As a company, you can use either a Professional Employer Organization (PEO) or an Employer of Record (EOR) to outsource specific tasks related to your employees. However, each offers unique roles and responsibilities.
A PEO is a firm that provides comprehensive HR solutions for small and mid-sized businesses. You can contract with a PEO to assume responsibilities and provide employee benefits, payroll services, workers’ compensation, recruiting, risk/safety management, and training and development. By entering into a contract, a PEO hires your employees, becoming their employer of record for tax and insurance purposes – a practice known as co-employment.
On the other hand, an EOR serves as the official employer for tax purposes while your employee works at your company. Like a PEO, an EOR handles your employee payroll, benefits, taxes, insurance, and other HR responsibilities.
The critical difference between an EOR and a PEO lies in the employment relationship. With an EOR, there’s no co-employment arrangement. The EOR is the official employer, and your company, where employees perform their work, becomes the EOR’s client.