EOR vs PEO: Understand The Differences

Posted on 8 July 2024 by IRIS FMP

When expanding into new global markets, an employer of record (EOR) and a professional employer organization (PEO) can help you find and manage talent. But which one is right for you, and what exactly do they do?

Here is your chance to learn more about EOR vs PEO for your business to decide which is best for you.

What Is an Employer of Record (EOR)?

An EOR stands for global employment organization. It takes on all responsibilities for your business in locations where you do not own an entity. The EOR is the legal employer of your workforce, but you still manage and supervise your workforce as you would without an EOR.

EORs are responsible for payroll and HR tasks, including,

  • Onboarding
  • Payroll
  • Taxes and deductions
  • Benefits administration
  • Unemployment

Because an EOR is the full legal employer in the new market, your liability for non-compliance is completely removed. The EOR manages and maintains legal compliance with all local, federal, and even international regulations and takes complete ownership of any compliance issues.

EORs are typically used by larger companies that are looking to expand to multiple countries simultaneously. EORs are able to streamline this process in each country, making rapid globalization possible, without requiring the company to go through the bureaucracy of creating a new legal entity in each market and becoming compliant to sometimes very complex international labor laws.

What Is a Professional Employer Organization? (PEO)

Where an EOR provides complete HR and payroll coverage, a professional employer organization (PEO) serves more as a partner. A PEO is a co-employer who helps but does not take on all HR and payroll responsibilities.

A PEO serves as a partner to your company who you can offload some tasks, including,

  • Tax filing
  • Regulatory compliance
  • Payroll processing
  • Benefits administration

Because a PEO acts as an outsourced HR department, your internal team has more time to focus on the core tasks of your expansion. However, because it is only a partner company, a PEO is not the employer of your international workforce. This means they take no accountability or ownership of your company in the new country. You are still accountable for filling and filing all necessary forms and documents to create a company, becoming compliant with regulations, and talent management.

Should You Use an EOR or a PEO?

If you are looking to expand to a new global market, an EOR or a PEO will help you better manage the transition into a new country, but depending on your company and your long-term goals in that country, one option may be better than the other.

Companies that choose an EOR are looking for someone else to handle HR and payroll in the country. They are willing to sacrifice some of the management and organization of their workforce to try to get into a new market as quickly and efficiently as possible.

Some countries have notoriously complex international business laws, making it very difficult to enter as a foreign company. An EOR is the best option in these cases because it is already an established legal entity in the country, and there is no need for complex paperwork or bureaucracy.

However, a PEO is a better option if you want to establish a lasting foothold in a new country. While you must do more paperwork when working with a PEO, you retain more ownership and direct control over your company’s growth in the new market.

Make the Right Choice with IRIS EOR Service

With over 40 years of experience, IRIS can provide your company with the support it needs in over 80 countries. With the IRIS Employer of Record (EOR) service, your company can simply tell us where you want to hire and what skills you need – anywhere in the world – and we’ll do the rest. Get started today and experience the difference IRIS can make for your company.