Differentiation Between EOR Services Vs PEO Services
EOR (employer of record) & PEO (professional employment organization) are terms that are frequently used interchangeably because both services can act as an extension of your industry by employing your employees when you are expanding internationally or locally. To further complicate the EOR Services vs PEO discussion, these are defined differently depending on which country you are in. Many Small and medium enterprises recognize the critical role of HR in their global expansion strategy and they must choose among two HR outsourcing options: EOR services and PEO services. Which is suitable for SMEs and startups?
An international Survey research shows that 60% of small and medium size businesses should have to need EOR services and PEO services. They can help to grow a company quickly.
1. Both EOR Services & PEOs handle human resource tasks like payroll, benefits, tax deductions, and reporting.
2. On paper, an EOR is the legal employer of your employees. A PEO creates a co-employment relationship between your company, your worker, and your PEO.
3. As a professional employer organization, you are purely responsible for ensuring that local labor laws are followed.
Employer OF Record (EOR)
Employers of Record EOR services are provided by a third-party entity able to provide you with all of the necessary assistance to hire overseas talent while remaining compliant, including taking care of local regulations, responsibilities, and benefits.
Simply put, international employers hire local staff through an EOR service provider, such as Slasify and the EOR services provider is in charge of all labor regulations, such as social insurance, pension benefits, labor contracts, tax filings, and labor records.
Professional Employer Organization
Professional Employer Organization (PEO) exists as a co-employment & handles their consumer HR tasks and employee liabilities, such as payroll, recommendation for employee benefits, tax handling, and lawsuit consultant. As a result, small and medium-sized businesses frequently seek a partnership with a PEO to reduce the burden of hiring.
At first glance, both EOR Services and PEO third-party institutions may appear to provide similar outsourcing HR services to assist you with global hiring & employment compliance. You name it: professional employee management, hiring, payroll records, labor cost savings, labor law compliance, and so on.
Comparison Between EOR and PEO
1. Legal Representation in a Foreign Country
Professional Employer Organization: PEO necessitates that your company establish a local legal structure in the target area or country. It is your duty to adhere to and enforce local labor laws. Because your company and the PEO are co-employees, risks and obligations are shared by both parties.
Employer of Record: EOR is your company’s local legal representative in a foreign country. As their customer, EOR Services covers all employment risks and liabilities and comes out to engage with any employment laws, report taxation under their tax ID, and employee contracts. EOR services assists businesses in hiring talent in any country where the EOR has founded a legal entity and managing the employee on a global scale.
2. Management Purpose
Employer of Record: On paper, EOR services hires your employees, and they are protected by EOR’s insurance. However, your company retains complete control over your employees’ job functions. EOR Services hires people and manages labor laws, compensation, and payroll.
Professional Employer Organization: In contrast, PEO encourages talent acquisition, and you are the lawful employer. The PEO is not heavily involved in the management of the employee’s job functions. PEO handles payroll, legal matters, and contractually agreed-upon tasks for both parties. Their knowledge provides company value guidelines to avoid problems, but the final decision is in your hands.
3. The Size of Your Company
Professional Employer Organization: You may have heard the expression “Size doesn’t matter.” Unfortunately, in this case, your business size is important to PEO because they usually require a certain number of employees to use their services. In general, PEO is unlikely to provide services to businesses with fewer than ten employees. This shouldn’t be an issue for large corporations, but it is a source of concern for small, growing businesses.
Employer of Record: On the other hand, EOR Services do not need a minimum count. They are more adaptable because they charge a service fee based on the number of employees hired.
Which Services Will Be Suitable For Your Business
To answer the question, you must first assess your company’s capabilities and resources in order to determine which partnership is best suited to your company’s growth strategy. Here are some ideas for you:
As you may have gathered from the preceding discussion of legal entities. If your company has already established a local entity in the new country but lacks the resources to meet the needs of your employees, PEO is a great choice for outsourcing certain HR functions. Otherwise, partnering with an EOR Services provider and having them handle all labor compliance for you is a logical choice because it will be more functional and scalable to implement a small number of overseas team members.
The type of workers you would like to hire influences your decision. For example, if a company requires full-time employees, either PEO or EOR Services is appropriate. Those looking for temporary employees. Because of the company’s frequent changes in personnel, EOR proficiency in employment laws of the activity country would be the best option.
Summing It Up
Both EOR Services and PEO have advantages and disadvantages. So you can start to make a list of what you want from HR outsourcing firms to help you with your expanding global strategy. Do you still have questions about which service to use? Contact us so that we can provide you with the best HR solution for your expanding team.