Is an EOR the same as a Professional Employer Organization (PEO)?
When companies start exploring international hiring solutions, two terms often come up: Employer of Record (EOR) and Professional Employer Organization (PEO). At first glance, they sound similar — both help manage HR, payroll, and compliance. But in reality, they serve different purposes.
Let’s break down the differences.
What Is a Professional Employer Organization (PEO)?
A PEO is a co-employment model.
- The employee is legally hired by your own company’s entity in that country.
- The PEO shares employer responsibilities with you.
- You remain legally responsible for compliance since the PEO supports your HR and payroll processes, but you must already have a local legal entity.
PEOs are popular for companies that want to outsource HR functions but already operate in the market.
What Is an Employer of Record (EOR)?
An EOR takes on full legal responsibility for employing staff in a country where you don’t have an entity.
- The EOR becomes the legal employer on paper.
- Your company manages the day-to-day work of the employee.
- The EOR handles employment contracts, payroll, benefits, tax withholdings, and compliance.
- No local entity is required.
This makes EORs a great solution for fast international expansion or hiring employees in a country where you don’t want to establish a subsidiary.
Key Differences Between EOR and PEO
| Feature | Employer of Record (EOR) | Professional Employer Organization (PEO) |
|---|---|---|
| Entity Requirement | No local entity needed | Local entity required |
| Employment Relationship | EOR is the legal employer | Shared responsibility (co-employment) |
| Global Hiring | Best for hiring abroad without setting up an entity | Best for HR support when entity already exists |
| Compliance Risk | EOR assumes most compliance liability | Employer retains legal risk |
| Speed to Hire | Hire in days or weeks | Dependent on entity setup time |
📌 When to Use an EOR vs. a PEO?
- Choose EOR if:
- You don’t have a local entity in the target country.
- You want to test a new market with a small team.
- You need quick, compliant hiring abroad.
- Choose PEO if:
- You already own a registered entity in the country.
- You want to offload HR, payroll, and benefits administration.
- You’re expanding long-term and want to keep a local presence.
Final Word
An EOR is not the same as a PEO. While both support payroll, HR, and compliance, the main difference lies in entity requirements and legal responsibility.
- EOR = hire without entity, EOR is the legal employer.
- PEO = requires your own entity, shares employment responsibilities.
If your company is exploring global expansion without opening entities, an Employer of Record is the faster, safer choice.