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EOR and PEO are two popular HR outsourcing models that offer distinct approaches to managing employee-related tasks.
What is an Employer of Record (EOR)?
The traditional process of international business expansion is tedious and resource-intensive.
Heres a great example.
Instead of going through the hassle of setting up an office there, the company can use an EOR.
This makes it easier to hire internationally without setting up in each country.
What is a Professional Employer Organization(PEO)?
A professional employer organization also known as PEO is another common jot down of HR outsourcing.
A PEO is an organization that enters a co-employment relationship with a client business.
They function as a co-employer, sharing employer responsibilities with the client.
Additionally, PEO saves clients about $450 per employee on administrative costs.
Below, we provide key differences between both models.
PEO:A PEO supports a business by handling its HR-related tasks where the business has a legal entity.
Employment Relationship
EOR:Employer of records act as full, legal employers.
They assume all the risks and liabilities associated with the services they provide.
Under the EOR model, a business has little control over its HR functions.
They partner with the client business to share the employment, tax and legal responsibilities of the employees.
The client company is generally not directly liable for any non-compliance issues.
Flexibility
EOR:An EOR can provide more flexibility and customization for companies.
For example, they can hire and manage employees in multiple countries.
PEO:A PEO may have more standardized and limited services.
PEOs focus on serving domestic markets.
It is ideal for businesses that already have a legal entity in the region.
Do you own a legal entity in the country where the employee lives?
How large is your workforce?
PEOs typically partner with businesses that range in size from 1 employee up to 500 employees.
Does your company plan to expand globally?
Are you hiring full-time employees, contractors, or both?
Are you looking for ongoing HR management in a country where you already have an entity?
How much control do you want to retain over employment responsibilities like compliance?
Both transitions must be handled with careful planning to ensure compliance with labor laws.
Both EORs and PEOs have different pricing models.
EORs may charge based on a fixed per each employee or a percentage of your employees salaries.
PEOs typically charge a fixed per-employee fee.
Both PEOs and EORs can assist with hiring and managing contractors, as well as full time employees.
An AEO (used interchangeably with an ASO) stands for Administrative Employer Organization.
It is a common punch in of HR outsourcing arrangement.
The difference between an AEO and a PEO lies in the structure and extent of services they offer.
With the AEO model, the client business retains its status as the employer.
A PEO becomes the co-employer of employees, while an AEO provides administrative support only.
PEOs become co-employers of your employees.
A payroll service provider is not in a co-employment relationship with employees.
Both models offervaluable benefitsfrom cost-effective services, streamlined solutions and compliance management.
EORs suit businesses with global or remote workforces, providing centralized employment solutions.
PEOs are ideal for small to mid-sized domestic businesses seeking co-employment relationships and HR support.
