To expand into new markets and build a diversified workforce, many companies are hiring remote employees. In fact, 16% of companies around the world are fully remote and the number is expended to rise.
Hiring remote employers overseas, however, is not without its challenges with compliance with local labor laws and payroll being major ones. To hire employees overseas compliantly, many companies choose to partner with an EOR or PEO to navigate the barriers to international hiring.
In the HR industry, some people use the terms interchangeability but EORs and PEOs have a few key differences you should know before entering a partnership.
In this post, we’ll walk you through how an EOR is different from PEO and help you determine the right solution for your business.
What is an EOR?
Also known as Global PEO or GEO, an Employer of Record (EOR) help companies employ remote workers anywhere around the world through its legal entity.
The EOR takes on the complete liability of the employees and mitigates risks to the client by ensuring full compliance in every country where the company employs workers.
From handling country-specific taxes, payroll, compliance to benefits administration, the EOR is liable for all employer-related responsibilities.
What is PEO?
Also known as a co-employment relationship, a Professional Employer Organization (PEO) handles HR tasks for businesses such as payroll and benefits administration.
In other words, PEOs act as a company’s outsourced HR department so that internal staff can focus more on strategic thinking rather than consumed by mundane day-to-day HR responsibilities.
What is the difference between an EOR and a PEO?
Both PEO and EOR are employment solutions and that’s why some use them interchangeably. However, unlike a PEO, an EOR does more than merely handling HR operations for businesses.
Its primary goal is to help companies hire employees overseas by navigating the barriers and challenges to global expansion. EORs do so via its network of local entities around the world.
Therefore, if you do not own a legal entity in the country where you want to hire someone and have no plan to set up an entity in the target country, you need an EOR.
On the other hand, you can’t count on PEOs to hire employees overseas on your behalf. Their primary function is to manage part of your company’s HR operations including payroll and benefits. Some PEOs may also provide assistance related to the hiring and training of the workforce.
Does your business need an EOR or PEO to expand globally?
Whether you should partner with an EOR or PEO, it entirely depends upon your unique business requirements and goals. To help you decide the right employment solution for your business, here are two key factors you can consider before making a final decision.
1. Do you own a legal entity in the target country?
Let’s say you have successfully built an international presence by setting up your own legal entities in target states or countries. But you have no resources or a dedicated HR department to cater to all your employee’s needs and deliver the experience your employees deserve. In such scenarios, you need a PEO to handle the HR operations of your business.
By working with a PEO, you can make sure your employees receive their paychecks on time and have access to competitive benefits such as healthcare, retirement plans and others.
Also, many businesses choose to partner with PEOs to find top-tier talent in the same region where their company is registered.
But what if you do not own a legal entity in the country where you want to hire someone? You can either partner with an EOR or establish an entity in the target country to employ workers overseas in a fully compliant manner.
The reason being businesses choose to work with an EOR rather than establishing a firm in the target state or country is the latter option is quite expensive and delays time-to-hire.
2. Do you want to share a risk?
Both PEOs and EORs work differently. When you partner with an EOR, the EOR becomes the legal employer while you retain the complete direction of managing the day-to-day tasks of your employees. In the other words, an EOR takes all the risk on its shoulders – saving you from all potential legal headaches and problems down the road.
On the other hand, you sign a cop-employment agreement with a PEO. This means that you and the PEO are both legal employers of your workforce.
In the agreement, the PEO and you will assign and share the employer’s responsibilities and liabilities. So, you still have to address some other parts of HR while working with a PEO.
While you share the risk with a PEO, you still retain the complete management of the day-to-day tasks of your workforce.
3. Do you want to outsource all of your HR operations?
Typically, both PEOs and EORs provide the same sort of human resources services such as payroll processing, benefits administration, talent sourcing (hiring, onboarding or offboarding) and others. Therefore, in such scenarios, you can partner either with an EOR or PEO.
But what if you decide to hire remote workers overseas in the future? As EORs can provide all the HR services, so having an all-in-one partner in place to handle the day-to-day HR activities along with taking care of compliance can be a smart move.
A Quick Comparison – EOR vs. PEO
Here’s a quick recap of the two most popular employment solutions – EOR vs PEO.
| EOR | PEO | |
| Entity Establishment | Not Required | Required |
| Core Functions | International hiring + facilitating complete HR functions of the client | Facilitating complete or part of the client’s HR functions |
| Employment Model | Sole employer | Co-employer |
| Liability | Assumes all responsibilities & liabilities | Share responsibilities & liabilities |
| Worker’s compensation coverage | Included | Maybe |
| Legal Guidance | Included | Maybe |
| International Compliance | Included | No |
How InfoStride Can Help Your Business?
At InfoStride, we offer both EOR and PEO services to businesses across industries. Whether you want to simplify the process to hire international workers without setting up local legal entities or just want to outsource the HR functions of your business to a reliable partner, you can count on us.
No matter how you collaborate with InfoStride, we tailor our services to meet your precise requirements and needs. We begin every partnership with long-term success in mind for our clients. We put our key teams in legal and compliance on work when it comes to hiring remote talent overseas in a locally compliant manner.
As we understand there are many factors that play a role to determine the right employment solution for your business, so it makes sense to get expert advice before making a final call.
Talk to our experts today in a free consultation session and figure out whether EOR or PEO is the right move for your business goals.
Conclusion
An EOR is ideal for any company that wants to hire employees overseas compliantly and cost-effectively with leaving all responsibilities and liabilities to the EOR. On the other hand, if you’re just want to leave HR activities for workers living in the same region where you own a legal entity, PEO may be the right employment solution.
Before you decide with whom to work with – whether EOR or PEO, make sure to assess your business requirements and goals. This, in turn, will help you choose the right path to expand your business globally.
