In today’s economic climate, companies are increasingly tasked with reassessing their approach to business success. Small businesses and medium-sized businesses alike are turning to the resilience and opportunity unlocked by global expansion to navigate common challenges like talent shortages. Despite global uncertainty, 73% of C-suite leaders are prioritizing growth in 2024, proving that a global mindset is paramount for organizations that want to thrive. Additionally, 39% of hiring leaders plan to increase their financial commitment toward hiring throughout 2024.
Yet, new market entry can be expensive and time-consuming. And as the global hiring market continues to shift, fueled by trends like the emerging global mindset and the rise of AI-driven innovations, companies must take a proactive approach and prepare for growth by creating a favorable environment for job seekers.
That’s why many companies seek an alternative to streamline HR functions like hiring, recruiting, and compliance. If you are looking to quickly expand your workforce, you may want to partner with an EOR or a global PEO to efficiently manage your HR needs while saving time and money.
But what do EOR and PEO stand for in HR? What’s the difference between a PEO and an EOR model? Let’s explore the benefits of each model and how their services can help companies attract and retain talent.
What is a PEO?
A Professional Employer Organization (PEO) is a company that co-employs individuals with another company that already has its own registered entity in the particular jurisdiction where it’s hiring. A PEO can provide companies with a range of HR services, including payroll, benefits, tax filing, workers compensation, business insurance, and other HR responsibilities. A PEO offers expertise that can reduce the cost of benefits administration and streamline payroll operations. Since a PEO utilizes a co-employment model, the PEO and employer share liability for the employed individual.
There are currently 523 PEOs in the United States alone, and the PEO industry’s 4.5 million worksite employees were paid USD 305 billion in 2022. A PEO takes on specific company responsibilities, including:
- Payroll and taxes
- Benefits administration
- Compliance support
- HR services and administration
- Workers’ compensation insurance
How much does a PEO cost? The cost of partnering with a PEO depends on the size of the company and the specific HR, legal, tax, accounting, and client services required. In general, PEOs set their fee by charging a flat fee for each employee per month or by collecting a predetermined percentage of a company’s total payroll.
If you’re exploring options to manage your HR needs, chances are you’ve also come across Administrative Services Organization (ASO) services. What is an ASO vs. a PEO? PEOs and ASOs both perform HR-related duties, but a PEO acts as a co-employer while an ASO does not. An ASO does not directly provide payroll, benefits, or workers’ compensation but it can help facilitate finding providers who can.
What is an EOR?
A global Employer of Record (EOR), on the other hand, handles all the functions of a PEO — including payroll and benefits — but acts as the sole legal employer and supports companies that do not have a legal entity in the country. An EOR handles all HR, payroll, and compliance functions — while significantly reducing legal liability — and allows companies to hire internationally without having to set up a local entity in-country.
An EOR handles all HR-related tasks to streamline day-to-day operations, including:
- Onboarding and offboarding
- Employment contract generation
- Tax withholding and filing
- Payroll
- Compliance with local laws
- Benefits administration
How much does an EOR cost? EOR costs vary depending on a few key factors, including number of employees, types of services offered, and location. Some EORs have a fixed fee per employee, while other service providers determine costs based on the location and length of the contract.
Employer of Record vs. PEO: What’s the difference?
What is the difference between PEO and EOR? While both services handle HR functions for a company, they differ in terms of cost, structure, scale, and scope. Unlike a Professional Employer Organization (PEO), G-P’s EOR solutions provide global guidance, compliance, and risk management — so you can focus on strategic growth with greater peace of mind. Here are a few key differences between Employer of Record services vs. PEO:
| EOR | PEO | |
|---|---|---|
| Employer structure | Direct employer | Co-employer |
| Legal responsibility for employees | Yes — mitigates risk | No — shares liability |
| Scope | Full-cycle employment | HR management |
| Cost | Higher long-term cost savings | Minimal long-term cost savings |
| Compliance | No entity needed | Local entity required |
1. Unlike a PEO, an EOR acts as the legal employer.
The most significant difference between an EOR and a PEO is the employer structure. An EOR acts as the legal employer and hires workers on behalf of a company. A Professional Employment Organization (PEO) is a co-employment structure, which means that companies are also legally responsible for their employees.
2. An EOR offers strategic guidance and market insight.
PEOs coordinate country-specific benefits typically included in a local employment package. But an EOR takes it one step further by providing guidance regarding employee expectations in target markets. This strategic advice on employment considerations for multiple jurisdictions enables companies to make informed decisions about their global expansion strategy.
3. A PEO requires an established entity.
A PEO requires companies to have an established entity in place, while an EOR is a partner that already has a legal global presence and does not require the company to have an in-country entity or any local expertise.
4. An EOR ensures global compliance.
Global EORs continuously review international labor laws, ensuring they are meeting and staying up to date with local, state, and national regulations as they evolve.
PEO’s have a less comprehensive approach and will generally provide guidance and instructions on how to remain compliant in specific areas, but it’s up to the business itself to take the necessary actions to meet the requirements.
Employer of Record services vs. PEO: Why choose an EOR solution?
Working with a PEO may be a more cost-effective alternative if you already have a legal entity in your target country and you’re looking to streamline certain HR operations and provide better benefits to employees. However, an EOR is significantly faster and more affordable than setting up a new entity.
The ability to access global markets is a key benefit that companies obtain when partnering with an EOR. With an EOR, companies can seamlessly hire skilled workers from every corner of the globe in minutes instead of months.
Hire talent in 180+ countries with G-P’s Employer of Record (EOR) solution.
G-P created the global Employer of Record (EOR) model, enabling a fast and easy solution for global growth — without setting up new entities. Unlike a PEO, our end-to-end EOR solutions provide guidance, compliance, and risk management, so you can grow your business with peace of mind.
Our #1 Global Growth Platform™ streamlines and automates:
- Onboarding and offboarding. Our HR experts help simplify onboarding to train new hires quickly, and handle offboarding with sensitivity, care, and compliance with local laws.
- Bulk onboarding. Our Bulk Onboarding feature allows G-P Meridian Prime™ account holders to handle large onboardings or easily mass convert contractors to full-time employees (FTE).
- Contract generation and customization. Finalizing contracts can be time-consuming. Easily create legally compliant contracts in a few simple clicks with our in-platform Employment Contract Generator. Plus, you can request contract template customizations directly through the platform to get the contract that best suits your needs.
- Benefits management. Investing in more benefits to improve physical and emotional wellness is a top priority for over 50% of HR professionals in 2024. Attract top talent by quickly delivering competitive benefits packages that meet all country-specific requirements.
Whether you’re a startup looking for skilled tech talent or a large corporation venturing into new markets, partner with G-P to find, hire, and manage employees and contractors anywhere in the world, today.
