PEO vs EOR: Similarities & Differences, Which One to Choose For Business

eor and peo similarities differences
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When it comes to business growth and global expansion, especially for small or mid-sized businesses, Professional Employment Organizations (PEO) or Employer of Record (EOR) services can help you realise the HR capacity to optimise your workforce or manage your remote team.

Efficiency, cost-effectiveness, and streamlined HR processes are some of the advantages that are associated with engaging in PEO or EOR services - making them the ideal choices when you are considering to scale your business to greater heights with compliant, effective hiring practices. The important reason to consider PEO or EOR services lies in the fact that access to competent HR expertise will be available; assisting you in offering better or more comprehensive benefits to your employees - which can in turn help to hire and retain talents better.

However, what do both PEO and EOR offer to your organisation, and how different are they when compared to each other?

Key Similarities and Differences

A robust HR function can help you grow your team and elevate your employee experience while you focus on your core business aspects. Here are a few key similarities and differences between PEO and EOR services as summarised in the table below:

SimilaritiesDifferences
Both PEO and EOR handle similar HR functions such as compliance, payroll, tax filing, reporting and documentationsEOR will assume all risks or liabilities, whereas PEO will share them with your organisation
Both services cater to global or international businessesEOR handles the hiring of global workforce, while PEO manages the existing local workforce
Both services offer comprehensive benefits to employeesThere is no requirement to set up an entity with EOR; however, it is a prerequisite for PEO

The key similarities and differences may help you to compare the pros and cons between PEO solutions and EOR solutions. In order to choose the right service for your organisation, there is a need for a complete assessment of your organisation to understand your business needs and requirements - and the following factors can help you decide and choose between PEO and EOR services for your organisation’s growth.

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Factors To Consider When Choosing Between PEO and EOR

1. Your location matters

Do you want to hire employees in locations with an established local entity, or do you want to set up a global team without an entity? 

If you are looking to hire with an established entity, PEO will be the ideal choice. However, if you choose to hire without an entity within a country, you can opt for EOR services.

2. Decide which employment support you need

Does your organisation need an extended HR department to take care of your human resources requirements? You can consider PEO solutions for this purpose; however, if you are looking for wider employment services that span across countries, then EOR solutions will be a better fit.

3. The number of your employees counts

Partnering with a PEO service provider normally requires an organisation to have a minimum requirement of employees. When you have an established entity in place within a geographical location, you might be looking to hire in larger numbers - therefore a PEO service will help to provide you with the necessary HR expertise for building a team.

On the other hand, engaging an EOR does not necessarily need a minimum employee headcount; this works well even if you are looking to hire a single employee. EOR is a great solution for hiring staff in new countries without a physical presence - however, you may eventually need to opt for PEO if you are to expand your business.

4. Determine the level of control you want to retain

In a co-employment with a PEO service provider, you can work collaboratively in HR functions - allowing you greater flexibility and authority in managing your workforce.

With an EOR service provider, however, you will need to trust them to carry out HR functions for you that are compliant and legal within the country.

5. Consider your budget and long-term costs

In general, PEO solutions may have higher long-term costs than EOR solutions - determining your budget for your organisation will help you decide if PEO or EOR is right for you, in addition to knowing your business needs.

Looking for PEO or EOR solutions that can accelerate your business growth and drive expansion? Start here to discover AYP’s award-winning HR solutions - or contact us here for more details.     

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