EOR vs PEO: Demystifying Employment Solutions

Blog
CPBTZ
May 19, 2022
The Atlas Team

EOR vs PEO: Demystifying Employment Solutions

Employer of Record, EOR, PEO, Global PEO – there are so many similar sounding terms for just two types of employment service.

Although these terms are easily confused, their use can lead to very different consequences and for HR and payroll compliance and accuracy, where there is zero margin for error. It is critical to ensure that both a company and its employees are aligned with all local laws regarding taxation, labor and even data protection.

It is critical to ensure that both a company and its employees are aligned with all local laws regarding taxation, labor and even data protection.

These challenges may seem obvious to those already familiar with employment laws in their own country, but if a business plans to expand internationally they will need to be fluent in a range of local legal requirements and aware of the potential risks and understand how employment services vary.

What Are EORs and PEOs?

Employer of Record (EOR)

An EOR is empowered to employ staff overseas in countries where the company lacks an entity. An EOR is solely liable for the employees’ local tax and labor laws compliance; including the responsibility of all administrative aspects, complying with all local legal regulations, while the company focuses on the employees’ day-to-day work and the wider business.

Professional Employment Organization (PEO)

A PEO undertakes a portion of HR tasks like benefits enrolment and payroll and splits the risk with the company. This is because a PEO partners with the company on a co-employment agreement, which means that both the PEO and the company are employers. This exposes the company to extra risks.

What Are the Core Differences?

The type of service required often dictates whether a company needs an Employer of Record solution or PEO:

  • An EOR is suitable for any business planning to expand their operations and employ staff overseas in a fully compliant and rapid manner.
  • Businesses seeking to offload some HR duties for employees located in the same country where their business is registered are more aligned with a PEO.

Why Use a PEO?

A PEO facilitates and manages part of a company’s HR processes, including payroll and benefits like healthcare, dental, and vision. It can even include hiring and training of staff. This is helpful to some small and medium-sized businesses, as it means they do not have to employ a huge HR team to support their staff. It also allows a company to offer their employees benefits like a pension or 401k, health and dental plan options – which they may not have been able to do without the use of a PEO service.

When a company works with a PEO provider, they sign a co-employment agreement where they contractually allocate and share the employer’s responsibilities and liabilities. The PEO will usually only assume responsibilities associated as “general” for purposes of administration of benefits and remittance of payroll and payroll taxes.

A PEO can facilitate:

  • Remit wages and withholdings of the worksite employees
  • Deposits and reports employment taxes to local, state and federal authorities
  • Enrolling and supporting employees with their benefits

A PEO cannot facilitate:

  • Global employees in countries the client company isn’t already incorporated in.
  • Global mobility options
  • Removal of all global labor law and taxation risk
  • Small groups of employees from a company – they often have a minimum employee requirement of between 5-10 people

The client company remains responsible for their company’s direction and operations. Most other areas of HR will still need to be addressed by the company’s internal HR team.

Even though a co-employment agreement will clearly define the liability split between the employer and the PEO – it still isn’t always watertight. This is because a co-employment agreement splits the risk, so neither the business nor the PEO is fully responsible.

PEOs are considered a good choice in the US for across state employment, as while the client business would still share the risk of hiring across states, the PEO can work at ensuring all of the individual taxes and labor laws are adhered to. However, if your business wants to move employees globally, a PEO is not the solution as co-employment is illegal in major economies like France and Brazil.

How Does an EOR Work?

When a company partners with an Employer of Record, they enter into an agreement that allows the EOR to legally employ the staff through its local entity. The EOR is responsible for handling HR support to guide both the employee and client through their entire international journey, whether it’s a six-month assignment or a permanent position.

An EOR can onboard, manage and pay staff on your behalf. Consider it the legal employer while you retain the role of managing employer and execute the day-to-day management of the employees. In other words, you call the shots on hiring, compensation, assignments, duties and termination.

