PEOs vs EORs: A Comparative Guide for Global HR Solutions

In the ever-evolving landscape of global business, the complexities of international law pose significant challenges for businesses seeking to hire abroad. Compliance intricacies and cross-border payroll management can often become overwhelming.

To navigate these complexities, businesses often turn to employment partners such as a Professional Employer Organisation (PEO) or an Employer of Record (EOR). This article aims to demystify what a PEO is, how it differs from an EOR, and the potential benefits it can bring to your business.

PEOs vs EORs: A Quick Overview

The primary difference between a PEO and an EOR lies in their operational mechanisms. An EOR can employ workers in foreign countries on your behalf, eliminating the need for you to establish your own entity in that country. On the other hand, to engage with a PEO, you must have a legal entity in the country or region of operation.

Both PEOs and EORs handle HR tasks such as payroll, benefits, and tax deductions and reporting. However, with a PEO, there is a co-employment arrangement between your company, your employee, and the PEO. This makes you solely responsible for compliance with local labour laws.

The Role of PEOs in HR

In the realm of Human Resources (HR), PEO stands for “Professional Employer Organisation”. As of 2023, 81% of those who don’t use a PEO are interested in using one in the future. A PEO acts as a co-employer with businesses, taking on certain employer responsibilities such as payroll and tax, benefits and administration, and compliance with employment law.

The Cost of a PEO

The cost of partnering with a PEO can vary depending on factors such as the number of employees in the company and the specific HR services required. Some PEOs charge a percentage of a company’s total payroll, while others charge a flat fee for each employee per month.

Why Use PEOs?

Companies choose to partner with PEOs when they want to streamline their HR operations, save time on administrative tasks, and provide better benefits to their employees. A study on the NAPEO (National Association of Professional Employer Organizations) shows that, companies that use PEOs grow 7 to 9% quicker, experience 10 to 14% less turnover, and are 50% less likely to go out of business.

PEOs vs EORs: Which is Better for International Employees?

If you don’t own an entity in the country where you want to employ someone, you need an EOR, not a PEO. An EOR allows you to employ full-time workers in countries where you do not own a legal entity. A PEO may be able to help you hire employees in other countries. PEOs offer most of the same HR services as EORs, but they require co-employment with your local entity. Additionally, PEO companies may not possess the same level of legal expertise as EOR providers.

It’s important to remember that EORs can also provide all the HR services your business needs, such as payroll and benefits management, but your EOR always acts as the local employer for your employees on paper.

When expanding your team into new countries or regions, having an all-in-one EOR partner to handle these critical processes, in addition to your compliance needs, can make your international expansion much easier.

Read also: Hiring and Paying Remote Workers by using PEO/EOR services in Singapore

The Advantages of Using an EOR

An EOR is typically a better option than a PEO when you want to hire a full-time employee in a country where you don’t have a legal entity or plan to establish one. Some benefits of using an EOR include cost efficiency, flexibility for companies looking to hire across the globe, and compliance with local labour laws and regulations.

Deciding Between a PEO and EOR

When deciding between a PEO and an EOR, consider factors such as whether you own a legal entity in the country where the employee lives, how many employees you want to hire, and whether you’re hiring full-time employees or contractors.

Is it Time to Partner with a PEO or an EOR?

If you’re a small or medium-sized business owner that needs HR help, teaming up with a PEO services provider is worth considering. If your plans are refined to one country, a PEO may be a solid option. If you are considering hiring internationally, an EOR will give you more flexibility.

At Links, we offer more than just PEO and EOR services. Our comprehensive solutions include payroll outsourcing, outplacement services, visa application assistance, and more. Whether you’re expanding locally or globally, Links has you covered, helping you stay ahead of the competition and unlock new opportunities for growth.

Contact us today to learn more about how Links International can support your HR needs and drive your business forward.