Posted on 20 Apr 21byJayne Garrison

Your growing business focuses on quality products. But that goal can get sidetracked when you or your administrative staff must also focus on managing paychecks, benefits, and reams of payroll-related details required to pay employees.

That’s why so many cannabis businesses choose to outsource the payroll side of their operations. Payroll outsourcing lets you quickly scale up – or down – without the associated HR headaches. Additionally, outside payroll service providers stay on top of state and other compliance regulations so you can focus on what you do best while making sure your team is paid accurately and on time.

What’s the right solution for you? How do you get started? Here’s a brief guide to industry-wide payroll solutions.

EOR vs PEO

There are two types of payroll solutions for growing companies:

  1. A professional employer organization (PEO) provides comprehensive HR services in partnership with your business. Think of them as co-employers that handle HR needs for you.

  2. An employer of record (EOR) becomes the full legal employer of your employees, which means your partner company assumes all legal responsibilities for payroll, benefits, unemployment claims, and taxes.

Pros and Cons of a PEO

Pros:

  • As your co-employer, a PEO can manage time-consuming HR functions and assume greater responsibility than a typical HR outsourcing service.

  • You remain the official employer of record and keep control of all organizational decision-making related to employees’ jobs.

  • You can choose which HR chores are outsourced and which are not in your contract with the PEO.

Cons:

  • Your company remains the co-employer, and thus retains some legal liability. When working with a PEO you can still face penalties or fines related to employer responsibilities.

  • A PEO can request payments up front, which can affect your cash flow unexpectedly.

  • Most PEOs require that you provide liability and workers’ compensation coverage, which can be expensive.

  • If your company expands, you must register your business in every state or country where you have employees.

BOTTOM LINE: Your company is still an employer of record and subject to the rights and responsibilities of an employer in an ever-changing business environment.

Pros and Cons of an EOR

Pros:

  • You designate which staff works for the EOR. You no longer have any payroll, tax, or insurance responsibilities for these employees.

  • The EOR can quickly expand or contract employee headcount based on your requirements. EORs provide expertise in employment law and can offer assistance with taxes, benefits, and insurance.

  • You can expand to other states or countries without registering your business in those locations. The EOR is the employer of record, no matter where employees are located.

Cons:

  • The EOR now employs your staff, so it’s important that your EOR provider is responsive and can quickly deal with onboarding and offboarding workers.

  • Having another company recruit your employees may make you feel like you have a little less control. However, many growing cannabis companies keep an HR expert on their internal team to manage certain HR functions and oversee the organization’s internal business culture. This allows you to keep in-house the fun stuff like employee learning and development while leaving the payroll paperwork and administrative details to your EOR.

BOTTOM LINE: As new cannabis markets emerge, employers have increased opportunities and business reasons to hire teams who work at offsite locations. EORs offer the greatest flexibility for growing businesses.

If your company wants to avoid complicated labor laws while expanding, look into an EOR. Employer of Record services can save growing businesses both time and money.

To learn more about Higher Growth Search’s payroll solutions, contact us today. We’re here to help!

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