PEO vs. EOR: Which is Best for Your Business?

Business growth brings new opportunities—and new challenges. As your team grows, so does the time and energy needed to effectively manage HR tasks.

To keep up with the pace of growth, many companies turn to HR outsourcing providers for added support and expertise. A professional employer organization (PEO) and employer of record (EOR) provide similar HR services, but they differ in how and where they operate.

Continue reading to learn more about PEOs vs. EORs and to determine which solution best suits your needs.

In a unique structure known as co-employment, PEOs offer an HR outsourcing solution that provides human resources administration and support, payroll processing, employee benefits, and other services for small and mid-sized businesses.

In a co-employment agreement, you retain full control of all business decisions, day-to-day operations, and employee management. The PEO becomes the employer of record for your business, handles back-office HR tasks on your behalf, and shares liability for employment-related matters with you.

One main advantage of partnering with a PEO is that the organization takes time-consuming HR administration off your plate, so you can focus on growing your business while still ensuring your employees receive the care they deserve.

PEO Services

Some PEOs, such as G&A Partners, offer strategic HR services that include:

• HR management
• Payroll processing
• Payroll taxes
• Employee benefits and administration
• Risk management and safety services
• Compliance assistance
• Performance management and employee training and development
• HR technology

PEO Cost Savings and Benefits

The PEO co-employment model also puts economies of scale to work in your favor. PEOs are the employer of record for a large number of companies, and the employees of each of those companies become “worksite employees” of the PEO. Therefore, many PEOs are able to negotiate better rates for comprehensive benefits, such as medical, dental, vision, and life insurance options.

An employer of record (EOR) – sometimes referred to as an international PEO – is an organization that legally employs workers in foreign countries on your behalf. Whereas a PEO works with a business in a co-employment agreement and shares liability on employment-related matters, an EOR assumes full liability for hiring and managing employees for businesses it works with.

When you engage an EOR, they become the official employer of record for your international employees. The EOR handles the administrative tasks associated with employment, such as onboarding, processing payroll, handling taxes, managing terminations, and more.

Unlike a PEO, an EOR assumes full liability for most employee-related matters and is responsible for complying with the labor laws of the foreign country.

Common Reasons to Work with an EOR

Hiring employees abroad is a complicated process. You must register your business as an entity in the country where your workers are domiciled. You’re also responsible for knowing and understanding labor laws in that country, which can be time-consuming and expensive. An EOR provides a more efficient and cost-effective way for employers to expand internationally.

You might work with an EOR if:

• You wish to hire a remote employee who is currently living in another country.
• You have a current employee who is relocating to another country, but you wish to retain the employee.
• You have a short-term need to fill a few positions with workers abroad.
• You have a low employee count in another country, making it difficult to manage employee benefits.
• You are interested in testing your business in another market.
• You’ve acquired or merged with a small international business and want to ensure a quick and smooth transition for your new employees.

It’s important to note that an EOR is often a bridge or temporary solution for businesses with long-term global expansion plans. Establishing your business as an entity can take several months in some countries, so engaging an EOR allows you to begin working in that market while you get set up.

One of the main distinctions between a PEO and an EOR is who employs the employee and who assumes the risk for employment-related compliance violations. Their services, however, are similar. For example, you receive HR administrative support with both a PEO and EOR, meaning they perform many employee-related tasks such as payroll processing and benefits administration on your behalf.

Below is a quick snapshot of the key differences between a PEO and EOR:

Another key difference between an EOR and PEO is how long you may utilize their services. Small and mid-sized businesses often partner with PEOs for years and in all stages of business growth. With an EOR, however, some countries may have limitations on the length of EOR arrangements, how many EOR workers a company can have, or even the activities the EOR employees engage in.

While both PEOs and EORs support HR functions, the right fit for your business will depend on your specific goals. Consider the following to help you make the best decision for your organization:

You may be better served by a PEO if:

• You need additional resources and expertise to manage HR administrative tasks for your growing company.
• Your workforce is located primarily within one state or country.
• You seek affordable, comprehensive, and high-quality benefits for your employees.
• You would like assistance maintaining compliance with local, state, and federal regulations.
• You own a small or mid-sized business, though businesses of all sizes can benefit from a PEO’s services.

You may be better served by an EOR if:

• You are expanding your workforce globally but lack the time or money to establish an entity abroad.
• You don’t want to assume the risk of maintaining compliance with labor laws and requirements in other countries.
• You want help providing benefits for a small number of global employees.
• You’ve acquired or merged with a small business that employs workers abroad.
• You want to test your business in a new market.
• You plan to set up an entity abroad in the future but want to employ overseas workers now.

Yes, many PEOs, including G&A Partners, have established relationships with EORs that they can recommend to clients who want to hire international talent.

When working with both a PEO and an EOR:

• The PEO will provide HR management, payroll processing, benefits administration, compliance assistance, and more for your U.S.-based workforce.
• The EOR will provide HR administration, payroll, benefits administration, and assume full risk for compliance with labor laws for your global employees.