An EOR can facilitate:

  • Global expansion via compliant placement of employees into countries where the company is not incorporated
  • Global mobility, including visa sponsorship for employees and family
  • Employee onboarding, including benefits enrollment and support  
  • Payroll administration for global employees, including collecting and reporting employment taxes to all required in-country authorities
  • Cross-cultural training for employees, as well as support in English and local language
  • Collation of all HR information to remain compliant and data-safe with any data privacy requirements

An EOR cannot facilitate:

  • An Employer of Record can sponsor and support an application for a visa, but cannot guarantee it will be approved

EOR: The Ultimate Global Employment Solution

Companies are prioritizing global expansion. A quarter of European middle-market organizations are planning international expansion, according to Ernst & Young’s annual Growth Barometer.

An EOR is a seamless way of reaping the benefits of international reach at a fraction of the cost, time and risk. It accelerates the process of employing overseas more cost-effectively than creating and managing dozens of local entities in a host of different languages. Whether a company wants quick global expansion or support for remote workers on assignments, an EOR service allows them to place employees globally in a locally compliant way.

In a Partnership with an EOR, Who Holds the Control and the Risk?

The EOR legally employs the overseas personnel and therefore takes on all the fiscal and labor law risks and requirements. The EOR takes on the full liability of the employees and minimizes any risk to the client as it ensures full compliance in every country where the company places employees.

While the EOR is responsible for ensuring local compliance, the client retains control over their employee and business strategy. This allows a business to focus on its core objectives without the distraction and stress of understanding thousands of global HR requirements and laws.

Unlike a PEO service, an EOR solution fully supports and facilitates a company’s global need to employ overseas. An EOR can be a company’s single employer for all its global employees.

Unlike a PEO service, an EOR solution fully supports and facilitates a company’s global need to employ overseas.

What Does an EOR Service Cover?

  • Local registration
  • Remuneration and compensation
  • Employment contracts in multiple languages
  • Employment law for 160+ countries
  • Local tax compliance
  • Cultural training
  • Employee onboarding, payroll and offboarding
  • Full global support for the employee and the client
  • Data privacy guidance

Only with an Employer of Record is it possible to place staff anywhere globally within weeks. It’s a ground-breaking 21st-century solution to global expansion.

An EOR partners with businesses by employing staff in countries where the business lacks a local entity. The EOR takes on all the risks for any local or international fiscal or labor laws and allows the client to focus on their business strategy and day-to-day goals. This partner removes international barriers to entry to enable expansion within weeks.

A PEO supports a business by handling their HR where the business already has a local entity. PEOs use co-employment agreements, which are illegal in some major economies, and share the financial and legal risks with their clients.

EOR vs PEO: Demystifying Employment Solutions

Blog
CPBTZ
May 19, 2022
The Atlas Team

EOR vs PEO: Demystifying Employment Solutions

Employer of Record, EOR, PEO, Global PEO – there are so many similar sounding terms for just two types of employment service.

Although these terms are easily confused, their use can lead to very different consequences and for HR and payroll compliance and accuracy, where there is zero margin for error. It is critical to ensure that both a company and its employees are aligned with all local laws regarding taxation, labor and even data protection.

It is critical to ensure that both a company and its employees are aligned with all local laws regarding taxation, labor and even data protection.

These challenges may seem obvious to those already familiar with employment laws in their own country, but if a business plans to expand internationally they will need to be fluent in a range of local legal requirements and aware of the potential risks and understand how employment services vary.

What Are EORs and PEOs?

Employer of Record (EOR)

An EOR is empowered to employ staff overseas in countries where the company lacks an entity. An EOR is solely liable for the employees’ local tax and labor laws compliance; including the responsibility of all administrative aspects, complying with all local legal regulations, while the company focuses on the employees’ day-to-day work and the wider business.

Professional Employment Organization (PEO)

A PEO undertakes a portion of HR tasks like benefits enrolment and payroll and splits the risk with the company. This is because a PEO partners with the company on a co-employment agreement, which means that both the PEO and the company are employers. This exposes the company to extra risks.

What Are the Core Differences?

The type of service required often dictates whether a company needs an Employer of Record solution or PEO:

  • An EOR is suitable for any business planning to expand their operations and employ staff overseas in a fully compliant and rapid manner.
  • Businesses seeking to offload some HR duties for employees located in the same country where their business is registered are more aligned with a PEO.

