As a digital marketer, I love asking questions and conducting surveys. I do this in order to gather feedback that helps me see the “big picture”. Thus, I’ve recently asked some people in my network on a random basis if they see the difference in the hiring options we offer at Motion Software – Talent on demand and Employees of record. What surprised me is that both startup founders and C-suite managers in big, well-established companies, can’t really outline these distinctions and legal implications.
The following article aims to set the record straight and help organisations determine what employee type they need now.
What is an Employee of Record (EOR)?
This is an officially hired professional in a country or jurisdiction where you do not have a legal entity or ability to hire people. The EOR will perform a specific job role for a set amount of hours per month, whether that’s full-time or part-time. For this purpose, you use the services of an intermediary company, such as Motion Software, that takes care of the compliance and payroll specifics on your behalf.
When you hire an employee of record, you’re initiating a long-term, committed business relationship. That begins with an offer via email or EOR platform and an employment contract signed by all three parties. The contract plays a crucial role as it specifies the terms of employment, including salary, pay period, annual PTO, withheld social security taxes, notice period when resigning, etc.
Here’s an overview of what employees of record look like:
- technically, they are your in-house employees with outsourced administration.
- they work under permanent contract terms and get paid weekly, bi-weekly, or monthly.
- the employer and the EOR are legally obliged to stick to the notice period for termination of the employment contract.
- they have rights to PTO, sick time off, maternity leave.
- the employer is the one who covers social security taxes and health insurance.
- the intermediary company or platform supplies the EOR with the needed software and equipment, and other job perks (i.e. gym membership, professional learning opportunities, team buildings, etc.).
Why hire Employees of Record?
- The Employees of record work for the company, not for themselves. They’re available during the entire workweek. Freelancers on the other hand, often serve multiple clients (and that creates scheduling conflicts and restricted availability). I’d suggest completing a cost analysis of the value of those tasks, the cost for delays, and how you can increase revenue with a full-time employee for that role.
- An employee that’s familiar with the company’s vision and values and feels part of the team is more likely to be more motivated at work and perform better. Plus, these employees help develop more spoiled teams, whether remotely or on-site.
- In-house employees have a deeper understanding of everything that’s going on in the organisation. They can leverage that knowledge to its advantage when maintaining relationships with existing clients or forming new ones.
- If the company handles or stores confidential proprietary data, security risks should also be considered. Full-time employment grants greater control, including where people work, the networks they connect to, and other security protocols.
Talent on demand in a nutshell
Talent on demand encompasses all non-payroll workers (who aren’t formally hired by a company). Including freelancers, gig workers, and independent contractors. They represent about 36% (or 1.2 billion professionals) of the global workforce in 2020 (Source: Upwork).
What’s key here is that they don’t work under long-term contracts and do not receive a monthly salary, nor do they enjoy employee benefits. In contrast, they complete a specific task or project under an individual written contract.
There is also an alternative model that we developed within Motion Software, called Pro Consultants, which combines the best features of both hiring models. Our on-demand workforce is 100% working under permanent contracts and receives premium employee benefits. At the same time, they enjoy the flexibility and independence of freelance workers.
Here’s an overview of what talent on demand looks like at Motion Software:
- they are permanently hired by Motion Software and work under the highest security and industry standards.
- they track the actual time they work (billable hours) and report to you on a monthly basis.
- Motion Software covers their social security taxes and health insurance, along with a long list of perks and benefits (gym membership, professional learning opportunities, team buildings, and more).
What are the perks of leveraging Talent on demand?
- Using on-demand talent gives companies access to a large pool of top-quality specialists and the right expertise for their current needs without any geographic restrictions.
- Working with non-payroll workers leads to potential overhead savings for the organisations, including office space rentals and equipment, training and onboarding time, and other administrative expenses.
- Having on-demand employees surely speeds up the delivery of secondary (less important) tasks. Especially when the important ones are put on ice as full-time employees are allocated to other needs.
- Using on-demand talent gives flexibility to both companies and professionals – they can decide if that will be either a long- or short-term employment relationship.
The bottom line
Hiring on-demand talent, such as gig workers or independent contractors, is not about ousting traditional full-time employees, but creating an effective hybrid workforce.
Make sure to check our article “How to make the hybrid work model a success for your company“
Let the numbers speak for themselves. A recent Accenture’s report found that using productivity anywhere hybrid workforce models are adopted by 63% of high-revenue growth companies. According to the same report, labourers prefer a hybrid model 83% of the time.
In my opinion, founders and business managers in the post-COVID epoch should re-do their workforce strategy and build a new type of workforce, where some positions are better suited for employees of records, while other tasks and projects could be handled by freelancers, independent consultants, and other types of gig workers.