Choosing between PEO vs EOR can be confusing. Both help with HR, payroll, and compliance. But they work in different ways and are best for different situations. This quick guide breaks down the key differences in simple terms.
What Is a PEO?
A Professional Employer Organization (PEO) uses a co-employment model. You are the main employer and control daily work. The PEO shares some employer duties and handles back-office HR.
- Payroll and tax filing
- Benefits and workers’ comp
- HR policies and compliance support
What Is an EOR?
An Employer of Record (EOR) becomes the legal employer for the worker. Your company still manages tasks and goals, but the EOR is on the paperwork.
- Issues contracts and pays employees
- Handles local labor law and taxes
- Often used for global or remote hiring
5 Key Differences Between PEO vs EOR
1. Employment Relationship
- PEO: Co-employment; you and the PEO share responsibilities.
- EOR: EOR is the full legal employer; you direct the work only.
2. Legal Entity Requirements
- PEO: You must own a legal entity where employees work.
- EOR: No local entity needed; EOR uses its own.
3. Geographic Scope
- PEO: Best for U.S. or single-country operations.
- EOR: Ideal for multi-country or global hiring.
4. Control and HR Involvement
- PEO: More control over policies and processes.
- EOR: The provider standardizes many HR rules.
5. Typical Use Cases
- PEO: Growing small and mid-sized businesses that want better benefits and HR support.
- EOR: Companies testing new markets or hiring one-off roles in new countries or states.
PEO vs EOR: Which Is Right for You?
- Choose a PEO if you have a legal entity and want stronger HR, benefits, and compliance support.
- Choose an EOR if you want fast, low-risk hiring in new locations without opening an entity.
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