Why Use a PEO?

A PEO facilitates and manages part of a company’s HR processes, including payroll and benefits like healthcare, dental, and vision. It can even include hiring and training of staff. This is helpful to some small and medium-sized businesses, as it means they do not have to employ a huge HR team to support their staff. It also allows a company to offer their employees benefits like a pension or 401k, health and dental plan options – which they may not have been able to do without the use of a PEO service.

When a company works with a PEO provider, they sign a co-employment agreement where they contractually allocate and share the employer’s responsibilities and liabilities. The PEO will usually only assume responsibilities associated as “general” for purposes of administration of benefits and remittance of payroll and payroll taxes.

A PEO can facilitate:

  • Remit wages and withholdings of the worksite employees
  • Deposits and reports employment taxes to local, state and federal authorities
  • Enrolling and supporting employees with their benefits

A PEO cannot facilitate:

  • Global employees in countries the client company isn’t already incorporated in.
  • Global mobility options
  • Removal of all global labor law and taxation risk
  • Small groups of employees from a company – they often have a minimum employee requirement of between 5-10 people

The client company remains responsible for their company’s direction and operations. Most other areas of HR will still need to be addressed by the company’s internal HR team.

Even though a co-employment agreement will clearly define the liability split between the employer and the PEO – it still isn’t always watertight. This is because a co-employment agreement splits the risk, so neither the business nor the PEO is fully responsible.

PEOs are considered a good choice in the US for across state employment, as while the client business would still share the risk of hiring across states, the PEO can work at ensuring all of the individual taxes and labor laws are adhered to. However, if your business wants to move employees globally, a PEO is not the solution as co-employment is illegal in major economies like France and Brazil.

How Does an EOR Work?

When a company partners with an Employer of Record, they enter into an agreement that allows the EOR to legally employ the staff through its local entity. The EOR is responsible for handling HR support to guide both the employee and client through their entire international journey, whether it’s a six-month assignment or a permanent position.

An EOR can onboard, manage and pay staff on your behalf. Consider it the legal employer while you retain the role of managing employer and execute the day-to-day management of the employees. In other words, you call the shots on hiring, compensation, assignments, duties and termination.

An EOR can facilitate:

  • Global expansion via compliant placement of employees into countries where the company is not incorporated
  • Global mobility, including visa sponsorship for employees and family
  • Employee onboarding, including benefits enrollment and support  
  • Payroll administration for global employees, including collecting and reporting employment taxes to all required in-country authorities
  • Cross-cultural training for employees, as well as support in English and local language
  • Collation of all HR information to remain compliant and data-safe with any data privacy requirements

An EOR cannot facilitate:

  • An Employer of Record can sponsor and support an application for a visa, but cannot guarantee it will be approved

EOR: The Ultimate Global Employment Solution

Companies are prioritizing global expansion. A quarter of European middle-market organizations are planning international expansion, according to Ernst & Young’s annual Growth Barometer.

An EOR is a seamless way of reaping the benefits of international reach at a fraction of the cost, time and risk. It accelerates the process of employing overseas more cost-effectively than creating and managing dozens of local entities in a host of different languages. Whether a company wants quick global expansion or support for remote workers on assignments, an EOR service allows them to place employees globally in a locally compliant way.

In a Partnership with an EOR, Who Holds the Control and the Risk?

The EOR legally employs the overseas personnel and therefore takes on all the fiscal and labor law risks and requirements. The EOR takes on the full liability of the employees and minimizes any risk to the client as it ensures full compliance in every country where the company places employees.

While the EOR is responsible for ensuring local compliance, the client retains control over their employee and business strategy. This allows a business to focus on its core objectives without the distraction and stress of understanding thousands of global HR requirements and laws.

Unlike a PEO service, an EOR solution fully supports and facilitates a company’s global need to employ overseas. An EOR can be a company’s single employer for all its global employees.

Unlike a PEO service, an EOR solution fully supports and facilitates a company’s global need to employ overseas.

What Does an EOR Service Cover?

