PEO vs. EOR: What's Best (and How to Decide)
The never-ending battle opposing PEO vs. EOR gets easier once you know your business needs. Both are third-party solutions that help you hire people overseas while handling your HR needs. So, you must be wondering… what makes them that different?
It all comes down to how they legally employ people. Get ready to understand their main characteristics to choose the best for your business.
PEO vs. EOR: Their Meanings and Main Differences
There’s no denying it: both solutions act as your hiring partner abroad. But that’s not all.
The way PEOs and EORs function is different. And though they work around the same niche, their meanings and characteristics set the record straight – while helping you reach a wiser decision.
Let’s start with the basics.
PEO Meaning
A Professional Employer Organization (PEO) is a business entity that partners with companies to provide comprehensive HR solutions. Though that’s not mandatory, businesses usually look for a PEO when they need help employing someone abroad.
PEOs handle most HR tasks, such as payroll processing, benefits administration, and compliance management. That way, companies can focus more on their core business activities by outsourcing these functions while PEOs manage most employee-related responsibilities (but not all).
EOR Meaning
An Employer of Record (EOR) takes on all the legal responsibilities of a regular employer. When companies partner with EORs, they need a legal solution to employ workers overseas – as they can’t do it while established in a different country.
EORs act as an intermediate between your business and the team you build abroad – while being the ones legally employing each person. But that’s not all, as EORs usually handle other critical tasks if you need them, such as HR.
Some, like BRIDGE IN, deal with payroll processing, tax withholding, and compliance management. So, knowing what to look for in an EOR is important when comparing your options.
All in all, the EOR becomes the official employer on record for tax and regulatory purposes, allowing the client company to concentrate on day-to-day operations – without worrying about administrative complexities.
So, this is an excellent time to decide if you’re legally employing your team overseas or need another entity to do it. Plus, bear in mind that you can go for local or global PEOs and EORs.
PEOs vs. EORs: The Legal, Management, and Day-to-Day Responsibilities
Let’s go through the differences between PEOs and EORs regarding their responsibilities.
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Shares employer responsibilities with the client company, acting as a co-employer
Assists with HR tasks, payroll, and benefits administration – promoting a shared employer-employee relationship
Employees may have a dual relationship with both the client company and the PEO
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Assumes all legal employer responsibilities, including compliance and liability
Takes full responsibility for employment-related functions, overseeing payroll, taxes, and legal compliance on behalf of the client
The EOR officially employs workers, establishing a direct relationship with them. But their day-to-day relationship happens with the client company
However, you must consider other critical aspects when comparing PEO vs. EOR.
PEOs Require Business Registrations (but EORs Don’t)
Keep in mind: PEOs (Professional Employer Organizations) act as co-employers.
This means that partnering with a PEO in the same country as your headquarters – or where you have legal entities – is straightforward and helps you avoid legal complications when employing workers.
However, employing workers in a different country with a PEO requires registering your business there, as you will be a co-employer with the PEO.
In contrast, EORs (Employers of Record) function differently.
An EOR takes on the legal responsibility of employing individuals on your behalf. This arrangement means you don't have to register your business in the countries where you employ people through an EOR. They ensure that employment complies with local laws, regardless of your company's physical presence in those geographies.
We do that at BRIDGE IN if you want to employ a team in Portugal.
Some PEOs Require a Minimum Number of Employees
Though this doesn’t happen with all PEOs, it does with many.
When you partner with these entities, you must meet a minimum number of hired people (which can vary between 5 to 10). So, that can be an option when you’re looking to increase an already-created team. But not when you start employing from scratch.
EORs, on the other hand, don't have these requirements, meaning you can hire only one person.
Understanding the differences opposing PEOs vs. EORs is crucial before making a decision. You may need help employing overseas only or, on top of that, assistance with HR and legal services. PEOs and EORs have pros and cons – so it all comes down to your business needs.
Team up with the one that best suits your goals (including long-term), aligns with your budget, and, above all, offers exquisite, close customer support.
