PEO vs. EOR: What's the Difference?

If you have been looking for ideal candidates for your workplace, then you must have heard about both PEO and EOR. PEO stands for Professional Employer Organization, is an organization that helps you to hire employees in an international location, but only if you have an entity in that location. Meanwhile, EOR helps to hire workers in international countries even if you don't have any entity in that area. They work as a legal employer of your organization.  

While both PEO and EOR do the hiring job seamlessly, they differ from each as per the hiring process. Besides that, there are several other differences between PEO and EOR. Here's a brief:

Different Structure

Both PEO and EOR have different working mechanisms and structures. While an EOR works as an on-site legal employer, PEO is more of a co-employment arrangement. If you want any help with HR tasks, both PEO and EOR can surely help with the same.

However, an EOR has to be flexible and trustworthy enough to help you with your HR-related decisions. If you choose the right organization, they can handle a portion of your HR activities. Meanwhile, if you take assistance from PEO, they can take over the entire HR (and related) function for efficient management.

Safety, Security, and Risks

PEO can ensure the safety and security of your organization, however, they are limited to their primary duties. As for EOR, most service providers go beyond their roles and responsibilities to ensure organizational safety. In fact, they are also well-equipped with best-in-class technologies to offer risk-free tax assistance and other activities.

To differentiate between both, you can say that a PEO doesn't have full responsibility for your workforce risk management. However, an EOR can do it for you in a hassle-free manner.

Flexibility

A PEO is quite efficient with their tasks, especially if you want a workforce with full-time employees. They will conduct thorough research and hire employees that fit your requirements. Meanwhile, EOR is also extremely productive and efficient, however, they are quite flexible with hiring too. Besides regular employees, these experts can help you hire temporary candidates as well. This is helpful, especially if you want a specific teammate for a particular time span.

Additionally, for Global EOR, there's no limit to minimum employee hiring. This means even if you want one employee for your international team, you can get them easily.

Global Expansion

As mentioned earlier, PEO is limited to offering services in the area where you have an entity. That's why, if you want to go global with your workforce, they won't be able to help much. However, they can definitely hire local employees for the organization.

Meanwhile, EOR can help you expand globally through widespread hiring. They can select candidates for you as per the location/area you want to set up your new branch. EOR is an effective way to grow your business in other countries and states without compromising on your business entity.

Tax Reporting and Payroll Management

If you take PEO assistance for your tax reporting, you will be able to file taxes using your tax ID number. However, in the case of EOR, things are a bit different. They can help you file taxes through their own tax ID number. Additionally, EOR is quite diverse with payroll management, and they can offer assistance related to all necessary withholding, tax deductions, and payroll seamlessly.

Now, what is payroll? Payroll is the salary that you pay the employees who are working with you. Payroll management is important to ensure accurate payments, employee satisfaction, and loyalty in your organization. And fortunately, EOR can help you with that as well.

Tax Responsibilities

Even if you get assistance from PEO, they will be using your tax ID for reporting. This means you will be fully responsible for the correct deposits of your payroll taxes.

Meanwhile, for EOR, the organization uses their own tax ID, and hence they, are responsible for any issues related to the same. They must also ensure an accurate remission of taxes for your employees.  

Employment Agreements

Being a legal employer of your organization, EOR signs the employee agreement directly with the workers. However, in the case of POE, as it is a co-employment arrangement, you have to sign the employment agreement with your workers.

Worker Insurance

Just like for tax reporting, PEO will be operating under your working insurance all the time. However, its management and facilitation can be done by the PEO. As for EOR, the employees will work under the EOR's worker insurance. This cuts down the hassle/effort and makes things more convenient for you.

Payroll Funding

While PEO needs payment before the payroll, EOR doesn't require so. They manage payment as per the payment terms. This means EOR requires payroll funding, but PEO doesn't need payroll funding. Payroll funding is a way through which organizations get capital/money to pay their employees.

Others

Mandatory benefits: EOR can help with the management of pensions and insurance for the worker, while PEO can do that only sometimes.

Holidays and Expense reimbursement: EOR can help manage holidays, time offs, and reimbursement easily. Some PEO can do that too, but it's not as common as EOR.

Legal Responsibilities: EOR can take legal responsibilities for the employees/workers, while PEO can't do so.

Collective agreement: PEO cannot manage the collective agreement responsibilities. However, EOR can manage such things easily.

Severance and Termination: In case of employee severance and termination, PEO can only advise you for the same. However, EOR can handle such duties seamlessly.

PEO vs. EOR: The Winner?

Both PEO and EOR have different responsibilities, and they can manage them quite well. So, depending on your requirements/organization, you can choose between PEO and EOR. However, if you want to easily set up a global team and want someone to handle your HR, compliance, and tax-related activities easily, go for EOR. They will definitely be a perfect pick for your organization!

As for EOR, look for an all-in-one platform like Brix that can help you select talented and skillful employees (and manage other responsibilities). From interviews to onboarding, Brix can hire the best employees for you within just 72 hours! Check out our test-free trial and get a complete refund if you are not satisfied with our services.

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