If your business is expanding into a new country or region, an EOR can help you on-board your team. They handle the legal employment and compliance for you, making them the perfect HR partner.
In most cases, EORs secure general liability and workers’ compensation insurance coverage on your behalf.
EOR vs. PEO
New HR solutions enter the marketplace at a rapid pace, making it challenging to determine which option best meets your organization’s needs. Two options that appear similar on the surface are employer of record services (EOR) and professional employment organizations (PEO).
Both provide solutions to help your business improve human resources management and remain compliant with local laws. However, there are some key differences between the two that could impact your decision.
EOR providers are often used for seasonal workers, contractors and project-based hires. They act as legal employers in the countries where they operate, taking on the responsibility for all employment-related risks and liabilities.
In comparison, PEOs offer more comprehensive HR support for companies seeking to scale globally. As co-employers, they manage all aspects of HR on your behalf, including compliance, payroll taxes, benefits administration and more. They also assist with business registration and legal entity formation, where applicable. This can be beneficial for businesses that have large and complex workforces.
Understanding the Differences
Essentially, an EOR is the employer of record, they take on all legal compliance and payroll duties. With an EOR, it’s a three-way relationship between the company, the employee and the EOR. They can also provide extra HR functions like brokering health insurance, pensions and bonus schemes.
A PEO on the other hand, is a co-employer. They share responsibilities with you as the business, and can be especially helpful for smaller businesses that are looking to scale globally. PEOs can lower costs, help with risk mitigation and ensure global compliance.
Before choosing either an EOR or PEO service, assess your business needs and your planned growth trajectory. Consider the size of your workforce and geographical location, as well as the level of control you want to retain over HR functions in-house. Finally, look at the cost and budget implications of both options. Then, choose the option that best suits your requirements.
Whether you’re planning to hire a team of people locally or expanding internationally, both an EOR and a PEO can improve your human resources management by taking responsibility for many tasks that are time-consuming and risky to make errors in. These include securing a work visa, compliance monitoring, hiring employees and ensuring that local laws are adhered to.
An EOR also oversees seasonal workers, contractors and project-specific hires, so it’s a good option for companies looking to expand internationally without setting up local entities in each country. This can save you time and money in the long run.
An EOR is a good fit for smaller businesses that are unable to afford or manage comprehensive big-company benefits. However, an EOR may have less control of internal culture and can sometimes hire people with attitudes that differ from the company’s. This can cause a problem if the company wants to maintain consistency in its culture. It’s important to research reputable providers and choose a partner that can handle these differences well.
Legal Employment Status
Employer of record and PEO services allow you to delegate the time-consuming payroll, tax withholdings, benefits management, compliance monitoring, onboarding, and more. Rather than relying on your own internal HR team, these third-party service providers serve as an extension of your company, taking on the legal employment status and employer responsibilities in the country where they operate.
The advantage of this is that you don’t have to worry about putting your company at risk for a worker classification misstep, like those that made headlines in Uber and Pimlico Plumbers cases. An EOR can help you expand your global workforce without the hassle of establishing a local legal entity.
For companies looking to hire more seasonal workers, contractors, project-specific employees, or country employees for short-term projects, an EOR is a great option. With a PEO, you enter into a co-employment relationship and are legally responsible for your employees, but with an EOR, the client company retains control of the day-to-day duties and tasks.