  • Local registration
  • Remuneration and compensation
  • Employment contracts in multiple languages
  • Employment law for 160+ countries
  • Local tax compliance
  • Cultural training
  • Employee onboarding, payroll and offboarding
  • Full global support for the employee and the client
  • Data privacy guidance

Only with an Employer of Record is it possible to place staff anywhere globally within weeks. It’s a ground-breaking 21st-century solution to global expansion.

An EOR partners with businesses by employing staff in countries where the business lacks a local entity. The EOR takes on all the risks for any local or international fiscal or labor laws and allows the client to focus on their business strategy and day-to-day goals. This partner removes international barriers to entry to enable expansion within weeks.

A PEO supports a business by handling their HR where the business already has a local entity. PEOs use co-employment agreements, which are illegal in some major economies, and share the financial and legal risks with their clients.

EOR vs PEO: Demystifying Employment Solutions

Blog
CPBTZ
May 19, 2022
The Atlas Team

EOR vs PEO: Demystifying Employment Solutions

Employer of Record, EOR, PEO, Global PEO – there are so many similar sounding terms for just two types of employment service.

Although these terms are easily confused, their use can lead to very different consequences and for HR and payroll compliance and accuracy, where there is zero margin for error. It is critical to ensure that both a company and its employees are aligned with all local laws regarding taxation, labor and even data protection.

It is critical to ensure that both a company and its employees are aligned with all local laws regarding taxation, labor and even data protection.

These challenges may seem obvious to those already familiar with employment laws in their own country, but if a business plans to expand internationally they will need to be fluent in a range of local legal requirements and aware of the potential risks and understand how employment services vary.

What Are EORs and PEOs?

Employer of Record (EOR)

An EOR is empowered to employ staff overseas in countries where the company lacks an entity. An EOR is solely liable for the employees’ local tax and labor laws compliance; including the responsibility of all administrative aspects, complying with all local legal regulations, while the company focuses on the employees’ day-to-day work and the wider business.

Professional Employment Organization (PEO)

A PEO undertakes a portion of HR tasks like benefits enrolment and payroll and splits the risk with the company. This is because a PEO partners with the company on a co-employment agreement, which means that both the PEO and the company are employers. This exposes the company to extra risks.

What Are the Core Differences?

The type of service required often dictates whether a company needs an Employer of Record solution or PEO:

  • An EOR is suitable for any business planning to expand their operations and employ staff overseas in a fully compliant and rapid manner.
  • Businesses seeking to offload some HR duties for employees located in the same country where their business is registered are more aligned with a PEO.

Why Use a PEO?

A PEO facilitates and manages part of a company’s HR processes, including payroll and benefits like healthcare, dental, and vision. It can even include hiring and training of staff. This is helpful to some small and medium-sized businesses, as it means they do not have to employ a huge HR team to support their staff. It also allows a company to offer their employees benefits like a pension or 401k, health and dental plan options – which they may not have been able to do without the use of a PEO service.

When a company works with a PEO provider, they sign a co-employment agreement where they contractually allocate and share the employer’s responsibilities and liabilities. The PEO will usually only assume responsibilities associated as “general” for purposes of administration of benefits and remittance of payroll and payroll taxes.

A PEO can facilitate:

  • Remit wages and withholdings of the worksite employees
  • Deposits and reports employment taxes to local, state and federal authorities
  • Enrolling and supporting employees with their benefits

A PEO cannot facilitate:

  • Global employees in countries the client company isn’t already incorporated in.
  • Global mobility options
  • Removal of all global labor law and taxation risk
  • Small groups of employees from a company – they often have a minimum employee requirement of between 5-10 people

The client company remains responsible for their company’s direction and operations. Most other areas of HR will still need to be addressed by the company’s internal HR team.

Even though a co-employment agreement will clearly define the liability split between the employer and the PEO – it still isn’t always watertight. This is because a co-employment agreement splits the risk, so neither the business nor the PEO is fully responsible.

PEOs are considered a good choice in the US for across state employment, as while the client business would still share the risk of hiring across states, the PEO can work at ensuring all of the individual taxes and labor laws are adhered to. However, if your business wants to move employees globally, a PEO is not the solution as co-employment is illegal in major economies like France and Brazil.

