What is a PEO?
PEOs (Professional Employer Organizations) offer an outsourced HR function that helps companies to comply with local employment laws related to payroll and taxation. This is a co-employment relationship and is sometimes referred to as “global payroll.”
By working with a PEO, you can lower HR overheads and improve your employee experience, all while maintaining control of organizational decision-making, such as managing your employees’ day-to-day roles and responsibilities.
Read our in-depth guide to Professional Employer Organizations to learn more about PEOs.
What is an EOR?
An Employer of Record (EOR) offers similar HR services to a PEO, but EORs become the legal employer of their client’s chosen talent. This isn’t a co-employment relationship, which means that the EOR takes on the added responsibility of complying with local employment laws relating to onboarding, payroll, benefits, and more. As a result, the client doesn’t have to spend time and resources studying the complex labor laws of different countries, which can save them time and money.
Check out our detailed guide to EORs to learn more about how they can benefit your business.
Key differences:
In both cases, service agreements are signed to specify the offered services by the provider. PEOs are good for outsourcing HR functions and cutting costs, while EORs are beneficial when hiring talent in a country where you lack a local entity.
PEOs are suitable if you are establishing or incorporating local entities in new markets and need local HR support. They can handle administrative tasks like payroll and reduce HR teams' workload.
EORs are ideal for hiring talent globally without setting up local entities in each jurisdiction. They already have local entities in hiring countries and can legally employ talent on your behalf, saving time and resources.
| PEO | EOR |
Manages payroll & taxes | Yes | Yes |
Manages mandatory benefits (e.g., pensions & insurance) | Sometimes | Yes |
Provides a locally compliant employment contract | No | Yes |
Manages holidays & time off | Sometimes | Yes |
Manages expense reimbursements | Sometimes | Yes |
Handles severance & termination | Can advise | Yes |
Takes legal responsibility for employee | No | Yes |
Manages collective agreement responsibilities | No | Yes |