Global employment guides

Navigating the World of Global Hiring: Employer of Record vs PEO

Published on:
July 19, 2023
Written by:
Lucas Botzen

Most business owners feel intimidated the moment they see the international regulations required to hire talent overseas. While this may be a valid reaction considering how complex and difficult these regulations are especially for the small and growing businesses, it may be a sign for you to consider options like the Employers of Record and the Professional Employer Organization to assist you to perform these exact tasks.

Table of contents

Employer of Record vs PEO

Hiring talent globally has become an essential part of today's business landscape. With the rise of remote work and distributed workforce, companies have to navigate complex labor laws and local regulations in multiple countries. In this article, we'll dive deep into the world of global hiring by examining the differences between Employer of Record (EOR) and Professional Employer Organization (PEO) services. You'll learn how each solution can help your company hire talent globally while staying compliant with local laws and regulations.

Employer of Record vs PEO

Both EORs and PEOs provide similar services aimed at helping companies hire internationally. However, there are key differences between these two solutions that can impact how your company approaches global hiring. Let's explore the main features of each service and how they can assist your business in its global expansion.

Employer of Record (EOR)

An Employer of Record (EOR) is a legal entity that becomes the "legal employer" of your international employees. This means that the EOR is responsible for handling all HR functions, including payroll processing, benefits administration, and compliance with local employment laws. By partnering with an EOR, your company can hire talent globally without having to establish its own local legal entities or navigate complex labor laws in each country.

EOR Services

EORs provide a wide range of services to help companies manage their global workforce. These services include:

Payroll processing

EORs handle payroll processing in compliance with local laws and regulations.

Employee benefits

EORs manage employee benefits administration, including health insurance, retirement plans, and other perks.

Compliance

EORs ensure that your company's employees are compliant with local labor laws and tax regulations.

Risk management

EORs take on the legal responsibility of employing your international workers, mitigating the risk of non-compliance.

Professional Employer Organization (PEO)

A Professional Employer Organization (PEO) is a company that enters into a co-employment relationship with your business. In this arrangement, the PEO acts as a "co-employer" alongside your company, handling many HR-related tasks and responsibilities. By working with a PEO, you can access a wide range of HR services without having to build your own HR team or manage complex labor laws.

PEO Services

PEOs provide various HR services to help companies manage their workforce more effectively. Some of these services include:

HR tasks

PEOs handle HR functions like payroll processing, benefits administration, and workers' compensation.

Compliance

PEOs ensure that your company remains compliant with local employment laws and regulations.

Employee experience

PEOs help improve the employee experience by offering access to benefits, training, and other resources.

Key Differences Between EOR and PEO

While EORs and PEOs offer similar services, there are some crucial differences between the two that can impact your decision when choosing a global hiring solution.

Legal Entity vs Co-Employment

One of the main differences between an EOR and a PEO is the way they approach the employer-employee relationship. An EOR becomes the legal employer 

of your international employees, taking on full legal responsibility for their employment. In contrast, a PEO enters into a co-employment arrangement with your company, sharing the responsibility for HR-related tasks and compliance.

Local Legal Entities vs Co-Employer

When working with an EOR, your company does not need to establish its own local legal entities in each country you want to hire employees. The EOR takes care of all local compliance, allowing you to hire talent globally without the burden of setting up local entities. On the other hand, a PEO typically requires your company to have its own legal presence in the target country or work with a local partner to access its services.

Global Expansion vs Local Expertise

EORs are well-suited for companies looking to expand globally, as they can help you quickly hire employees in multiple countries without the need to establish your own local entities. PEOs, on the other hand, tend to focus more on providing local expertise and support within a specific country or region. This makes PEOs a better fit for companies that are focused on expanding within a particular market.

Independent Contractors vs Full-Time Employees

EORs are generally more flexible when it comes to employing different types of workers, including full-time employees, temporary employees, and independent contractors. PEOs typically focus on managing full-time employees and may not be as well-equipped to handle the unique challenges associated with hiring and managing independent contractors.

How to Choose Between an EOR and a PEO

When deciding whether to work with an EOR or a PEO, consider the following factors:

Global expansion goals

If you're looking to expand your business globally and hire employees in multiple countries, an EOR may be a better fit for your needs.

Local expertise

If you need local expertise and support within a specific country or region, a PEO may be a more suitable option for your company.

Legal presence

If your company already has a legal presence in the target country or is willing to establish one, a PEO can be a good choice. Otherwise, an EOR can help you hire talent without needing to set up local legal entities.

Types of workers

Consider the types of workers you plan to employ. If you need to hire a mix of full-time employees, temporary employees, and independent contractors, an EOR might be a better fit.

Conclusion

Choosing between an EOR and a PEO for your global hiring needs can be a complex decision. By understanding the key differences between these two solutions and considering your company's specific needs, you can make an informed choice that supports your global expansion goals. Whether you decide to work with an EOR, a PEO, or a combination of both, these services can help you navigate the complex world of international hiring while maintaining compliance with local laws and regulations.


Rivermate as EOR provider

Rivermate, a top-tier Employer of Record (EOR) provider. By partnering with Rivermate, companies can successfully navigate the complexities of international hiring, compliance, and workforce management. This chapter will delve into the key features and benefits of Rivermate's EOR services.

Rivermate's Employer of Record Services: Features and Benefits

Streamlined Global Hiring Process

One of the primary challenges faced by companies looking to hire internationally is navigating the complex and time-consuming processes involved in recruiting, onboarding, and managing global talent. Rivermate simplifies this process by acting as the legal employer for your international employees, allowing you to focus on growing your business without the added burden of managing the intricacies of international employment.

Compliance with Local Laws and Regulations

When hiring employees in foreign countries, compliance with local labor laws, tax regulations, and employment contracts is crucial to avoid potential legal issues. Rivermate's EOR services ensure that your company remains compliant by managing payroll, benefits administration, and tax withholdings in accordance with local laws and regulations.

Access to Local Expertise

Rivermate's in-depth knowledge of local employment laws and regulations in multiple countries enables them to provide valuable guidance and support to client companies. By leveraging Rivermate's local expertise, businesses can confidently navigate the complexities of international hiring while avoiding costly mistakes and ensuring compliance with local requirements.

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FAQs

1. Can I use both EOR and PEO services simultaneously?

Yes, you can use both EOR and PEO services to manage your global workforce. This approach allows you to take advantage of the unique benefits each solution offers, such as the EOR's ability to employ workers without establishing local legal entities and the PEO's local expertise.

2. How do EORs and PEOs handle employee benefits?

Both EORs and PEOs manage employee benefits administration. They ensure that your employees receive the appropriate benefits according to local laws and regulations, such as health insurance, retirement plans, and other perks.

3. What are the costs associated with using an EOR or PEO?

The costs of using an EOR or PEO can vary depending on the services provided, the number of employees, and the countries involved. Generally, EORs and PEOs charge a fee based on a percentage of the employee's salary or a flat fee per employee. There may also be extra fees for additional services like visa sponsorship or relocation assistance.

4. Can I switch from a PEO to an EOR or vice versa?

Yes, it is possible to switch between a PEO and an EOR as your business needs change. However, switching may require some administrative work, such as transferring employee records and adjusting payroll processes.

5. How do EORs and PEOs help with tax compliance?

Both EORs and PEOs ensure that your company and its employees are compliant with local tax regulations. They handle payroll processing and tax withholdings for your international employees, taking into account the specific tax laws in each country.

6. Do EORs and PEOs provide support for remote workers?

Yes, both EORs and PEOs can support remote workers, helping companies manage their distributed workforce and maintain compliance with local laws and regulations.

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