When expanding globally, businesses often consider using an Employer of Record (EOR) or a Professional Employer Organization (PEO). While both solutions assist with HR and compliance, their structures and functions differ significantly.
Key Differences Between EOR and PEO
| Feature | Employer of Record (EOR) | Professional Employer Organization (PEO) |
|---|---|---|
| Legal Employer | EOR becomes the legal employer | The client company remains the employer |
| Entity Requirement | No local entity required | Requires a local entity in the country of operation |
| Compliance | Ensures full legal compliance | Provides HR guidance but the company is responsible for compliance |
| Payroll Management | Handles payroll, taxes, and social security | Assists with payroll but requires company oversight |
| Best for | Companies expanding internationally | Companies managing HR within their home country |
When to Choose an EOR vs. PEO
- Choose an EOR if: You are expanding into a foreign market and do not want to establish a local entity.
- Choose a PEO if: You already have a legal entity but need HR support and compliance guidance.
Final Thoughts
Both EOR and PEO services provide HR and compliance assistance, but an EOR is best for companies expanding internationally without setting up a legal entity