Insights into global expansion & employee retention

Published: May 11, 2022

Employer of Record VS PEO : Making the Right Choice

Learn about the key differences between an Employer of Record (EOR) and a Professional Employer Organisation (PEO) in this comprehensive article. Find out which option is best for your business needs and discover the benefits of using an EOR for international expansion or a PEO for managing domestic HR services.

What Is an Employer of Record?

Simply put, an employer of record (EOR) is a third-party company that acts as an employer for the sake of tax and legal purposes. Employer of record are most commonly used by companies looking to expand internationally or non-recruiting small businesses.

This is due to the fact that there are boatloads of benefits when using an employer of record (EOR) if you are looking to sow some seeds across the global employer pond. Small and large businesses can also benefit from the fact that an employer of record can manage their H.R. and payroll duties.

What is a Professional Employer Organisation?

A PEO is a company that specialises in managing the human resources of other businesses. A PEO can be outsourced to take over hr services such as filing payroll taxes, employee benefits management, regulatory compliance, payroll processing and more.

PEOs provide businesses with greater flexibility and scalability, enabling them to quickly adapt to changing market conditions or growth opportunities. For example, a business can easily expand into new regions or markets by partnering with a PEO that has a presence in those areas. PEOs can also help businesses navigate complex employment laws and regulations, ensuring compliance and minimising legal risks.

Key differences between an Employer of Record and a PEO

When you use an employer of record services, it becomes the full legal employer of your personnel. As a legal entity, an employer of record becomes in charge of all employer-related responsibilities such as payroll taxes and insurance.

If your company decides to partner with PEO services, both your company and the PEO become legal employers of your workforce, which means that your company is still responsible.

An employer of record ensures that you can recruit talent from nearly every region that is supported by the employer of record that you decide to partner with. This is, thankfully, owing to the fact that you do not need to register your business in the region you are hiring workers if you are partnered with an EOR service provider.

When using a PEO, your business needs to be registered in the specific region that you choose to hire in. A PEO will therefore only be beneficial to your business if you choose to hire workers only in regions in which your company is registered.

An employer of record service can help your business manage many different types of talent ranging from freelance, part-time, full-time, seasonal and even other types of flexible personnel.

Professional employer organization (PEO) services are usually used as co-employers for permanent personnel. A company will need to find an alternative method to pay their non-permanent employees compliantly.

Employer of records can generally partner with any company regardless of how many personnel are on their payroll.

Companies that partner with PEOs are generally larger as many PEO partners ask that their clients co-employ at least 5-10 employees.

The difference between an EOR services and a PEO largely depends on your company’s needs. Understanding the differences in the services provided can help make your choice easier.

Who will benefit from using a PEO?

PEOs are best suited for large companies that operate domestically or hire employees from regions in which they are registered. PEOs can help these companies find local talent and rid them of the arduous hiring process and some other hr services. Your company will still, however, be legally liable due to PEOs co-employing your personnel.

When it comes to remote workers, PEOs are especially valuable because they can help ensure that companies are in compliance with the local employment laws in the regions where their remote employees are located. This can be a complex task, as these laws can vary widely from region to region. PEOs can help ensure that companies are following the local employment laws and regulations that apply to their workers, which protect both the company and the workers themselves.

By ensuring compliance with employee laws, PEOs can help companies avoid legal penalties, fines, and lawsuits that can arise from non-compliance. This can help companies save money, avoid reputational damage, compliance risks and reduces the risk of legal disputes.

Who will benefit from using an Employer of Record?

If your company is looking to hire talent from all over the globe in a legally compliant way then you needn’t look any further as we’ve got you covered at Playroll.

It’s important to note that regardless of whether a company chooses an EOR or PEO, they must ensure compliance with local employment law. With international workers, it’s essential to be aware of the legal employment responsibilities that comes with being a global employer. Partnering with an EOR or PEO can help alleviate some of that responsibility, but it’s ultimately up to the company to ensure compliance with native employment law.

Employment contracts are a critical component of compliance and should be reviewed by legal experts to ensure they meet native employment law requirements. By working with EOR services and PEOs, companies can focus on their business operations, while ensuring they meet legal responsibilities.

We make hiring workers internationally a walk in the park by offering a wide range of services that can be customers to your needs. We plan on providing employer of record services in every country in the world. So what are you waiting for? Come play with us.

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