How Does an EOR Work?

When a company partners with an Employer of Record, they enter into an agreement that allows the EOR to legally employ the staff through its local entity. The EOR is responsible for handling HR support to guide both the employee and client through their entire international journey, whether it’s a six-month assignment or a permanent position.

An EOR can onboard, manage and pay staff on your behalf. Consider it the legal employer while you retain the role of managing employer and execute the day-to-day management of the employees. In other words, you call the shots on hiring, compensation, assignments, duties and termination.

An EOR can facilitate:

  • Global expansion via compliant placement of employees into countries where the company is not incorporated
  • Global mobility, including visa sponsorship for employees and family
  • Employee onboarding, including benefits enrollment and support  
  • Payroll administration for global employees, including collecting and reporting employment taxes to all required in-country authorities
  • Cross-cultural training for employees, as well as support in English and local language
  • Collation of all HR information to remain compliant and data-safe with any data privacy requirements

An EOR cannot facilitate:

  • An Employer of Record can sponsor and support an application for a visa, but cannot guarantee it will be approved

EOR: The Ultimate Global Employment Solution

Companies are prioritizing global expansion. A quarter of European middle-market organizations are planning international expansion, according to Ernst & Young’s annual Growth Barometer.

An EOR is a seamless way of reaping the benefits of international reach at a fraction of the cost, time and risk. It accelerates the process of employing overseas more cost-effectively than creating and managing dozens of local entities in a host of different languages. Whether a company wants quick global expansion or support for remote workers on assignments, an EOR service allows them to place employees globally in a locally compliant way.

In a Partnership with an EOR, Who Holds the Control and the Risk?

The EOR legally employs the overseas personnel and therefore takes on all the fiscal and labor law risks and requirements. The EOR takes on the full liability of the employees and minimizes any risk to the client as it ensures full compliance in every country where the company places employees.

While the EOR is responsible for ensuring local compliance, the client retains control over their employee and business strategy. This allows a business to focus on its core objectives without the distraction and stress of understanding thousands of global HR requirements and laws.

Unlike a PEO service, an EOR solution fully supports and facilitates a company’s global need to employ overseas. An EOR can be a company’s single employer for all its global employees.

Unlike a PEO service, an EOR solution fully supports and facilitates a company’s global need to employ overseas.

What Does an EOR Service Cover?

  • Local registration
  • Remuneration and compensation
  • Employment contracts in multiple languages
  • Employment law for 160+ countries
  • Local tax compliance
  • Cultural training
  • Employee onboarding, payroll and offboarding
  • Full global support for the employee and the client
  • Data privacy guidance

Only with an Employer of Record is it possible to place staff anywhere globally within weeks. It’s a ground-breaking 21st-century solution to global expansion.

An EOR partners with businesses by employing staff in countries where the business lacks a local entity. The EOR takes on all the risks for any local or international fiscal or labor laws and allows the client to focus on their business strategy and day-to-day goals. This partner removes international barriers to entry to enable expansion within weeks.

A PEO supports a business by handling their HR where the business already has a local entity. PEOs use co-employment agreements, which are illegal in some major economies, and share the financial and legal risks with their clients.

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CPBTZ

EOR vs PEO: Demystifying Employment Solutions

EOR vs PEO: Demystifying Employment Solutions

Employer of Record, EOR, PEO, Global PEO – there are so many similar sounding terms for just two types of employment service.

Although these terms are easily confused, their use can lead to very different consequences and for HR and payroll compliance and accuracy, where there is zero margin for error. It is critical to ensure that both a company and its employees are aligned with all local laws regarding taxation, labor and even data protection.

It is critical to ensure that both a company and its employees are aligned with all local laws regarding taxation, labor and even data protection.

These challenges may seem obvious to those already familiar with employment laws in their own country, but if a business plans to expand internationally they will need to be fluent in a range of local legal requirements and aware of the potential risks and understand how employment services vary.

What Are EORs and PEOs?

Employer of Record (EOR)

An EOR is empowered to employ staff overseas in countries where the company lacks an entity. An EOR is solely liable for the employees’ local tax and labor laws compliance; including the responsibility of all administrative aspects, complying with all local legal regulations, while the company focuses on the employees’ day-to-day work and the wider business.

