Imagine being able to hire remote workers from around the world without any headaches about compliance or payroll. Sounds perfect, right? But in the real world, navigating international laws can make hiring abroad pretty tricky.
That’s where an employment partner comes in, like an employer of record (EOR) / professional employer organisation (PEO). In this article, we’ll dive into what a PEO is, how it’s different from an EOR, and the benefits it can bring to your business.
While some people use the terms interchangeably, there are important distinctions between PEOs and EORs.
Primary difference: While PEOs manage HR functions for businesses that already have legal entities, EORs hire employees on behalf of their clients without requiring the client to establish a local entity.
While both EORs and PEOs handle HR functions for your company, they’re not the same. Here are five key differences:
If you don't own an entity in the country where you want to employ workers, you need an EOR, not a PEO. If a global employment partner requires you to open your own entity before you can hire people, they provide PEO services, not EOR services. These are sometimes called "global PEOs."
Global PEOs are useful if you’re planning to open an entity, but if not, an EOR is faster and often more affordable, especially if you’re hiring only a few employees in a new country. With an EOR, you can work with your employees just like you do with all your other employees, allowing you to hire full-time workers in countries / organisations where you don’t have a legal entity.
A PEO can help you hire workers in other countries, but only if you have an entity. PEOs provide most of the same HR services as EORs, like payroll / benefits administration, but require co-employment with your local entity. PEO-only companies may lack the same legal expertise that EOR providers have.
An EOR also provides all the HR services your business needs, such as payroll / benefits management, but it acts as the local employer of your workers on paper. When expanding your team into new countries, an all-in-one EOR partner can make life much easier by handling compliance and other key processes.
An EOR is a better alternative than a PEO when you want to hire a full-time person in a nation where you don’t have a legal entity / plan to establish one. Your EOR will check the legal employment of your workforce in other countries, so on paper, the EOR is the employer. However, the EOR simply facilitates the paperwork for compliance.
We can help you with your US bookkeeping.
An EOR can hire workers in other countries on your behalf, so you don’t need to set up your own entity there. They act as the legal employer for your workers on paper.
To work with a PEO, you need to establish a legal entity in the country. They help manage HR tasks but require you to have a presence there.
Yes, both EORs and PEOs take care of HR tasks like payroll, benefits, and tax deductions/reporting.
Using a PEO involves a co-employment arrangement between your company, the employee, and the PEO. This means you are responsible for compliance with local labor laws.
If you already have a legal entity in the country, a PEO might be more affordable. However, if you don’t, an EOR is usually much cheaper and faster than setting up a new entity.
If you don’t own a legal entity in the country where you want to hire full-time workers, you need to use an EOR. It’s your only option if you don’t want to open your own entity. However, be cautious because some EORs work through third parties, adding extra fees and causing a confusing experience for your employees. It can also get expensive and result in inconsistent service.
At Remote, we own our legal entities in all the countries where we operate. This ensures a smooth experience for your team and flat-rate pricing for your company. If you’re considering paying workers as contractors, you might use a PEO, but be careful not to misclassify employees as contractors.
Opening your own entity is another option, but consider these factors:
Both PEOs and many EORs often have minimum employee requirements. Starting a local legal entity can get expensive, and providers might require a minimum number of employees to start a partnership. This can make international hiring too costly for startups and small businesses, forcing them to stick with local talent. If you’re planning to hire many employees in a new country, a local PEO can manage HR functions through a co-employment arrangement.
For international contractors, you don’t necessarily need an EOR or a PEO. You just need a compliant contractor management and payment solution. Remote simplifies paying and managing contractors worldwide, offering a good solution for companies of all sizes.
PEOs offer a range of HR services, including:
EORs typically handle:
PEOs and EORs share many similarities, including:
In a perfect world, yes. But in reality, international laws can make it tough to hire workers abroad.
You'll need an employment partner like an Employer of Record (EOR) / a Professional Employer Organization (PEO).
If you already own a legal entity in the country, a PEO might be more affordable. But if you don’t, an EOR is generally cheaper and faster than setting up a new entity.
Both manage HR tasks like payroll, benefits, and tax deductions. However, with a PEO, you are solely responsible for compliance with local labor laws.
PEO stands for Professional Employer Organisation. They provide HR services to businesses and act as a co-employer, taking on responsibilities like payroll, benefits, and compliance.
Costs vary, but PEOs typically charge either a percentage of your total payroll / a flat fee per employee per month.
Companies use PEOs to streamline HR operations, save time on administrative tasks / provide better benefits to employees. Businesses using PEOs grow faster, experience less turnover, and are less likely to go out of business.
Small and medium-sized businesses often benefit from PEO services. They provide a range of HR services without the need to hire additional staff.
Consider your workplace needs, the PEO’s cost and reputation, their customer service standards, and whether they have the relevant technology.
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