PEO vs EOR: What’s the Difference and Which Is Best for You?

Since the pandemic, remote work has continued to gain traction. Now employers are realizing that if they can hire remotely, they can hire globally, too, opening their business up to a world of opportunity. But international employment is really complex. Fortunately, an entire industry exists to make it easy for you to hire anyone, anywhere, at any time.

Both PEOs (Professional Employer Organizations) and EORs (Employers of Record) can help you navigate the complexities of international employment. But they don’t provide exactly the same services, and one may be better suited to your company’s hiring strategy than the other.

In this guide, we’ll answer the key questions surrounding PEOs and EORs for you, including:

• What are PEOs and EORs?
• Is there a difference between them?
• Which service is best for your company and its global talent strategy?

Let’s get started.

PEOs and EORs Explained

Although some people within the HR industry use the terms interchangeably, PEOs and EORs do have important distinctions, so here’s a quick look at what the two do.

Professional Employer Organization (PEO)

In HR, PEO stands for Professional Employer Organization. PEOs 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 aglobal PEO services provider, 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.

Employer of Record (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.

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‍Key Differences Between EORs and PEOs

Now that we’ve outlined exactly what PEOs and EORs do, let's look at the differences between them so you can determine which service is right for your company.

PEOs and EORs both offer massive benefits to businesses. However, they operate in significantly different capacities. Determining which service is best for your business depends on where your business is within the global expansion process.

If you have established or are setting up local entities (i.e., incorporating a company or registering your business) in new markets and need local HR support, PEOs can take on that responsibility. As a result, they can reduce the amount of time your HR teams need to devote to administrative tasks such as payroll.

However, if you’re looking to hire talent globally without setting up local entities in each jurisdiction, a PEO probably isn’t right for your business. In that case, an EOR is likely to be better suited to your needs.

This is because EORs already have local entities in the hiring country/countries, so they can legally employ talent on your behalf. This, too, can save your HR team a significant amount of time and resources. After all, setting up local entities can be very expensive and time-consuming.

In both cases, service agreements are drawn up and signed by client companies to outline the exact services offered by a specific PEO or EOR service provider.

In short, PEOs can be a useful way of outsourcing particular HR functions and reducing costs, while EORs are especially helpful if you’d like to hire talent in a country where you don’t already have a local entity. Explore Employer of Record services to determine if they can best support your business needs.

In the table below, we’ve outlined the typical differences between EORs and PEOs, but please note that each provider has a slightly different offering:

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