Professional Employment Organization (PEO)

A PEO undertakes a portion of HR tasks like benefits enrolment and payroll and splits the risk with the company. This is because a PEO partners with the company on a co-employment agreement, which means that both the PEO and the company are employers. This exposes the company to extra risks.

What Are the Core Differences?

The type of service required often dictates whether a company needs an Employer of Record solution or PEO:

  • An EOR is suitable for any business planning to expand their operations and employ staff overseas in a fully compliant and rapid manner.
  • Businesses seeking to offload some HR duties for employees located in the same country where their business is registered are more aligned with a PEO.

Why Use a PEO?

A PEO facilitates and manages part of a company’s HR processes, including payroll and benefits like healthcare, dental, and vision. It can even include hiring and training of staff. This is helpful to some small and medium-sized businesses, as it means they do not have to employ a huge HR team to support their staff. It also allows a company to offer their employees benefits like a pension or 401k, health and dental plan options – which they may not have been able to do without the use of a PEO service.

When a company works with a PEO provider, they sign a co-employment agreement where they contractually allocate and share the employer’s responsibilities and liabilities. The PEO will usually only assume responsibilities associated as “general” for purposes of administration of benefits and remittance of payroll and payroll taxes.

A PEO can facilitate:

  • Remit wages and withholdings of the worksite employees
  • Deposits and reports employment taxes to local, state and federal authorities
  • Enrolling and supporting employees with their benefits

A PEO cannot facilitate:

  • Global employees in countries the client company isn’t already incorporated in.
  • Global mobility options
  • Removal of all global labor law and taxation risk
  • Small groups of employees from a company – they often have a minimum employee requirement of between 5-10 people

The client company remains responsible for their company’s direction and operations. Most other areas of HR will still need to be addressed by the company’s internal HR team.

Even though a co-employment agreement will clearly define the liability split between the employer and the PEO – it still isn’t always watertight. This is because a co-employment agreement splits the risk, so neither the business nor the PEO is fully responsible.

PEOs are considered a good choice in the US for across state employment, as while the client business would still share the risk of hiring across states, the PEO can work at ensuring all of the individual taxes and labor laws are adhered to. However, if your business wants to move employees globally, a PEO is not the solution as co-employment is illegal in major economies like France and Brazil.

How Does an EOR Work?

When a company partners with an Employer of Record, they enter into an agreement that allows the EOR to legally employ the staff through its local entity. The EOR is responsible for handling HR support to guide both the employee and client through their entire international journey, whether it’s a six-month assignment or a permanent position.

An EOR can onboard, manage and pay staff on your behalf. Consider it the legal employer while you retain the role of managing employer and execute the day-to-day management of the employees. In other words, you call the shots on hiring, compensation, assignments, duties and termination.

An EOR can facilitate:

  • Global expansion via compliant placement of employees into countries where the company is not incorporated
  • Global mobility, including visa sponsorship for employees and family
  • Employee onboarding, including benefits enrollment and support  
  • Payroll administration for global employees, including collecting and reporting employment taxes to all required in-country authorities
  • Cross-cultural training for employees, as well as support in English and local language
  • Collation of all HR information to remain compliant and data-safe with any data privacy requirements

An EOR cannot facilitate:

  • An Employer of Record can sponsor and support an application for a visa, but cannot guarantee it will be approved

EOR: The Ultimate Global Employment Solution

Companies are prioritizing global expansion. A quarter of European middle-market organizations are planning international expansion, according to Ernst & Young’s annual Growth Barometer.

An EOR is a seamless way of reaping the benefits of international reach at a fraction of the cost, time and risk. It accelerates the process of employing overseas more cost-effectively than creating and managing dozens of local entities in a host of different languages. Whether a company wants quick global expansion or support for remote workers on assignments, an EOR service allows them to place employees globally in a locally compliant way.

In a Partnership with an EOR, Who Holds the Control and the Risk?

