The trend of remote work has increased since the outbreak. Employers are now aware that if they can recruit remotely, they can also hire internationally, which opens up a world of possibility for their company. However, global employment is incredibly complicated. Thankfully, there is a whole industry that makes it simple for you to hire anyone, anywhere, at any time.
You can get assistance navigating the difficulties of working abroad from both PEOs (Professional Employer Organizations) and EORs. They don't offer the same services, though, and one of them might be more appropriate for your company's hiring strategy than the other.
We'll provide you with answers to the most important questions about PEOs and EORs in this tutorial.
Understanding PEOs and EORs
Here's a quick look at what PEOs and EORs do since, despite the fact that some people in the HR field use the phrases interchangeably, there are some significant differences between the two.
Professional Employer Organisation (PEO)
PEO stands for professional employer organisation in human resources. PEOs provide an outsourced HR service that aids businesses in adhering to regional tax and payroll-related labour requirements. It's a co-employment situation, and the phrase "global payroll" is occasionally used to describe it.
Working with a PEO allows you to keep control over organisational decision-making, including managing the day-to-day roles and duties of your employees, while lowering HR overhead costs and enhancing the employee experience.
Employer of Record (EOR)
Similar HR services are provided by an Employer of Record (EOR), which takes over legal employment of the selected talent for its client. EOR is also responsible for adhering to all applicable local employment regulations, including those governing onboarding, payroll, benefits, and other matters. The client can save time and money by not having to invest time and resources in researching the intricate labour regulations of many nations.
Now that we've explained what PEOs and EORs perform in detail, it's time to compare and contrast them so you can decide which service is best for your business.
Both PEOs and EORs provide enormous advantages to firms. They do, however, function in quite distinct ways. Depending on where your company is in the process of becoming global, you can decide which solution is appropriate for you.
PEOs can provide local HR help if you have established or are building up local entities (i.e., establishing a corporation or registering your firm) in new markets. They can thus lessen the time that your HR employees must spend on administrative duties like payroll.
However, a PEO is generally not the best option for your company if you want to hire talent internationally without establishing local organisations in each jurisdiction. An EOR is perhaps more suited to your needs in that situation.
This is so that EORs can employ individuals on your behalf lawfully as they already have local businesses in the hiring country or countries. Your HR team may save a lot of time and money by doing this as well. Creating local corporations can, after all, be very time- and money-consuming.
In both situations, service agreements that specify the precise services provided by a particular PEO or EOR service provider are created and signed by client companies.
In summary, PEOs can be a cost-effective solution to outsource specific HR tasks, whereas EORs are especially valuable if you want to employ people in a nation where you don't already have a local presence.
Please note that each provider has a slightly different service; the distinctions between EORs and PEOs are listed in the table below.
| EOR | PEO |
Provides a locally complaint employment contract | Yes | No |
Manages holidays & time off | Yes | Sometimes |
Manages payroll & taxes | Yes | Yes |
Manages mandatory benefits | Yes | Sometimes |
Handles severance & termination | Yes | Can advise |
Manages expense reimbursements | Yes | Sometimes |
Manages collective agreement responsibilities | Yes | No |
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