Employer of Record vs PEO vs Staffing Agency
Employer of record vs PEO vs staffing agency: who finds the worker, who is the legal employer, how each is priced, and when a business should use which one.September 24, 2026
7 min read
Running an Agency
Written by the NextCrew team
Definition
An employer of record (EOR), a professional employer organization (PEO) and a staffing agency all take on employer duties for another business, but they split those duties differently. A staffing agency finds workers and employs them. An employer of record employs people the client already found. A PEO co-employs the staff a business already has, to run its payroll, benefits and HR.
The quickest way to tell them apart is to ask two questions: who found the worker, and who is the legal employer? Almost everything else, including how each one is priced, follows from those two answers.
What is the difference between an employer of record, a PEO and a staffing agency?
| Staffing agency | Employer of record (EOR) | PEO | |
|---|---|---|---|
| Who finds the worker | The agency recruits and screens | The client; the EOR employs who it is given | The client; they are already its employees |
| Legal employer | The agency | The EOR | Shared: the PEO and the business co-employ |
| Who directs the daily work | The client | The client | The business |
| Payroll, payroll taxes, workers' comp | The agency | The EOR | The PEO, under the co-employment agreement |
| Who it covers | Individual workers, per assignment | Individual workers the client names | Usually the whole workforce |
| Typical reason to use it | Filling shifts and roles fast; flexible headcount | Hiring someone without becoming their employer, including in other countries | Giving a small or midsize business stronger benefits and HR support |
| Common pricing | A bill rate: pay rate plus markup | A per-worker fee or a lower markup | A per-employee fee or a percentage of payroll |
Pricing models vary by provider and contract. The table shows the common pattern, not a rule.
Employer of record vs staffing agency: what is the difference?
The difference is recruiting. Both are the legal employer: both run payroll, withhold taxes and carry workers' compensation. A staffing agency also finds the person. An employer of record takes on a person the client has already picked, so there is no recruiting cost in its price, and it usually charges less.
In US staffing, employer of record work is usually called payrolling. A client finds someone, often a former employee, a referral or a contractor it wants off its own books, and asks the agency to employ and pay them. Many agencies sell payrolling as a second service line. Outside staffing, the term is most often used for global EOR providers, which employ people in countries where the client has no legal entity of its own. Same role, different reason.
PEO vs staffing agency: what is the difference?
A PEO does not supply workers. It takes over payroll, benefits, workers' compensation and HR administration for employees a business already has, under a co-employment agreement. A staffing agency supplies additional people, usually for a set assignment. A business can use both at once: a PEO for its permanent staff and a staffing agency for peaks, gaps and backfill.
EOR vs PEO: what is the difference?
Under a PEO the business stays an employer; under an EOR it does not. A PEO co-employs, so the business keeps its own employer registrations and shares responsibility with the PEO. An EOR is the only legal employer of the people it takes on, which is why EORs are used to hire where the client has no entity.
A fourth option is an administrative services organization (ASO). An ASO handles HR and payroll administration while the business remains the only employer, with no co-employment.
Which one should a business use?
- You need people you do not have yet: a staffing agency.
- You already found the person but do not want to employ them: an employer of record, or payrolling through a staffing agency.
- You want stronger benefits and HR support for your own staff: a PEO.
- You only want the administration handled: an ASO.
Why this matters to a staffing agency
Clients mix these models up, and the confusion shows up in the price. A client that asks an agency to "just payroll" someone it found is asking for employer of record work. Quote it at the full recruited markup and the client walks; quote it too low and the agency loses money, because it still carries every employer cost in its burden rate: payroll taxes including SUTA, workers' compensation and the risk of being the employer.
Some agencies use a PEO or an employer of record themselves. A smaller agency may run its own payroll and benefits through a PEO, or place people through an EOR partner in states or countries where it is not set up as an employer. Either way, hours have to move from the agency's system to the provider that pays, and every hand-keyed transfer is a chance to pay the wrong amount.
Put the model in writing. The staffing agreement should say whether the agency recruited the person or is only employing them, because that decides the rate, the conversion fee terms and who is responsible for what.
Bottom line: a staffing agency finds and employs the worker, an employer of record employs a worker the client found, and a PEO co-employs the staff a business already has. Ask who found the worker and who is the legal employer, and the rest follows.
How NextCrew fits
NextCrew is not a PEO or an employer of record. It is the software a staffing agency uses to run recruited placements and payrolling work, and it connects to the PEO, EOR or payroll provider the agency works with. A payrolled Crew Member goes through the same flow as any other:
- One onboarding link. Forms are pre-filled from the profile, and completed documents are written back to it automatically.
- Separate rates for payrolling clients. Rate configuration is set per client and position, so a payrolling client's lower markup never leaks into your recruited placements.
- Hours the client approved. Clients approve timesheets in their portal, so the hours you pay are the hours the client confirmed.
- Connects to your PEO, EOR or payroll provider. Approved hours go to the provider through the Open API for automated transfers, or through file export and import.
When a PEO or EOR is the employer, NextCrew can still run everything up to the hire. Some companies use NextCrew as their applicant tracking system and hand the finished hire to the provider:
- 1Recruit and screen
Candidates move through configurable pipeline stages, and AI resume parsing fills in the profile.
- 2Complete the onboarding paperwork
Where the PEO or EOR accepts onboarding completed outside its own system, the document package goes out as one link, pre-filled from the profile, with reminders until it is done.
- 3Hand over a ready-to-hire worker
The worker and their onboarding information go to the PEO or EOR through the Open API or a file export, so the provider starts from a complete record instead of collecting it again.
See recruiting and onboarding, the Open API and staffing payroll software.
Frequently asked questions
Related terms
- Payrolling: a staffing agency acting as employer of record for workers the client found.
- Co-employment: how employer duties are shared between two businesses.
- Markup: the percentage added to pay rate to set the bill rate.
- Burden rate: the employer costs every model has to cover.
- Staffing agreement: the contract that should name which model applies.
General information, not legal or tax advice. Who is responsible for what under each model depends on the contract and on federal and state law.