Employer of Record vs. PEO: What's the Difference?

If your business is operating internationally, innovative technologies can streamline countless HR tasks like payroll processing (in numerous currencies), tax reporting and financial planning for future expansion.

Employer of Record
May 15, 2024
Table of Contents

By 2026, the HR outsourcing market is expected to grow by US$10.90 billion. As businesses navigate the hiring landscape, HR outsourcing firms like Professional Employer Organizations (PEOs) have emerged as allies to support optimizing and improving day to day operations. 

And then there are Employers of Record (EOR), which serve as a comprehensive service for companies aiming to expand internationally. Let’s brush over the definitions:

What is a PEO?

What is it? A PEO acts as an outsourced HR partner 

Who is it for? Businesses without formalized inhouse HR functions 

How does it work? By forming a co-employment agreement, PEOs work closely with companies to manage a variety of HR-related functions.

What does it handle? Payroll and payroll tax management, benefits administration, HR compliance, risk management and employee relations. 

By partnering with a PEO, businesses can focus on their core operations without the worry of managing the more intricate aspects of HR.

What is an EOR?

What is it? The Employment of Record (EOR) model  managing companies through established international entities

Who is it for? Global employers looking to outsource the employment of its staff overseas,. 

How does it work? By providing its own legal entities to employ staff internationally.

What does it handle? The maintenance of normal working relationships with employees across borders through HR tech, visa support, benefits management, etc.

Feature Employer of Record (EOR) Professional Employer Organization (PEO)
Legal Entity Requirement No local entity needed; EOR uses its own entities. Local entity required in employee's country.
Employment Model Acts as the sole legal employer. Co-employs workers; shared responsibilities.
Key Services Manages payroll, taxes, compliance, and HR tasks. Comprehensive HR services including payroll and compliance.
Risk and Compliance Takes on all employer-related risks and compliance. Shares liability and compliance responsibilities.
International Capability Ideal for international hiring without a local presence. Suitable for companies with an international presence needing HR outsourcing.
Flexibility and Control High flexibility, less control over HR functions. Control over HR operations, must align with PEO practices.
Target Clients Suitable for any company expanding internationally. Best for companies with significant workforce needing HR streamlining.

PEO vs. Employee Leasing and HR Outsourcing

While the concepts "PEO," "employee leasing," and "HR outsourcing" can be easily confused, there are differences that exist between them. Here’s what you need to know:

Professional Employer Organization

A PEO shares employer responsibilities with a client company though a co-employment relationship. The organization is directly responsible for managing HR functions and compliance on behalf of the client company

‍Employee Leasing

‍Also referred to as "staff leasing", employee leasing typically involves providing workers to a client company for a contractually agreed upon fee.  The client company maintains control over day-to-day employee relations.

‍HR Outsourcing‍

HR outsourcing involves contracting specific HR functions out to external HR service providers, without forming a shared co-employment. Specific HR-related functions are subcontracted to specialized HR firms on an ad-hoc basis. 

Woman explaining the what is a PEO to an employee

PEO vs EOR Pros and Cons

Still weighing your options? Let’s break down the pros and cons of choosing one over the other.

Aspect EOR (Employer of Record) PEO (Professional Employer Organization)
Pros - EOR handles legal and compliance responsibilities internationally.
- No need for a local entity; simplifies international hiring.
- Reduces the burden of administrative HR tasks.
- Mitigates compliance and employment-related risks.
- Co-employment model allows sharing of employer responsibilities.
- Access to better benefits and HR services due to pooling resources.
- Can be more cost-effective for businesses with a significant domestic workforce.
- Helps with compliance, payroll, and HR management.
Cons - Limited control over HR functions and policies.
- Potentially higher costs due to comprehensive service offerings.
- Less direct engagement with employees.
- Requires a local entity, limiting international flexibility.
- Shared control may lead to conflicts in HR practices and policies.
- Potential for complexity in the co-employment relationship.

 EORs might involve higher costs and offer limited control over HR functions, as well as less direct employee engagement. But PEOs can introduce complexities in shared control and HR policy conflicts.

However, overall both models provide robust solutions but cater to distinctly different business needs.

PEO vs Playroll EOR

Playroll is an employer of record service that assumes full responsibility for local labor laws and regulations around global hiring. 

Importantly, with Playroll EOR, the client company maintains control over the employees' daily tasks and duties, unlike in a typical PEO arrangement where some operational controls are shared.

PEO vs EOR: Why Choose Playroll as Your EOR Partner
Feature PEO Playroll EOR
Employment Model Co-employment agreement Official employer on behalf of the client
Control Over Employees Shared control Client retains control over day-to-day duties
Global Expansion Limited support Supports hiring in 180+ countries, handles local legal nuances
Payroll Management Varies by provider Centralized payroll through a single bulk payment, manages taxes, pensions, and more
Operational Efficiency Depends on local partnerships Streamlined operations, quick onboarding/offboarding
Customer Support Standard support Dedicated customer success managers, 24/7 support
Flexibility and Scalability Varies High flexibility, adapts quickly to market changes

The burgeoning interest in PEO and EOR services, particularly in the US, parallels the increasing foreign direct investment, highlighting the EOR's vital role in facilitating international business expansion without the administrative burdens typically associated with entering new markets. 

As businesses look towards sustainable growth, EORs allow companies to maintain a competitive edge in international markets, ensuring they remain agile and compliant amid shifting economic and political climates. 

Ultimately, the choice between EOR and PEO hinges on a business’s specific needs, but the rise of the EOR model points to a shift towards global employment solutions that prioritize efficiency, compliance, and strategic international presence.

