What are the differences between PEO and EOR?

If you are looking into ways to build a global remote workforce, you have probably stumbled across two common abbreviations: EOR and PEO. Both terms are often used interchangeably, but there are actually some major differences between the services so-called employers of record (EOR) and professional employer organizations (PEO) provide. Read on if you want to know which one of these two services you should consider for your business.

With an ever increasing level of globalisation, companies are constantly looking for ways to quickly scale their business and hire talent from around the world. This includes outsourcing certain aspects of the business such as HR services to external providers. And that’s exactly what professional employer organizations and employers of record specialise in.

A professional employer organization, or PEO, is a company that provides HR services such as payroll, tax, and compliance management for companies that wish to outsource these parts of their business. Usually, PEOs partner with small to medium-sized corporations and also assist in their recruiting and onboarding process. They also help attract more talent by offering competitive benefits such as health insurance or educational assistance that their clients otherwise wouldn’t be able to afford.

Main services generally provided by PEOs include:

• Employee benefits

• Payroll processing

• Compliance

• HR administration

• Employee training

• Recruiting and hiring

• co-employment with company that hires them

EOR offer very similar services, with one major difference: While PEOs are only in charge of the HR aspects of a business, an employer or record serves as the official employer for new staff hired through them. This is especially helpful for companies that want to hire international talent or enter a new market without the legal hassle of global employment. Since employers are responsible for paying taxes and social security benefits for their staff, they must open a new branch of their business in their new employee’s country of residence in order to legally hire them. 

Since this is a very time-consuming and expensive process, EOR collaborate with local partner firms to legally hire employees for their clients and make sure that all necessary requirements for new employees are met, including paying taxes and social security benefits, on top of handling payroll and compliance issues.

Main services generally provided by EOR include:

• Employee benefits

• Payroll processing

• Compliance

• Administration

• Recruiting and hiring

• Acting as legal employer for new employees

• Arranging visa and work permits

• Acting as the interface between employees and government authorities

• Providing legal advice concerning notice periods, termination rules and severance pay

Whether you should hire a professional employer organization or an employer of record is dependent on your company’s individual needs and goals. 

If you are working for a small to medium-sized business that does not have the infrastructure to handle payroll and other employee related services or is unable to afford benefits that help attract the best talent, hiring a PEO as a co-employer for your staff might be the right solution.

On the other hand, if you are more focused on entering a new market or want to recruit international talent for your global team without having to open a legal entity in a new country, an employer of record would be your preferred option. EOR take care of compliance issues and reduce their client’s risks by being legally responsible for the hiring process on top of managing their payroll, benefits, and other administrative tasks.

We offer an employer of record solution that allows you to hire employees without having to set up legal entities in the countries where you are looking to hire. Send us a message and we’ll tell you more about our employer of record solution.