in as the legal employer to handle payroll, contracts, and benefits in the employee’s country.

Use this approach when you need:

• Access to a staffing agency’s local market knowledge
• To retain and invest in the talent over the long term
• To avoid the legal responsibility of being the employer

By combining both models, you maintain control over the hiring experience, ensure legal compliance, and create a scalable employment structure across regions.

Final Choice: EOR vs Staffing Agency – Which Model Is Right for Your Business?

Choosing between an employer of record (EOR) and a staffing agency is  more about what your business needs the most in  your growth journey.

The EOR model offers control, compliance, and continuity, while the staffing agency model delivers speed, flexibility, and access. Understanding the strengths of each helps you build a smarter, more scalable workforce strategy.

Why Tarmack Is the Right EOR Partner for Your Business

Tarmack offers you the combined benefits of local compliance expertise with a seamless global hiring experience. We give you global reach, simplicity, speed, and compliance, all in one place. 

With services like payroll, EOR, and recruiting offered across borders, Tarmack enables you to scale internationally without the usual operational headaches.

We empower you to build stronger and more diverse teams by making global hiring accessible, efficient, and compliant.