If you want access to the best talent, regardless of your company size or budget, you need to be hiring globally. While that may seem counterintuitive, an entire industry exists to make it easy for you to hire anyone, anywhere, any time.
PEOs (Professional Employer Organisations) and EORs (Employers of Record) can help you navigate the complexities of international hiring and employment. But they don’t provide exactly the same services, and one may be better suited to your company hiring strategy than the other. In this guide, we’ll answer the key questions surrounding PEOs and EORs for you, including:
- What actually are PEOs and EORs?
- Is there a difference between them?
- Which employment service is best for your company and its global talent strategy?
In short, PEOs and EORs are both professional services providers that help companies, like yours, with their internal HR functions, both locally and globally. Though some people within the HR industry use the terms interchangeably, PEOs and EORs do have some important distinctions, including different meanings and legal implications from country to country.
In this article, we break down the key offerings of PEOs and EORs and highlight their meaningful differences so you can make an informed decision about what is best for your company. We also demonstrate how global solutions like Omnipresent offer a uniquely tailored solution for employing and scaling your international workforce.
What Is a Professional Employer Organisation (PEO)?
In HR, PEO stands for Professional Employer Organisation. If your business is looking to outsource its HR function locally, PEOs can offer extensive employment management services. They can provide a holistic HR and admin solution including:
- Managing benefits
- Advice to help companies keep to 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 helps companies to comply with local tax and employment laws. There are a handful of other benefits of working with an experienced PEO team, including:
- Lower HR overheads
- Simplified payroll process and tax preparation
- Advice on 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, while maintaining control of organizational decision-making, such as managing your employees’ day-to-day roles and responsibilities.
But there is one significant disadvantage to working with a PEO, and that’s that the legal responsibility remains with you as the employer. This often means you have to set up a local entity (i.e. incorporate a company or register your business) in the jurisdiction where your employees will work. This can be time-consuming and complex, especially for start-ups or SMEs. It’s also worth noting that PEOs aren’t legal in some countries. You can read more on that below.
Is a PEO Right for Your Business?
PEOs are a great option for companies that are expanding their operations globally and setting up local entities, but require local HR support for their remote team. They can help take away some of the workload associated with HR functions and could save your company money.
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. Read on to discover what an Employer of Record and Omnipresent can do for you in that case.
What Is an Employer of Record (EOR)?
An Employer of Record (‘EOR’ for short) offers similar services to a PEO, but unlike a PEO, an EOR does become the legal employer for their client’s chosen talent.
While PEOs focus on particular HR and payroll tasks, they don’t represent or act on behalf of client companies. In contrast, EORs do act on behalf of client companies, employing talent for their clients via a service agreement.
This means that 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 alongside the employee. On paper, they are the employer for a client’s chosen talent and are legally liable for them.
Nevertheless, client companies still retain full control over their relationship with the employee and the work they are doing. This is ensured through the service agreement between an EOR and their client company.
How Can EORs Help You Hire Global Teams Successfully?
If you want to hire someone based in a country your company doesn’t already operate in, using an EOR is probably the best solution for you. This is because you won’t need to set up a local entity, which will, in turn, save your HR team precious time and resources.
Using an EOR can help you hire talent abroad compliantly while taking on HR work like payroll and benefits.
What Are Local PEOs and EORs?
Traditionally, PEOs and EORs are local organizations. That means companies can work with them to recruit and employ talent based in another jurisdiction, local to the chosen PEO or EOR. What a PEO or EOR can offer depends on the country it’s operating in. Generally, local PEOs and EORs offer a consultancy-like service for local employment needs.
But PEOs and EORs aren’t always treated the same from country to country. For example, in France, the traditional PEO model isn’t legal. But EORs are very common. These are known by the term portage salarial.
Some countries don’t even make a legal distinction between PEOs and EORs. This is the case in China, where PEO and EOR services are also known by the term Foreign Enterprise Service Company (FESCO), which provide labor 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 Foreign Registered Employer (Ausländischer Arbeitgeber ohne Sitz in Deutschland) to continue employing the employee.
Companies that are expanding globally 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 long-term solution for jurisdictions unassociated with the primary business location of the clients’ business operations.
But what if you want to hire talent in different countries? That’s where global PEOs and EORs may be useful.
What Are Global PEOs and EORs?
Unlike most local PEOs and EORs, international PEOs and EORs offer their services worldwide. Rather than looking for a PEO or EOR in each country, your company can hire a global PEO or an EOR to manage all your remote workers worldwide.
To help you choose between a global PEO or EOR, you have to consider what kind of service your company needs. If you want to set up a local entity in each country where your talent may be based but also want someone to manage the HR and payroll burden, a global PEO would probably be appropriate for your needs.
However, if you don’t want to set up local entities abroad, it would be best to work with a global EOR who will act as the legal employer for your remote workers. This can drastically reduce onboarding timescales and can create lower overhead costs overall.
With the rise of remote-first companies and remote working, traditional global PEOs and EORs are finding that they need to adapt and change the way they work to meet the demands of a rapidly evolving market. In the past, they typically served a small number of employees - often ex-pats and relocation hires - but with global recruitment trending upwards, upscaling is necessary. But luckily, that’s the service we already offer at Omnipresent.
EOR Vs PEO: Which Should Your Company Use?
Now that we’ve outlined exactly what a PEO and an EOR do, both locally and globally, here’s a quick summary to help you decide which service is right for your company.
While PEOs can handle a range of HR functions including payroll, benefits and compliance advice, they will not assume all related legal liabilities and responsibilities. On the other hand, EORs do accept legal responsibility to the appropriate extent and actually become the legal employer on behalf of client companies.
In both cases, contractual agreements or service agreements are drawn up and signed by client companies and their hires to outline the exact services offered by a specific PEO or EOR service provider.
That leaves us with this question: which type of employment services provider should your company use?
If you’re a company looking to hire staff remotely and globally, both PEOs and EORs might well be a viable option, depending on whether or not you already operate in the jurisdictions your chosen talent is based in.
If you do operate in those countries already, then a PEO can be a useful way of outsourcing particular HR functions and reducing costs. But if you would like to hire talent in a country where you don’t already have a legal entity - and you don’t want to set one up - then an EOR is probably right for you.
At Omnipresent, we’ve taken the concept of a traditional EOR and made it modern, affordable and user-friendly. That way, we can help you hire great talent from around the world with ease. Read on to find out more.
How Can Omnipresent Help Make Your Global Hiring a Success?
Omnipresent is here to help your company tap into global talent and hire internationally with ease. We offer a fresh, modern take on global employment services to make your global teams work.
While traditional global PEOs and EORs offer services at a very high cost, our solution is transparent, cost-effective, comprehensive and user-friendly.
With Omnipresent, you no longer have to look for local service providers in each country you want to hire in or find multiple providers for payroll, legal and benefits services – we are a one-stop-shop for international employment; we’re a global employment services provider that makes hiring the best talent around the world easy and hassle-free.
Here’s a simple table to show you how Omnipresent differs from and goes beyond local and global PEOs and EORs:
*AML - Anti-money laundering, *ABC - Anti-bribery and corruption
As a remote-first, global company ourselves, we live and breathe remote working. In fact, our team is made up of over 100 people in more than 20 countries across the globe! Because of that, we empathize with the challenges remote businesses are facing when managing a global workforce.
At Omnipresent, we’re here to offer you a tailored solution for your global employment needs. Our goal is to make employing global talent simple and risk-free. Click here to get in touch for a free consultation so we can help you find the best path for your business.