EOR or Employer of Record and PEO OR professional employer organizations can empower the HR functionality of an organization viably, but these entities are different from one another. One of the prime differences is that a PEO handles the HR functions completely while EOR services are rendered on a service agreement with your organization. It is important to understand the difference between the two because you can hire the right organization to meet your HR requirements based on the differences. EOR or Employer of Record and PEO OR professional employer organizations can empower the HR functionality of an organization viably, but these entities are different from one another. One of the prime differences is that a PEO handles the HR functions completely while EOR services are rendered on a service agreement with your organization. It is important to understand the difference between the two because you can hire the right organization to meet your HR requirements based on the differences.
It is easy to confuse between a PEO and EOR. There are small differences between the two; nonetheless, these are variances that can make a big difference to your organization.
1. EOR works on a subset of outsourced work, whereas a PEO will take up all HR Functionalities. For example, PEOS will handle employee payroll, recruitment, termination, performance appraisals and review, taxes and compliances, health insurance, statutory compliances, and more. EOR services are usually limited to certain HR functions that you are ready to outsource due to lack of internal resources etc. An EOR Service provider might take on projects like hiring seasonal workers or contractors or project-to-project-based hiring services.
2. EOR services work best for firms that have one or two employees. That is why, for startups and small organizations, EORs can offer full-scale services because they are so well-versed with the labor laws of a country. PEOs mostly work when the number of employees is more, usually more than ten employees.
3. When you are just starting in a country, it is better to go in with an EOR. This is when your business is still not registered, and you would need help with many of the business laws to set up your business entity in the new place. Every country has its set of rules and regulations, and an EOR will assist you in establishing your business with the foreign land. However, a PEO can only come on board when your business is registered. The difference primarily rises because EORs are registered businesses and take the HR functionalities of your business on their registration.
4. Providing insurance- EORs can provide workers’ compensation and general liability insurance coverage. PEOs, however, require you to get your insurance.
So, when to select EOR services or a PEO
EOR services are great when you need a workforce on a short-term basis. If you have just landed on a foreign shore and need to start every aspect of your business from scratch, it is a wise move to go in for an EOR. However, suppose your business is already established, and you are looking to outsource almost all HR department functions. In that case, going in for one of the best global PEO companies is the right solution.
Making the right and the most validated choice is crucial for your business’s success. All factors need to be considered and weighed before choosing the best one from all the service providers. The company’s reputation makes a huge difference – ensure that they are experienced in your industrial niche.