Start your global hiring journey today from $399 per employee.

Professional Employer Organization Guide vs EOR Pricing Plan

By 2026, the HR outsourcing market is expected to grow by US$10.90 billion. As businesses navigate the hiring landscape, HR outsourcing firms like Professional Employer Organizations (PEOs) have emerged as allies to support optimizing and improving day to day operations. 

And then there are Employers of Record (EOR), which serve as a comprehensive service for companies aiming to expand internationally. Let’s brush over the definitions:

What is a PEO?

What is it? A PEO acts as an outsourced HR partner 

Who is it for? Businesses without formalized inhouse HR functions 

How does it work? By forming a co-employment agreement, PEOs work closely with companies to manage a variety of HR-related functions.

What does it handle? Payroll and payroll tax management, benefits administration, HR compliance, risk management and employee relations. 

By partnering with a PEO, businesses can focus on their core operations without the worry of managing the more intricate aspects of HR.

What is an EOR?

What is it? The Employment of Record (EOR) model  managing companies through established international entities

Who is it for? Global employers looking to outsource the employment of its staff overseas,. 

How does it work? By providing its own legal entities to employ staff internationally.

What does it handle? The maintenance of normal working relationships with employees across borders through HR tech, visa support, benefits management, etc.

Feature Employer of Record (EOR) Professional Employer Organization (PEO)
Legal Entity Requirement No local entity needed; EOR uses its own entities. Local entity required in employee's country.
Employment Model Acts as the sole legal employer. Co-employs workers; shared responsibilities.
Key Services Manages payroll, taxes, compliance, and HR tasks. Comprehensive HR services including payroll and compliance.
Risk and Compliance Takes on all employer-related risks and compliance. Shares liability and compliance responsibilities.
International Capability Ideal for international hiring without a local presence. Suitable for companies with an international presence needing HR outsourcing.
Flexibility and Control High flexibility, less control over HR functions. Control over HR operations, must align with PEO practices.
Target Clients Suitable for any company expanding internationally. Best for companies with significant workforce needing HR streamlining.

PEO vs. Employee Leasing and HR Outsourcing

While the concepts "PEO," "employee leasing," and "HR outsourcing" can be easily confused, there are differences that exist between them. Here’s what you need to know:

Professional Employer Organization

A PEO shares employer responsibilities with a client company though a co-employment relationship. The organization is directly responsible for managing HR functions and compliance on behalf of the client company

‍Employee Leasing

‍Also referred to as "staff leasing", employee leasing typically involves providing workers to a client company for a contractually agreed upon fee.  The client company maintains control over day-to-day employee relations.

‍HR Outsourcing‍

HR outsourcing involves contracting specific HR functions out to external HR service providers, without forming a shared co-employment. Specific HR-related functions are subcontracted to specialized HR firms on an ad-hoc basis. 

Woman explaining the what is a PEO to an employee

PEO vs EOR Pros and Cons

Still weighing your options? Let’s break down the pros and cons of choosing one over the other.

Aspect EOR (Employer of Record) PEO (Professional Employer Organization)
Pros - EOR handles legal and compliance responsibilities internationally.
- No need for a local entity; simplifies international hiring.
- Reduces the burden of administrative HR tasks.
- Mitigates compliance and employment-related risks.
- Co-employment model allows sharing of employer responsibilities.
- Access to better benefits and HR services due to pooling resources.
- Can be more cost-effective for businesses with a significant domestic workforce.
- Helps with compliance, payroll, and HR management.
Cons - Limited control over HR functions and policies.
- Potentially higher costs due to comprehensive service offerings.
- Less direct engagement with employees.
- Requires a local entity, limiting international flexibility.
- Shared control may lead to conflicts in HR practices and policies.
- Potential for complexity in the co-employment relationship.

 EORs might involve higher costs and offer limited control over HR functions, as well as less direct employee engagement. But PEOs can introduce complexities in shared control and HR policy conflicts.

However, overall both models provide robust solutions but cater to distinctly different business needs.

PEO vs Playroll EOR

Playroll is an employer of record service that assumes full responsibility for local labor laws and regulations around global hiring. 

Importantly, with Playroll EOR, the client company maintains control over the employees' daily tasks and duties, unlike in a typical PEO arrangement where some operational controls are shared.

PEO vs EOR: Why Choose Playroll as Your EOR Partner
Feature PEO Playroll EOR
Employment Model Co-employment agreement Official employer on behalf of the client
Control Over Employees Shared control Client retains control over day-to-day duties
Global Expansion Limited support Supports hiring in 180+ countries, handles local legal nuances
Payroll Management Varies by provider Centralized payroll through a single bulk payment, manages taxes, pensions, and more
Operational Efficiency Depends on local partnerships Streamlined operations, quick onboarding/offboarding
Customer Support Standard support Dedicated customer success managers, 24/7 support
Flexibility and Scalability Varies High flexibility, adapts quickly to market changes

The burgeoning interest in PEO and EOR services, particularly in the US, parallels the increasing foreign direct investment, highlighting the EOR's vital role in facilitating international business expansion without the administrative burdens typically associated with entering new markets. 

As businesses look towards sustainable growth, EORs allow companies to maintain a competitive edge in international markets, ensuring they remain agile and compliant amid shifting economic and political climates. 

Ultimately, the choice between EOR and PEO hinges on a business’s specific needs, but the rise of the EOR model points to a shift towards global employment solutions that prioritize efficiency, compliance, and strategic international presence.

Start your global hiring journey today from $399 per employee.

Professional Employer Organization Guide vs EOR Pricing Plan
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