When you are looking to onboard and manage employees and independent contractors across borders, you need to consider HR outsourcing. Both Employer of record (EOR) and Professional Employer Organisation (PEO) relate to HR outsourcing however you need to have a clear understanding of the key characteristics of both service offering. At a glance, here are the differences between an EOR and a PEO.
Jump straight to a key chapter:
Table of Contents
What is an Employer of record (EOR) ?
In human resources, EOR stands for Employer of record. Basically, an employer of record is a third-party company that enables another organization to quickly hire and onboard workers in a country without having to register a local subsidiary.
You can get more information on the EOR scope here.
An Employer of Record (EOR) handles the legal employment of your workers abroad via a service agreement. In other words, the EOR provider is the legal employer of each employees or individual contractors you hire through them.
Nowadays, it is really commom to find on the internet, companies offering EOR services internationally. Most of the time, it is not the case as they partner with local entity to compliantly hire your employees. The best way to check it is to simply ask who is going to be the legal employer of your team members.
What is a Professional EmployER Oganisation (PEO) ?
In human resources, PEO stands for Professional Employer Organisation. Basically, PEO offers extensive HR and administrative solutions. They partner with your business and provide services such as:
- Payroll
- Benefits management
- Legal support
By working with PEOs, you can outsource many HR functions, while maintaining control of organizational decision-making.
Also, a Professional Employer organisation (PEO) works based on a co-employment relationship. Basically, a PEO supports your HR functions. Unlike an EOR, you hire your company’s employees which means you are the legal employer. Also, they do not hold related liabilities and responsibilities.
EOR vs PEO: What are the key differences?
PEO and EOR are both third-party entities which handle your HR needs. However, they provide a different service and they each take on different levels of legal responsibilities. The most significant differences lie in few key areas:
Employee benefits and insurance
Insurance coverage and benefits is one of the items in which PEO and EOR greatly differ. Indeed, if you choose to work with a PEO, you must provide your own insurance. Moreover, you have to opt in to pay coverage under their plan.
On the other hand, if you opt for EOR services, your employees are covered under the EOR’s insurance. The Employer of Record will maintain compliance with all regulations regarding health plan, life insurance and other benefits and compensations.
Minimum quotas
PEO partners will usually place a minimum of five to ten employee to ensure co-employment is profitable for them.
On the other hand, EORs are quite different in this perspective, as they don’t have minimum employee requirements. EOR usually prefer to work with small businesses, making it a great solution for company looking to start small in expansion plans.
Business registration
If you choose to partner with a PEO, you remain the legal employer and you need to comply with state registration requirements. It means that you must register your business in the country you are hiring employees and/or independent contractors.
However, an EOR employ the people working for you. You don’t need to set up a legal entity to hire a worker.
Which solution match best your needs ?
Much of this choice comes down to the question you are trying to address and the workforce strategy you are trying to achieve.
- Are you hiring contingent workers for the short term? Then, an EOR is the way to go. EOR is the best solution for businesses expanding globally. They are the way to go if you are looking to a flexible way to onboard talents without the hassle of setting up a physical entity in another country.
- Your business is looking to outsource HR function, from onboarding to benefits administration? Partner with a PEO.
How can Europortage benefits your business ?
We are an Employer of Record (EOR) company in Brazil. With our EOR and Payroll Services, we hire and onboard your candidates while managing compliance. Besides, we manage your payroll in Brazil. Do you have a project in Brazil ? Contact us now!
