VIDEO: EOR VS. PEO

This episode unpacks two of the main acronyms in global hiring: EOR (employer of record) and PEO (professional employer organization).

These two hiring solutions seem similar on the surface. In practice, however, they provide notably different types of human resources (HR) support. An organization must understand the critical differences between the solutions before choosing one.

When it comes to hiring, there are a lot of concepts and acronyms out there: FTE, EOR, PEO, ATS, HRIS, HCM, GDPR, M&A, LOL, BRB, TMI, TLDR.

It can all be a bit overwhelming.

I’m Ashley with Velocity Global. And today, we will unpack two of the main acronyms in hiring: EOR and PEO. Two hiring solutions that seem similar on the surface but, in reality, provide very different types of support.

Understanding the differences between these two solutions will be vital to making the right decision for your business and team.

Let’s start with a quick refresher on EOR.

EOR refresher

For a more detailed breakdown, check out our deep dive into EOR here.

An employer of record, or EOR for short, is a third party that takes on the legal responsibility of employing your global team. The EOR handles all HR functions, including compliance with local labor laws, payroll benefits, and more.

What is a PEO?

Now, let’s take a look at PEO, short for professional employer organization, which is another solution for hiring.

A PEO, unlike an EOR, acts as a co-employer with your company. This means responsibilities are shared. The PEO handles HR tasks like payroll, benefits, and compliance just like an EOR, but through something called a co-employment agreement.

What is a co-employment agreement?

So, what’s a co-employment agreement?

A co-employment agreement is a local arrangement where two separate entities share the responsibilities and liabilities for employing a group of employees.

One half of the relationship is typically the business the employees are doing work for, while the other half is often a PEO. So, when does it make sense to use an EOR versus a PEO?

When should I use an EOR vs. a PEO?

Let’s break it down.

Employers of record are an ideal solution if you want to expand globally and need a quick, compliant, and cost-effective solution.

EORs can help mitigate risk by ensuring compliance with local labor laws and tax regulations.

If you’re exploring new markets, EORs provide a flexible solution to test markets before making a long-term commitment.

And EORs allow you to expand your talent pool to quite literally anywhere in the world. If you’re looking for the best to join your team, an EOR can help you cast a much wider net.

On the other hand, PEOs work well when you need more control over HR policies and practices.

They’re best if you prefer a co-employment relationship and are willing to actively manage HR alongside your PEO partner.

You’ll have access to a broader range of employee benefits due to the shared employment structure. Often, this means a team can take advantage of better benefit options.

If your company has complex HR requirements, a PEO can provide more tailored solutions to fit your needs.

So there you have the key differences between using an EOR and a PEO for your international hiring needs. I’m Ashley from Velocity Global. I’ll see you next time with more tools and knowledge you need to make the best decisions for your international hiring strategy.