The EOR legally employs the overseas personnel and therefore takes on all the fiscal and labor law risks and requirements. The EOR takes on the full liability of the employees and minimizes any risk to the client as it ensures full compliance in every country where the company places employees.

While the EOR is responsible for ensuring local compliance, the client retains control over their employee and business strategy. This allows a business to focus on its core objectives without the distraction and stress of understanding thousands of global HR requirements and laws.

Unlike a PEO service, an EOR solution fully supports and facilitates a company’s global need to employ overseas. An EOR can be a company’s single employer for all its global employees.

Unlike a PEO service, an EOR solution fully supports and facilitates a company’s global need to employ overseas.

What Does an EOR Service Cover?

  • Local registration
  • Remuneration and compensation
  • Employment contracts in multiple languages
  • Employment law for 160+ countries
  • Local tax compliance
  • Cultural training
  • Employee onboarding, payroll and offboarding
  • Full global support for the employee and the client
  • Data privacy guidance

Only with an Employer of Record is it possible to place staff anywhere globally within weeks. It’s a ground-breaking 21st-century solution to global expansion.

An EOR partners with businesses by employing staff in countries where the business lacks a local entity. The EOR takes on all the risks for any local or international fiscal or labor laws and allows the client to focus on their business strategy and day-to-day goals. This partner removes international barriers to entry to enable expansion within weeks.

A PEO supports a business by handling their HR where the business already has a local entity. PEOs use co-employment agreements, which are illegal in some major economies, and share the financial and legal risks with their clients.

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EOR vs PEO: Demystifying Employment Solutions

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May 19, 2022
EOR vs PEO: Demystifying Employment Solutions

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EOR vs PEO: Demystifying Employment Solutions

Blog
CPBTZ
May 19, 2022
EOR vs PEO: Demystifying Employment Solutions

EOR vs PEO: Demystifying Employment Solutions

Employer of Record, EOR, PEO, Global PEO – there are so many similar sounding terms for just two types of employment service.

Although these terms are easily confused, their use can lead to very different consequences and for HR and payroll compliance and accuracy, where there is zero margin for error. It is critical to ensure that both a company and its employees are aligned with all local laws regarding taxation, labor and even data protection.

It is critical to ensure that both a company and its employees are aligned with all local laws regarding taxation, labor and even data protection.

These challenges may seem obvious to those already familiar with employment laws in their own country, but if a business plans to expand internationally they will need to be fluent in a range of local legal requirements and aware of the potential risks and understand how employment services vary.

What Are EORs and PEOs?

Employer of Record (EOR)

An EOR is empowered to employ staff overseas in countries where the company lacks an entity. An EOR is solely liable for the employees’ local tax and labor laws compliance; including the responsibility of all administrative aspects, complying with all local legal regulations, while the company focuses on the employees’ day-to-day work and the wider business.

Professional Employment Organization (PEO)

A PEO undertakes a portion of HR tasks like benefits enrolment and payroll and splits the risk with the company. This is because a PEO partners with the company on a co-employment agreement, which means that both the PEO and the company are employers. This exposes the company to extra risks.

What Are the Core Differences?

The type of service required often dictates whether a company needs an Employer of Record solution or PEO:

  • An EOR is suitable for any business planning to expand their operations and employ staff overseas in a fully compliant and rapid manner.
  • Businesses seeking to offload some HR duties for employees located in the same country where their business is registered are more aligned with a PEO.

Why Use a PEO?

A PEO facilitates and manages part of a company’s HR processes, including payroll and benefits like healthcare, dental, and vision. It can even include hiring and training of staff. This is helpful to some small and medium-sized businesses, as it means they do not have to employ a huge HR team to support their staff. It also allows a company to offer their employees benefits like a pension or 401k, health and dental plan options – which they may not have been able to do without the use of a PEO service.

When a company works with a PEO provider, they sign a co-employment agreement where they contractually allocate and share the employer’s responsibilities and liabilities. The PEO will usually only assume responsibilities associated as “general” for purposes of administration of benefits and remittance of payroll and payroll taxes.

