Professional Employer Organization (PEO) vs. Employer of Record (EOR)

Decoding international PEO

Researching and planning your global employment strategy is complex enough. Add in the confusing acronyms and industry jargon, and the undertaking can quickly become overwhelming. We’re here to help clarify and simplify—and we’ll
start with a dive into the murky definition of international PEO.

Let’s start with the basics: What is a Professional Employer Organization?

A PEO, or Professional Employer Organization, provides outsourced HR support, including benefits and payroll administration, HR guidance and assistance with employment law compliance.

PEO providers within the United States operate what is referred to as a “co- employment” model. In co-employment, the PEO provider becomes responsible for the legal employment and payroll component of hiring an employee, and the
workers have their day-to-day activities managed by the company. One crucial but often overlooked feature of the co-employment model is that the client organization is required to be legally registered as a company, or entity, in the country where the employees are.

What about an international PEO?

This co-employment format does not exist outside the United States. Some countries, such as France and Switzerland, may also view co-employment as illegal.

It’s easy to see why some providers refer to themselves as international PEOs—there are certainly similarities between a PEO and a global employer of record service.

By referencing the PEO model when they're referring to an employer of record, they give would-be buyers a familiar concept to help them understand what’s being offered. However, there must be a clear line between the domestic and global offerings due to the implications of co-employment and entity establishment.

Introducing Introducing Employer of Record

To distinguish between international PEO and a global employer of record service, we use the term “EOR". This means our service does not require clients to establish an entity in the countries they are looking for employment support.

EOR shares many properties with PEOs, such as removing the administrative HR and payroll burdens for our clients, but one key difference is that EOR allows our clients to compliantly employ and pay employees and contractors without the need for establishing an entity.

Another way EOR differs from international PEO is that it provides a flexible solution based on clients’ specific employment scenarios.

Traditional staffing agencies and other international PEO providers have rigid employment contract terms and benefit provisions for its workers. This can have an impact on clients looking to hire and retain a higher level of talent—particularly in countries where statutory benefit provisions may not be sufficient. The ability to customize employment scenarios can be invaluable in these circumstances.

Which model should I consider?

When evaluating your options, ensure that your provider is not advocating for the co-employment model that U.S.-focused Professional Employer Organization companies operate.

Your provider should be able to deliver a full employer of record service—including handling payroll and employment compliance, tax remittance and other administrative and reporting tasks—without requiring you to register a presence either as an entity or an employer in that country.

If you have further questions about using an international employer of record service, check out our video or contact us to speak with a global solutions advisor.