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Global collaboration is at an all-time high. A Deloitte survey found that 70% of organizations are planning to expand their use of global remote teams in the next two years.
At the same time, remote job listings have grown by over 40% year-over-year, according to FlexJobs. But what’s the process like for companies, especially when they need to navigate labor laws, payroll, and compliance?
That’s where Professional Employer Organizations (PEOs) and Employers of Record (EORs) services can come in. Let’s explore how each model works how can they improve your global growth strategy.
What is a PEO?
A Professional Employer Organization (PEO) partners with your company to provide comprehensive HR services, typically in a co-employment model. This means your business and the PEO share employer responsibilities for your workforce.
PEOs are ideal for companies with an existing legal presence in the target country and who want to streamline HR administration.
Role:
A PEO handles functions such as:
- Payroll processing
- Employee benefits administration
- Tax filings
- Workers’ compensation
- HR compliance support
In a co-employment arrangement, the client company manages the day-to-day duties of employees, while the PEO assumes some legal responsibilities related to employment.
Pros:
- Access to better benefits: PEOs often negotiate insurance and benefits at scale, offering your employees packages similar to those at larger corporations.
- Reduced administrative burden: The PEO takes care of payroll, taxes, and compliance-related paperwork.
- Cost savings: Bundled HR services can be more economical than hiring in-house teams.
Cons
- Legal entity required: You may need an established in the country to engage a PEO.
- Co-employment confusion: Some companies may find the shared responsibility model complex or restrictive.
- Limited geographic flexibility: Most PEOs operate within a specific country or region.
What is an EOR?
An Employer of Record (EOR) is a third-party organization that becomes the legal employer of your international workers on your behalf. It allows your company to hire talent globally without setting up a local entity. This makes EORs a fast and low-risk entry point into new markets.
Role:
An EOR takes full legal responsibility for employment, including:
- Hiring and onboarding
- Drafting compliant employment contracts
- Managing payroll and taxes
- Ensuring labor law compliance
- Handling terminations and employee disputes
The EOR enables you to focus on managing your team’s performance while it handles all legal and administrative employment aspects.
Pros
- No local entity required: You can hire quickly in new countries without the hassle of legal setup.
- Speed to market: EORs enable businesses to onboard international talent in days.
- Full compliance: The EOR assumes legal liability for employment, reducing your risk.
- Scalability: Easily scale your team across multiple countries with a single provider.
Cons
- Initial costs: EOR services typically require higher initial costs per employee due to their broader legal responsibilities.
- Less control over contracts: Since the EOR is the legal employer, it manages contracts and terminations.
- May not suit long-term strategy: For long-term operations, setting up a local entity may eventually be more cost-effective.
PEO vs EOR services: how to choose the right one for you?
Understanding the key differences between PEO vs EOR services is crucial when choosing the right solution for your business.
Here’s a side-by-side comparison:
| Feature | PEO | EOR |
|---|---|---|
| Legal employer | Shared (co-employment) | EOR |
| May require local entity | Yes | No |
| Payroll & tax management | Yes | Yes |
| Compliance responsibility | Shared | EOR |
| Onboarding speed | Moderate | Fast (often within days) |
| Global reach | Limited | Broad |
When it comes to PEO vs EOR services, the right option depends on your company’s current structure, expansion goals, and resources.
Choose a PEO if:
- You already have a legal entity in the country.
- You want to outsource HR functions while maintaining full control of employees.
- You’re focused on domestic or regional hiring.
Choose an EOR if:
- You’re entering a new international market without a local entity.
- You want to hire quickly while ensuring full legal compliance.
- You’re testing new markets or operating with a distributed global team.
You should also consider your long-term business plans. For short-term or flexible hiring in new markets, EOR services offer speed and simplicity. But for long-term operations in a single country, transitioning from an EOR to a PEO.
