An Employer of Record (EOR) and a Professional Employer Organization (PEO) both provide employment services, but they differ in their scope and responsibilities. An EOR acts as the legal employer for a company's workers, managing payroll, taxes, benefits, and compliance with local labor laws. This is ideal for companies looking to expand globally without establishing a legal entity in each country. The EOR assumes all legal risks related to employment, making it a seamless option for managing international teams.
On the other hand, a PEO co-employs the workers alongside the client company, sharing responsibilities and liabilities. While the PEO handles HR functions like payroll, benefits, and insurance coverage, the client company remains the legal employer and must have a legal entity in the country where the workers are located. This model is typically used within a single country where the business is already established and looking to outsource HR functions to focus on core business activities.
In summary, the key difference is that an EOR is the legal employer, which is beneficial for international employment, while a PEO shares employment responsibilities, requiring the client company to have a local presence.