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Employer of record vs PEO — which global hiring option is better?

If you are looking to quickly and compliantly hire overseas professionals, employer of record vs PEO is likely a choice you have considered.
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If you are looking to work with a partner to help you quickly and compliantly hire overseas professionals, employer of record vs PEO (professional employer organization) is likely a choice you have considered.

Both are effective solutions for anyone seeking to hire internationally, and while they are similar, they have some key differences.

It is worth noting that many employers of record also refer to their services as international PEO. Which can be a source of confusion when considering the question of employer of record vs PEO.

SEE ALSO: Call center outsourcing: 5 great destinations to consider 

However, the common conception of a professional employer organization that distinguished it from an employer of record (EOR) is that it serves as a co-employer of overseas professionals along with the client. An EOR, on the other hand, serves as the sole employer.

In each case, those professionals report directly to the client, while the service provider takes care of the payroll and other admin related to the employees.

At Serviap Global, are able to assist clients seeking international PEO / EOR services in over 100 countries worldwide. Contact us to find out more. 

Employer of record vs PEO: what is an EOR?  

An employer of record (EOR) is a third party that assumes all legal responsibilities on behalf of its client in a territory where the company has not established an entity. This means that an EOR oversees hiring, payroll, and range of other administrative matters related to hiring international team members.

As such, the employer of record pays salaries, withholds taxes, administers benefits, arranges vacation periods, processes visas and other work permits, and eventually offboards professionals, with the client being billed and reported to on a regular basis. 

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Employer of record vs PEO, which is best for you?

An EOR offers an ideal solution to companies looking to enter a new country rapidly, because a good provider will have an established recruitment network able to help find and hire local talent quickly, while allowing the client to avoid establishing its own local entity.  

With the EOR taking care of many administrative matters and overseeing proper adherence to regulations, the client is able to operate with the peace of mind of knowing that no compliance issues will arise.

Meanwhile, the client has control over the schedules, workload, and task-setting of all of the professionals employed through the EOR, so that the client will effectively be able to operate as if it has overseas staff, without having a legal presence of its own where those professionals are based.

An EOR will also be able to support clients with alternative hiring arrangement, such as taking people on as international independendent contractors, which may be preferable to some clients.

Employer of record vs PEO: what is a PEO? 

A professional employer organization is a company that also provides overseas employment solutions, handling various legal formalities on behalf of its clients, such as payroll management. 

That is very similar to an EOR, hence the confusion many people face when considering the choice of employer of record vs PEO. However, when working with a professional employer organization, it is the client that ultimately retains responsibility for compliance with local labor laws, rather than the provider

When working with a PEO, the client effectively becomes a co-employer, leaving complex administrative processes to the provider. That means the solution is only suitable if the client has a legal entity established in the jurisdiction, or is planning to set one up ahead of onboarding local professionals.

Partnering with a PEO can reduce HR overheads and improve the employee experience, as well as help avoid penalties for failure to comply with local regulations.

The in-depth market understanding that the professional employer organization offers the client should generally mean that compliance issues will not arise. However, the client will be liable in the case that they do. 

Employer of record vs PEO: key differences 

It may seem that when evaluating an employer of record vs PEO they are exactly the same. Both help their clients grow in another territory and comply with local regulations. However, there are marked differences in their structure, scale, scope, and costs, as well as the potential risks involved in contracting them. 

The two main differences in the employer of record vs PEO equation is the level of liability assumed by the client and the need to have a local entity set up when hiring overseas professionals.

Working with a professional employer organization means having an entity set up and assuming more liability. Hiring via an EOR, on the other hand means no need for a local entity and the provider assuming responsibility for compliance.

That obviously also has a bearing on fees, because the reduced commitment to the market and risk involved in working with an EOR means the provider will usually charge a higher fee.

Other differences that may be noticed when weighing up employer vs record vs PEO is the fact that the former will often not stipulate a minimum quota of personnel to be hired, while the latter often will.

So if you wish to hire a single executive to represent you or lead sales in a particular country or region, or should you only want to onboard a handful of tech professionals, you may find that an EOR provider is more willing to work with you.

Keep in mind when considering employer of record vs PEO, as previously highlighted, some EOR providers refer to their services as international PEO.

Serviap Global infographic of eor employer of record vs peo professional employer organization.
Key differences when considering employer of record vs PEO

Serviap Global assists clients with EOR services worldwide

At Serviap Global, we have more than 12 years of experience providing international PEO / EOR services to help our clients quickly expand overseas. Our global network allows us to assist clients in over 100 countries worldwide.

For anyone seeking to hire international professionals directly, we also offer global talent acquisition services.

We are a family-run business that started life in Mexico before expanding throughout the world. While our vision is global, we are committed to the sort of service excellence and individualised treatment that comes with working with a local provider.

Contact us today for more information.

If you liked this article about employer of record vs PEO, check out the rest of our coverage of our service worldwide. Or read more about us.

What is an employer of record (EOR)?

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