Start an Employer of Record and Payrolling Service

1. 1

   Build compliant payroll and tax infrastructure

   You become the legal employer, so you must run W-2 payroll cleanly: federal and state withholding and deposits, unemployment insurance registration in each operating state, W-2 issuance, and wage-and-hour compliance including overtime and state paid-leave rules. Use a serious payroll platform and know that multi-state means multi-registration. This infrastructure is the whole product.

2. 2

   Secure workers comp and understand co-employment

   Carry an active workers comp policy and understand that EOR creates a co-employment relationship: you own the employment liability while the client directs the work. Your service agreement must define exactly who is responsible for what (payroll, taxes, safety, discipline, termination), because that liability allocation is what clients are actually buying. Have an attorney draft it.

3. 3

   Price for the liability you carry

   Payrolling markups commonly run 8 to 20 percent of the worker's pay, or a flat fee of a few hundred dollars per employee per month. That covers employer taxes, workers comp, insurance, admin, and margin. Lead with the risk you absorb, not the price; the fee is small next to the back-tax and penalty exposure you remove from the client.

4. 4

   Target the 1099 misclassification problem

   Many businesses run workers as 1099 contractors who would fail the IRS and DOL multi-factor test, exposing them to back taxes, penalties, interest, and retroactive benefits. Open with education, not alarm: ask how they currently structure their contingent workers, offer a free classification review, and present EOR as the compliant fix. Do not give legal advice; frame it as employment structure and partner with counsel where needed.

5. 5

   Sell the speed lane too

   Not every client is driven by compliance fear; many just want a worker on payroll fast without adding them to internal HR. Your pitch: send us the person and we will have them employed, insured, and on payroll within 24 to 48 hours, with no burden on your team. Rapid, friction-free onboarding is a real differentiator.

6. 6

   Run onboarding and payroll like clockwork

   The client sends the worker; you collect W-4, I-9 with identity verification, direct deposit, state forms, and any benefits enrollment, then run payroll on the agreed cycle. You also become the first line of defense on wage audits, workers comp claims, and unemployment disputes. Reliability here is what turns a payrolling account into a long-term, expanding relationship.

Do not take our word for the money. Put your own numbers in and see what this idea has to earn before it works. Free, instant, no account needed.

Best for: Operators comfortable with payroll, tax, and employment compliance

Not for: Not for anyone who dislikes payroll, tax, and compliance detail, because that detail is the entire product and every error is your liability. Not for someone unwilling to carry employer risk (workers comp claims, unemployment disputes, wage audits). And not for an operator who wants to give legal opinions; classification is a legal question, so you frame employment structure and partner with counsel rather than advising on the law yourself.