What is a PEO or EOR? How can they help remote employers?
PEOs and EORs can support companies by taking care of HR and operational responsibilities for them. The extent to which they do this depends on the precise definition, geographical location and the individual company’s service offering. Read on to find out the difference between PEO and EORs how Omnipresent offers a new way forward to help your company employ the best talent globally.
Professional Employer Organisations (PEOs) and Employers of Record (EORs) are both professional services companies that help other companies with their internal HR functions. Though some in the HR industry use the terms interchangeably, PEOs and EORs have a few important distinctions. While PEOs can handle a range of HR functions including payroll, benefits and compliance, they will not assume all related legal liabilities and responsibilities. EORs go one step further to become the legal employer on behalf of client companies and assume the responsibility for these workers.
To add to the confusion, PEO and EORs also have different meanings in different countries and there are different regulations governing their business model as well. For companies looking to employ staff remotely, PEOs and EORs might well be a viable option and in both cases contractual agreements or service agreements are drawn up and signed by client companies and their employees to outline the exact services offered by a specific PEO or EOR service provider.
In this article, we break down the key offerings of PEOs and EORs and highlight their differences for you. We also demonstrate how Global PEOs, EORs and Omnipresent can offer a solution for employing and scaling your remote workforce.
What are Professional Employer Organisations (PEOs)?
For any business that is looking to outsource their HR function, PEOs can offer extensive employment management services. They provide a holistic HR and admin solution including:
- managing benefits
- making sure companies are in keeping of local employment laws
- meeting local customs and industry best-practice
As these administrative processes require dedicated resources and expertise, PEOs can offer an outsourced HR function that complies with local tax and employment laws. Benefits from working with an experienced PEO team include:
- lower HR overheads
- simplified payroll process and tax preparation
- Better regulatory compliance and management of legal risks
- Advice on industry best practices and benchmarks
- improved employee experience
- more time to focus on business and productivity
By working with PEOs you can often outsource a range of HR functions, most often payroll and benefits. However, the legal responsibility remains with you as the employer, which often means you need to have a local entity set up in the jurisdiction where your employees work. You maintain control of the organisational decision making including managing your employees’ day to day roles and responsibilities.
PEOs are a great option for companies that are expanding their operations globally but require local support for their remote team with a limited local presence.
What is an Employer of Record (EOR)?
EORs by comparison become the legal employer for the employees that their clients want to employ in a local jurisdiction.
PEOs focus on particular HR and payroll tasks. They do not represent a company or act on behalf of client companies.In contrast, EORs act on behalf of client companies. They employ talent for their clients via a service agreement. This means EORs take on the added responsibility of complying with local employment laws for their clients. EORs ensure compliance with local regulations regarding:
- Benefits and welfare
- Severance and termination
- Payroll tax
- Collective agreements
EORs also sign the employment contract. On paper, they are the employer for a client’s chosen talent. This means they are legally liable for the employee.
But client companies still retain full control over their relationship to the employee and the work they are doing. This is ensured through the service agreement between EOR and client company.
Local PEOs and EORs offer a consultancy like service for local employment needs.
Traditionally, PEOs and EORs are local organisations. Foreign companies can contract these to recruit and employ local talent. What a PEO or EOR can offer depends on the country it is operating in.
In France, the traditional PEO model is not legal. But EORs are very common. These are known by the term portage salarial. Companies licensed as portage salarial provide specific services:
- they allow client companies to hire in France, but recruit talent as independent employees
- the employee is legally defined as an employee of the EOR and is entitled to benefits
- the EOR helps employees find companies to hire them
- the portage salarial status is compatible with knowledge-based professions but excludes regulated vocations (doctors, lawyers) and commercial activities
Some countries do not make a legal distinction between PEOs and EORs. This is the case in China, where PEO and EOR services are also known as Foreign Enterprise Service Company (FESCO), providing labour dispatching services. Chinese FESCOs will employ staff for their clients, much like an EOR.
In Germany, an EOR is known as an Employee Leasing service provider, regulated under the law by the Labour Leasing Act (Arbeitnehmerüberlassungsgesetz - AÜG). This has a fixed term of 18 months after which the employer is required to set up a local virtual entity for the employee.
Expanding companies can benefit from the expertise in local law and employment practices of local PEOs and EORs. They can aid companies to make first steps in a new market, test the waters or respond to immediate needs for relocation due to Covid-19 or other circumstances. They can also be a good solution for the long term for jurisdictions unassociated with the primary business location of the clients’ business operations.
Global PEOs and EORs
International PEOs and EORs offer their services worldwide. So rather than looking for a PEO or EOR in each country, your company can hire a global PEO or EOR to manage all remote employees.
Whether you need a global PEO or EOR depends whether you want to set up a local entity in each country where your employees may be and want someone to manage the HR and payroll burden. In this case, you would hire a global PEO. Alternatively, you can hire a global EOR to be the legal employer for your remote employees. This drastically reduces your time for onboarding and creates lower overhead costs.
With the rise of remote-first companies and remote working, global PEOs and EORs traditionally serving a small number of employees, often expats and relocation hires, now find themselves needing to change the way they work to meet the demands of a rapidly evolving market.
Enter Omnipresent - a new take on traditional PEOs and EORs
As more and more companies are going remote, there is increasing demand for new PEO and EOR solutions. Omnipresent gives you just that.
While traditional global PEOs and EORs operate consultancy services at a very high cost, our solution is transparent, cost-effective, comprehensive and user friendly. You no longer have to look for local service providers, find multiple providers for payroll, legal and benefits services – we are a one-stop shop for international employment. Our tech enabled platform provides an easy way to monitor and onboard new employees anywhere in the world in 143 countries and counting.
The table below shows how we differ from local PEOs, EORs and global or international PEO and EORs as well.
As a remote-first company ourselves, we live and breathe remote working. We empathise with the challenges remote businesses today are facing in managing a global workforce. We are here to offer you a tailored solution for your local employment needs. Our goal is to make employing global talent risk-free for you.
Omnipresent offers a holistic solution for remote employment. Get in touch for a free consultation so we can help you find the best path for your business.