If you are considering outsourcing your HR, there are a few things that you have to take note of in order to make the best choice for your company. There are two different types of HR Outsourcing options, the PEO and the EOR.  While they are both HR outsourcing vendors, there are a number of significant differences between the two and both can significantly worsen your business functions when applied incorrectly. A clear understanding of both is crucial in order to make the best decision for your company. To help you get a better understanding of the two, we have summarised some key differences into the below article.

To start things off, let us go through the basic functions and purposes of the PEO and EOR respectively. PEO stands for Professional Employer Organisation (PEO). In layman terms, a PEO provides the necessary HR functions to clients. Some examples of such functions are payroll, taxes, employee benefits and training. On the other hand, EOR stands for Employer on Record (EOR). An EOR offers the same functions as a PEO with the added function of being the company that hires your employees for you. Hence, apart from providing your HR functions for you, an EOR is also a legal employer and holds all liabilities of hiring and terminating employees for clients. This is the biggest difference between the two. 

Key Differences

  1. Employment Contracts: As a part of your HR Department, a PEO will help you handle all your employee contracts. However, remember that a PEO simply provides you with HR Functions, but does not act as a legal employer. As such, the agreement itself ultimately has to be handled and concluded by your company. On the other hand, an EOR takes care of all legal matters regarding employment, including employee contracts. 
  2. HR Functions: PEOs are widely known as HR Outsourcing services. A PEO covers a wide range of HR-related tasks and functions that are necessary for a business to survive and thrive. This includes payroll, taxes, insurance and ensuring legislative compliance. While a PEO simple provides you with HR Functions, an EOR acts as an actual employer and takes over actual office management. 
  3. Overseas Expansion: A PEO solely focuses on the provision of HR functions to clients. This means that it is not within their role to fulfil business registration for your company, should you be looking to expand overseas. As such, while a PEO can take care of all HR Functions once your company has opened overseas, it is still your responsibility to carry out the business registration. On the other hand, an EOR is generally already located within the country of your choice and exists as a legal local entity. As such, an EOR can readily start hiring immediately without any legal complications.

So…Which Should You Pick?

Ultimately, there is no one-size-fits all answer to this question. However, looking at the needs of your business and its current goals can help you make the most suitable decision. A PEO and an EOR are very different and offer the solutions to very different needs. PEOs are generally for companies that are looking to enhance their HR functions by outsourcing help.  EORs are solutions for companies to expand and get talent onboard as quickly and efficiently as possible. In short, you have to measure the goals of your company against the functions of both PEO and EOR to determine which would be the most suitable. Of course, we are always happy to help should you need any tailored advice about either function. Should you need advice on taking a step in the right direction, you can contact us at https://ayp-group.com/find-us/