A PEO can facilitate:

  • Remit wages and withholdings of the worksite employees
  • Deposits and reports employment taxes to local, state and federal authorities
  • Enrolling and supporting employees with their benefits

A PEO cannot facilitate:

  • Global employees in countries the client company isn’t already incorporated in.
  • Global mobility options
  • Removal of all global labor law and taxation risk
  • Small groups of employees from a company – they often have a minimum employee requirement of between 5-10 people

The client company remains responsible for their company’s direction and operations. Most other areas of HR will still need to be addressed by the company’s internal HR team.

Even though a co-employment agreement will clearly define the liability split between the employer and the PEO – it still isn’t always watertight. This is because a co-employment agreement splits the risk, so neither the business nor the PEO is fully responsible.

PEOs are considered a good choice in the US for across state employment, as while the client business would still share the risk of hiring across states, the PEO can work at ensuring all of the individual taxes and labor laws are adhered to. However, if your business wants to move employees globally, a PEO is not the solution as co-employment is illegal in major economies like France and Brazil.

How Does an EOR Work?

When a company partners with an Employer of Record, they enter into an agreement that allows the EOR to legally employ the staff through its local entity. The EOR is responsible for handling HR support to guide both the employee and client through their entire international journey, whether it’s a six-month assignment or a permanent position.

An EOR can onboard, manage and pay staff on your behalf. Consider it the legal employer while you retain the role of managing employer and execute the day-to-day management of the employees. In other words, you call the shots on hiring, compensation, assignments, duties and termination.

An EOR can facilitate:

  • Global expansion via compliant placement of employees into countries where the company is not incorporated
  • Global mobility, including visa sponsorship for employees and family
  • Employee onboarding, including benefits enrollment and support  
  • Payroll administration for global employees, including collecting and reporting employment taxes to all required in-country authorities
  • Cross-cultural training for employees, as well as support in English and local language
  • Collation of all HR information to remain compliant and data-safe with any data privacy requirements

An EOR cannot facilitate:

  • An Employer of Record can sponsor and support an application for a visa, but cannot guarantee it will be approved

EOR: The Ultimate Global Employment Solution

Companies are prioritizing global expansion. A quarter of European middle-market organizations are planning international expansion, according to Ernst & Young’s annual Growth Barometer.

An EOR is a seamless way of reaping the benefits of international reach at a fraction of the cost, time and risk. It accelerates the process of employing overseas more cost-effectively than creating and managing dozens of local entities in a host of different languages. Whether a company wants quick global expansion or support for remote workers on assignments, an EOR service allows them to place employees globally in a locally compliant way.

In a Partnership with an EOR, Who Holds the Control and the Risk?

The EOR legally employs the overseas personnel and therefore takes on all the fiscal and labor law risks and requirements. The EOR takes on the full liability of the employees and minimizes any risk to the client as it ensures full compliance in every country where the company places employees.

While the EOR is responsible for ensuring local compliance, the client retains control over their employee and business strategy. This allows a business to focus on its core objectives without the distraction and stress of understanding thousands of global HR requirements and laws.

Unlike a PEO service, an EOR solution fully supports and facilitates a company’s global need to employ overseas. An EOR can be a company’s single employer for all its global employees.

Unlike a PEO service, an EOR solution fully supports and facilitates a company’s global need to employ overseas.

What Does an EOR Service Cover?

  • Local registration
  • Remuneration and compensation
  • Employment contracts in multiple languages
  • Employment law for 160+ countries
  • Local tax compliance
  • Cultural training
  • Employee onboarding, payroll and offboarding
  • Full global support for the employee and the client
  • Data privacy guidance

Only with an Employer of Record is it possible to place staff anywhere globally within weeks. It’s a ground-breaking 21st-century solution to global expansion.

An EOR partners with businesses by employing staff in countries where the business lacks a local entity. The EOR takes on all the risks for any local or international fiscal or labor laws and allows the client to focus on their business strategy and day-to-day goals. This partner removes international barriers to entry to enable expansion within weeks.

A PEO supports a business by handling their HR where the business already has a local entity. PEOs use co-employment agreements, which are illegal in some major economies, and share the financial and legal risks with their clients.

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EOR vs PEO: Demystifying Employment Solutions

Blog
CPBTZ
September 6, 2022

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