Employer of Record (EOR) vs. Professional Employer Organization (PEO): A Side-by-Side Comparison

Key takeaways

• Both EORs and PEOs help companies legally hire and pay workers, but they have several key differences.
• While PEOs work under a co-employer arrangement, EORs take more legal risk and liability for a company and can help them get set up in a new country faster.
• EORs are usually a better choice for companies wanting less risk, quicker speed, and the ability to hire in multiple countries.
• If hiring an EOR, choose a full-service provider to ensure access to local experts and more flexible tools.

How is a PEO like an EOR?

PEOs and EORs are companies that help you employ workers more easily. Both can handle HR functions like benefits administration, payroll, and onboarding. Additionally, both provide some measure of assistance in making sure your employment practices are legally compliant. However, PEOs offer a co-employment partnership, while EORs act as the legal employer for your workers, thereby taking on the legal risk for compliance with local laws.

What’s the difference between a PEO and an EOR?

PEO stands for “professional employer organization.” A PEO is similar to an EOR (employer of record), but it has some important differences. As mentioned, while both provide outsourced HR support, an EOR works as your legal entity — even in countries where you don’t currently have a presence — while a PEO functions as your co-employer. This means that with a PEO, you’re still required to be legally registered as an entity in the country where your employees are. This not only takes time, but leaves your company open to legal risk.

Usually, an EOR partner also offers more hands-on support, like local HR experts who can help you offer a competitive salary package, inform you of local holidays, and create custom employment contracts. PEOs, meanwhile, usually provide prewritten contracts and other templates that can be hard to modify.

EOR vs. PEO risk comparison

One of the biggest differences between an EOR and a PEO is the amount of risk you take on as a company. When you partner with a PEO, you share the liability and risk for compliance with employment regulations, tax withholding, and other laws. But when you work with an EOR, the EOR takes on 100% of the risk, because they are the legal employer of your workers.

This can be a huge benefit for a company that’s expanding quickly. The EOR takes on the responsibility of making sure that hiring, payroll, and employment are legally compliant, while the company can focus on its core business. Companies that need to quickly convert contractors to full employees also benefit from partnering with an EOR, because the EOR offers the local expertise that enables them to achieve legal compliance in days, not months.

EOR vs. PEO speed comparison

Because of how quickly they can hire and pay employees in full compliance, EORs are often a vital part of a company’s expansion strategy. An EOR can have an employee hired and onboarded in as little as two days, even if its partner company has never had an employee in that country before. But with a PEO, a company must already have a legal entity in that region before it can employ anybody. If your company is looking to expand quickly, an EOR is likely the right choice for you.

EOR vs. PEO: What’s best for a global workforce?

An EOR and a PEO both administer payroll, but a PEO focuses on one particular country or region. An EOR, meanwhile, can pay workers in a large number of countries. This gives you more flexibility to hire top talent, no matter where they might live. EOR providers like Safeguard Global can pay workers in full compliance in nearly 190 countries.

How to evaluate an EOR vs. a PEO 

When deciding which workforce enablement solution is right for your organization, consider the function you want it to serve. If you just need HR services like benefits administration and payroll, a PEO might be a good fit. But if you’re looking to expand into new areas, assume less risk, and gain access to more HR services, an EOR is probably best for you.

PEO vs. EOR comparison chart

Which is better for your organization, a PEO or an EOR? Consult this chart for the main differences between the two.  

EOR

PEO

Provides HR support

✅

✅

Helps you focus on your core business

✅

✅

Administers payroll

✅

✅

Requires you to have an in-country entity         

✅

No in-country presence required

✅

Requires rigid contracts and employment terms

✅

Covers the liability and legal risk

✅

Provides immediate access to talent 

✅

Can advise on hiring around the globe 

✅

Makes it easy to employ global remote workers 

✅

Retaining a full-service EOR

When evaluating your options, first make sure you’re clear about what model your provider is advocating for — a PEO or an EOR. When working with an EOR, it’s beneficial to work with a full-service EOR, rather than a self-service EOR. A full-service provider like Safeguard Global can handle payroll and employment compliance, tax remittance, and other administrative and reporting tasks — as well as provide in-country experts to support both you and your employees. At Safeguard Global, we also help clients set up legal entities, which makes it even easier for companies using EOR as an interim solution to transition workers to their own entity, once it’s set up. 

Learn more

Have more questions about the differences between an employer of record and professional employer organization? Join us for our webinar Register now or contact us to speak with a global solutions advisor.