Professional Employer Organizations (PEOs) have supported U.S. businesses since the 1970s, helping small and medium-sized companies manage their workforce while navigating increasingly complex regulation. As of 2025, the PEO industry has seen significant growth in the United States, with PEOs serving 208,000 businesses, representing 17% of all U.S. employers with 10 to 99 employees.
Employer of Record (EOR) services, on the other hand, are still a relatively new phenomenon, emerging over the past decade or so as globalization and digital transformation reshaped the modern business landscape.
Employment solutions are expected to keep growing in popularity as demand for streamlined workforce solutions rises – but while both PEOs and EORs help businesses manage HR-related tasks, they serve different needs. PEOs primarily support domestic HR and workforce management, whereas EORs specialize in hiring and managing employees across international markets.
In this overview, we'll weigh up the benefits of using a PEO versus an EOR for U.S. companies, helping you determine which option best aligns with your business strategy and talent goals.
The role of PEOs in the U.S. — when does it work best?
A PEO acts as a co-employer, meaning the client company remains the legal employer while sharing certain responsibilities with the PEO. For example, employee contracts typically list both the client company and the PEO, and compliance responsibilities — along with potential liabilities — are shared between the two parties. This shared liability can sometimes lead to disputes over legal exposure and risk.
PEOs handle various HR functions, including employment taxes, employee benefits and compliance. Some even assist with hiring and training staff, making them an especially helpful option for some small- and medium-sized businesses without an in-house HR team.
Additionally, by pooling employees from multiple client companies, PEOs can negotiate more competitive rates for benefits like health insurance, allowing businesses to offer their team a broader range of perks. However, many PEOs require a minimum number of employees, meaning it might not be the right solution for very small businesses.
Since PEOs primarily focus on domestic workforce management, they are best suited for companies operating solely within the United States (or in locations where they have a registered legal entity).
When does a U.S. company need an EOR instead of a PEO?
While a PEO is a great option for companies operating within a single state or managing multi-state employment in the U.S., an EOR provides a much broader geographic reach. EORs specialize in international hiring and workforce management, making them ideal for businesses looking to expand globally.
Unlike PEOs, EORs typically have no minimum employee requirements, offering greater flexibility for companies at various stages of growth — whether they have small teams spread across multiple locations or are just beginning to hire internationally. What's more, an EOR provides stronger legal protection than a PEO by serving as the full legal employer. This means the EOR assumes all employment-related responsibilities and risks, with contracts issued directly between the EOR and the worker.
For a deeper dive into the pros and cons of a PEO versus an EOR, you can read more here.
What is the best global hiring solution for U.S. companies?
For companies with international growth ambitions, an EOR is the smarter choice.
Unlike PEOs, which require the client to have a legal entity in each country where they operate, EORs are specifically designed to support global expansion. A PEO cannot easily manage co-employment across borders, making it a less viable option for businesses looking to scale internationally.
Employer of Record providers enable companies to hire employees in new markets without the need to establish a local legal entity. They ensure full compliance with local tax and labor laws, reducing legal and financial risks for the client company.
Beyond compliance, an EOR also simplifies global workforce management by handling employee onboarding, processing payroll and managing withholdings across multiple countries. This significantly reduces administrative burdens and minimizes the need for an expanded HR team.
Key EOR and PEO differences at a glance:
PEOs: Best for U.S.-based companies needing HR support, payroll services and benefits management domestically.
EORs: Ideal for companies expanding globally, hiring internationally without a local entity, and seeking full compliance risk mitigation.
An Employer of Record versus a PEO in the U.S.: Making the right decision for your business
Choosing between a PEO and an EOR depends on your company's growth plans and operational priorities.
To help you decide, consider the following:
Are you planning to expand your operations outside of the United States?
Are you planning to hire internationally, without establishing a legal entity outside of the United States?
Are you looking for a solution that acts as the full legal employer for workers?
Are you looking for support with legal compliance across your hiring strategy?
Are you looking to offload the risk of international expansion?
If you answered “yes” to any of the above, an EOR is the best option for your business needs.
How Atlas helps U.S. companies expand internationally
Atlas enables innovative companies to compete in a global economy. Our team of experts will help you overcome the challenges of global expansion while ensuring compliance with local laws and regulations, managing payroll and benefits, and handling all HR functions.
Operating across more than 160 countries, we allow you to expand rapidly into new markets, onboarding talent in as little as two weeks with support from our global team of local experts.