PEO vs EOR, which do you choose? The HR department serves as the functional backbone of your company if your company wants to operate effectively on a regional scale or expand your global business on an international scale overseeing functions like talent management and other crucial HR corporate duties.
Smooth business expansion requires moving beyond the limitations of traditional HR management structures. By using a PEO or EOR, you may effortlessly manage your talents that work remotely while streamlining work procedures across different regions.
A Professional Employer Organization (PEO) refers to a service that helps businesses manage risk and ensure compliance when expanding overseas and hiring global talents. It assists clients like you to stay in compliance and manage risk management including payroll, taxes, employment rules, compensation, and employee relations for your business to remain high in productivity.
An Employer of Record (EOR) refers to a third-party company that manages recruiting and payroll for companies. EOR allows companies to hire foreign employees lawfully in another country without the need to establish a local entity or own the risk of violating the local employment regulations, it takes responsibility for handling all formal employment tasks.
Both PEO and EOR are human resource outsourcing services, but they are quite different and often confusing for global employers to choose from. To have a better understanding of both of them, AYP has prepared the similarities, comparison table, and a decision-making checklist to understand what a PEO and an EOR can do for your business.
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Similarities between PEO and EOR
- Manage your day-to-day HR tasks.
- Hiring on behalf of the business.
- Conduct Payroll processing on behalf of the business.
- Both don’t interfere with your day-to-day operation, where employers have absolute control over day-to-day tasks, scheduling, management decisions, and salary allocations.
- Manage compliance risks for companies expanding overseas and hiring talents.
- Both share the company's liability where your liability burden will be managed.
- Both PEO and EOR offer additional insurance services with plenty of options to choose from.
- Both handles employment contract, but in different way.
Differences Between PEO and EOR
What are the biggest differences between them?
1. The biggest difference between both is the keyword "entity". With an EOR, you can employ workers in other countries WITHOUT owning and opening your own entity in the country. You DON'T need to own a separate legal entity yourself with an EOR service provider. 2. If you already HAVE or have decided to own a legal entity in a country where you plan to start your business, PEO will be a better choice as your co-employer. Further, PEO is a more affordable option if you already own a legal entity in the country. 3. EOR acts as the legal employer of your employees and they sign contracts with the EOR instead of your company. As such, you can leave all the legally associated employment risks to your EOR provider. 4. PEO handles fewer HR functions and responsibilities than an EOR. Your company has more control and is solely responsible for local labor law compliance issues.How to choose between PEO & EOR services?
PEOs are an excellent choice for companies looking to expand their global team and set up local entities requiring the support of a local HR. This eases the human resources HR responsibilities and saves the company time and resources. However, please note that a PEO isn't the right choice for you if you want to hire globally without setting up local entities. This is a great difference between PEO & EOR. Companies without an entity, especially smaller businesses, save a lot more working with an EOR, especially when speed and time are crucial to hiring global talents anywhere. When your business has grown more established and has formed your own HR team, you may flexibly switch from EOR to PEO with AYP. Hence, EOR is the long-term solution if you are looking for sustainable business expansion. It is clear that both Professional Employer Organizations and Employers of Record are both HR outsourcing companies that manage HR functions, employee's performance management and issue service agreements, but differently according to the business structures, needs, and expansion plans. Still uncertain whether PEO or EOR is the best choice for you? What if I tell you that AYP offers both of these solutions?Introducing the only PEO & EOR solution You Need
AYP Global Pay is a single digital platform offering both Professional Employer Organization (PEO) and Employer of Record (EOR) solutions. You can quickly access all of the HR capabilities your company requires from a single dashboard. This includes payroll in more than 130 currencies, digital onboarding, and automated compliance. Additionally, it provides you with an overview of your total workforce cost to manage your spending more optimally.Here is exactly what AYP PEO / EOR solution includes:
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Employment contracts
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Annual statutory reports for employers and employees (tax contribution, pension scheme, local statutory contribution)
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Customized payroll reports
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Ongoing HR support & HR advisory
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Continuous support from AYP Customer Success and Centre of Excellence teams
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Compensation and benefits according to the local regulations
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Local tax filing
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Cross-border salary payments
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Digital API system that integrates with your finance system
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Compliance check & Staff classification
