When it comes to availing PEO and EOR services, there are certain key differences that you must understand to know which function suits best for your organization.
A company can only use a PEO within a country in which it operates as an entity, while an EOR can operate outside the country where its client companies are tied to. Additionally, the company shares some legal exposure with a PEO that it does not share with an EOR. However, a PEO can be a more affordable option compared to EORs.
With a PEO, you enter into a co-employment relationship, which means the people you hire are your company’s employees. You are legally responsible for your employees, and the PEO is just there to support your HR functions such as managing biweekly payroll and employee health benefits.
On the other hand, when you engage with an EOR, the EOR is the legal employer of anyone you hire through them. Employees sign employment contracts with the EOR, not with your business. You still determine the employee’s wages and evaluate their performance, but since the EOR is the legal employer, you can work with anyone wherever the EOR has a business registration. Many EORs also offer HR services similar to PEOs.
If you need help managing payroll, taxes, and benefits within the country where your company operates, a PEO might be best for your company. However, if your company needs to employ workers in other countries, an EOR will be a better choice.