All your Frequently Asked Questions on PEO and EOR Answered!

Businesses often opt for PEO / EOR services to address a variety of strategic and operational needs. These services provide a flexible and cost-effective way to access specialised skills and expertise, allowing organisations to quickly adapt to changing market conditions, manage workload fluctuations, and fill skill gaps.

Valuates Reports explained that the global employer of record platform market was valued at US$4450.5 million in 2022 and is predicted to reach US$6604.4 million by 2029. This growth is attributed to straightforward expansion opportunities for businesses into global markets, assured local adherence, compliance with labour law regulations, and the absence of supplementary payroll obligations.

Below, we answer all your frequently asked questions on PEO and EOR services.

1. What does PEO/EOR refer to?

Imagine a scenario where your business could streamline its hiring procedures by entrusting administrative tasks like payroll, tax, compliance, and other intricate processes to a third party, enabling your company to concentrate on talent acquisition. This is precisely what the PEO / EOR model offers.

In essence, a PEO / EOR service provider facilitates companies in outsourcing the employment-related responsibilities, including payroll, for their staff, compliantly and across the geographical locations where the service provider operates. Under the following approach, the client’s company’s employees are formally hired by the PEO / EOR organisation, which assumes the role of the legal employer and takes charge of payroll management, compliance, and tax obligations. Simultaneously, the PEO / EOR service provider maintains payroll records for the client’s employees as part of the agreement. This arrangement empowers the client to focus on overseeing their employees’ day-to-day tasks and prioritise critical business initiatives.

Traditionally, companies would have to go through a very tedious process of setting up an entity, opening a bank account and sourcing for office spaces during international expansion. However, with PEO/EOR, employers can hit the ground running via a legal employer. Once this is done, companies will be able to immediately test the market feasibility before deciding if the market is a good fit for them to expand into. If it is a good fit, they can proceed to set up their entity.

2. What advantages come with employing through a PEO/EOR service?

The key advantages include:

EOR Advantages

3. In what ways does multi-country PEO / EOR vary from multi-country payroll outsourcing?

Multi-country payroll outsourcing involves the management and execution of payroll related activities including the statutory, tax and pension administration for employees situated in different countries, typically when a company has set up local entities. Essentially, the company directly employs its workforce under its own entity, while entrusting the payroll related administrative tasks to an external professional firm.

On the other hand, in the context of multi-country PEO / EOR arrangements, employees are legally hired through a third-party professional PEO / EOR service provider, who is also in charge of payroll administration for these employees. The third party will be responsible for all the legalities of employment according to the countries’ labour law which also includes preparation of employment contracts and issuance of group insurance plans.

Try Out Links’ PEO / EOR Cost Calculator Now and Get an Estimate Cost on the Employee You Want to Hire!

4. Does the employer or service provider hold the responsibility for supervising employee management?

A multi-country PEO / EOR assumes the legal employer role for employees, maintaining continuous and seamless communication between the company and its workforce. The PEO / EOR service takes care of the complex aspects of employment, which includes:

  • Drafting employment contracts and discussing employment terms,
  • Managing payroll, HR functions, and ensuring compliance with labour laws,
  • Processing and disbursing salaries,
  • Handling statutory and tax processing and submissions,
  • Offering group company insurance, where relevant,
  • Issuing letters, statutory documents, and payslips,
  • Providing in-country support for payroll, HR, and labour law queries,
  • Offering a self-service portal for pre-approved vacation and paid time-off (if required),
  • Providing visa and immigration support when necessary.

In contrast, the company that utilises the PEO / EOR service is responsible for:

  • Workplace safety and compliance,
  • Workplace arrangements and reporting structures,
  • Day-to-day performance monitoring,
  • Confirming vacation and paid time-off requests (if applicable).

In short, the PEO/EOR company is responsible for all legalities of employment in that particular country whereas the company that utilises the service will be responsible for the day-to-day management of the employee including their performance management.

5. How is the situation handled if an employee must be terminated due to performance concerns?

The employee service provider and the client uphold transparent communication. In the event of performance concerns that might ultimately lead to termination, it is expected that the client informs the service provider about their intention before directly addressing the matter with the employee/s. The service provider will offer guidance regarding compliance and industry standards, in addition to assisting with all necessary administrative tasks during the termination process including administration of severance payments to terminated employees.

Read also: A Case Study on How to Expand a Business Using EoR Services

Some takeaways on deciding to work with an EOR / PEO provider:

  • Know your options – Be it expanding overseas or overcoming a hiring freeze, be sure to know your options so you can better weigh out each solution your company needs.

  • Protect yourself legally – When entering a secondment agreement make sure to check the key details mentioned above and the terms included are conducive to your interests.

  • Take your time to find the right partner – While there are many organisations offering secondment services, not all demonstrate the same level of understanding. Make sure to partner with a certified vendor who is familiar with the local employment laws and regulations to defend yourself against unnecessary disputes.

  • Compare costs and benefits– When deciding between methods of international expansion, always do a cost/benefit analysis to determine the right choice for your nature of business.

Have more questions on PEO / EOR services? At Links, we provide professional PEO and employer of record services as a way to help businesses bypass the restrictions imposed by hiring freezes, headcount caps, and overseas employments. Get in touch with one of our representatives to see how we can help you build your business.

Additionally, try out our EOR calculator to find out the estimate hiring cost in a matter of seconds!

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Links International is an industry leader in innovative HR outsourcing with services such as payroll outsourcing, visa application, Employer of Record (EOR), recruitment and more! Contact us for more information on how we can help leverage your HR function.