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EOR v. PEO: What’s the Difference?

You may have heard the terms employer of record (EOR) and professional employer organisation (PEO), but do you really understand the differences between these two services? When it comes to choosing an EOR or a PEO, there are real distinctions in terms of cost, service delivery, and employer risks to consider as an organization looking for quality talent procurement services. 

At People2.0, we want to help you choose the best talent solution to meet your specific needs. In this blog post, we’ll break down the key points surrounding this important topic so that you can better weigh your options when deciding which is right for your organization: EOR or PEO? 

EOR and PEO defined

When it comes to human capital management, companies have a wide range of options. Two of the most popular options are employer of record (EOR) services and professional employer organisations (PEOs). While both offer similar services such as payroll and compliance management, there are a few differences to consider. Let’s start with definitions. 

EOR providers assume legal and administrative responsibility for their clients’ temporary workforce, taking care of all the details related to employment contracts, onboarding, HR management, offboarding, payroll processing, taxes calculation and remittances. They provide a flexible, customizable approach that allows you to outsource specific functions while maintaining control over your business. 

On the other hand, PEOs partner with clients acting as the legal employer for some or all of their core workforce. They function as a co-employer, taking on some of the responsibilities of an employer, including liability for certain employment practices. 

Comparing EOR and PEO

In comparing these two services, there are several factors to consider: employment model, professional liability, personnel employed, client sectors served, supporting services, payroll financing, employee minimums and insurance. Understanding these specifications for each specific service can help organisations decide which service will work best for them. 

Employment model

Working with a PEO or an EOR can provide your business with unparalleled solutions for staffing needs. An EOR like People2.0 acts as the sole employer of all the contingent and temporary personnel hired by their customers. This helps to streamline processes and makes sure everyone is on the same page with regards to regulations and legal compliance. 

On the other hand, with PEO services, a joint or co-employment relationship is established wherein both entities share employer duties and responsibilities. 

Professional liability

You will also want to consider your level of risk tolerance. An EOR such as People2.0 will accept all professional liability to ensure our temporary employees perform their job duties as expected. We are insured against any errors and omissions, providing extra protection for employers who take on our services. 

On the other hand, PEO’s do not generally assume this risk. Instead, they typically require the client’s indemnification. 

Personnel employed

The choice between using an EOR and a PEO will largely depend on the type of personnel you are trying to hire. EORs like People2.0 employ only temporary personnel, while our staffing clients employ their own branch staff. 

PEOs, on the other hand, act as administrative employers of your core permanent employees — unfortunately, no major PEO will co-employ temp workers. If hiring temporary personnel is part of your organisational challenge, an EOR is your ideal solution. 

Client sectors served

EORs may have several advantages over PEOs, but when it comes to sectors served, the right choice depends on your industry and needs. EORs provide solutions specifically tailored to the needs of companies in the staffing, recruiting, and talent procurement space. 

PEOs offer one-size-fits-all solutions for all kinds of businesses. They can provide services to a variety of different business sectors — though they may lack sector-specific specialisation. 

Supporting services

While PEOs may have a few advantages when it comes to range of businesses served, EORs certainly win in the category of supporting services. People2.0’s EOR services include payroll processing, employee benefits, onboarding, time tracking, and a wide range of back-office services. 

PEOs only provide payroll processing, employment administration, employee benefits, and some limited HR support. 

Funding payroll

Financing payroll is an important decision when it comes to managing a business. Although many organisations opt for PEO services, EOR services offer a more cost-effective option that runs more smoothly as People2.0 finances and handles all payroll expenses itself. 

On the other hand, with a PEO you are required to pay the burdened costs of each payroll before it can be processed. By choosing EOR services from People2.0, customers can be sure they are saving time and money while still accessing quality payroll and HR services. 

Employee minimums

Small business owners, this part is for you. EOR services with People2.0 do not require a minimum number of employees in order to provide those services. This gives small business owners the opportunity to benefit from the same expertise and resources that global companies have access to without worrying about having enough staff members in their employ. 

Conversely, PEOs generally do come with a minimum 5-10 employee requirement before they can offer their solutions and services. With People2.0’s approachable EOR solutions, businesses of all sizes have access to professional support and guidance that can empower them at any stage of growth. 

Business registration

Having employees in multiple countries can be a nightmare when it comes to business registration requirements. With the right partner, it doesn’t have to be. People2.0 is an EOR registered in over 40 countries, with local knowledge of complex, ever-changing labour laws and regulations We’re registered so you don’t have to be. 

Comparatively, PEOs typically require businesses to have their own registrations wherever they employ workers. This requires you to complete costly and time-consuming business registrations in all places where workers are located. 

With our global compliance expertise, People2.0’s EOR services can help your business reach its goals with ease and confidence. 

Insurance

People2.0’s insurance services provide an important layer of protection for businesses by making it convenient and accessible to secure general liability and workers’ compensation insurance. This can help employers manage the complexities of compliance, payroll and taxes that come with a global workforce. 

PEOs may be unable to accommodate roles outside clerical and administrative staff, making EOR services the more viable option when needing to insure non-traditional positions. 

Due to our size, People2.0 is able to offer premier insurance at a competitive rate, making these protections even more accessible for businesses looking to grow and protect their workforce. 

Which should I choose?

So, which option should you choose? The decision lies in your specific needs and requirements. If you’re involved in staffing, recruiting, or talent procurement, an EOR might be the optimal choice. 

An EOR operates as the sole employer, assuming all legal and administrative responsibility for temporary personnel. It offers robust professional liability protection and specialised services tailored for staffing, recruiting, and talent procurement industries. With no fixed minimum employee requirement, EORs offer a flexible solution for businesses of any size. They provide a wide array of supporting services including payroll processing, employee benefits, onboarding, time tracking, and more. Importantly, EORs handle all payroll expenses, offering a cost-effective solution for businesses. With registration in multiple states and countries, EORs relieve clients from the burden of business registrations. Furthermore, they provide general liability and workers’ compensation insurance. 

On the other hand, PEOs operate as a co-employer, providing services to a broader range of industries. They can be more cost-effective for businesses with a larger number of employees in the short run. However, they typically require a minimum of 5-10 employees and do not assume professional liability, which could cost you in the long run. Their supporting services are more limited, focusing on payroll processing, employment administration, and employee benefits with some HR support. Clients bear the burdened costs of each payroll and are responsible for business registrations. 

People2.0’s EOR solution

People2.0’s EOR services provide a comprehensive and cost-effective alternative to working with a PEO. With our global compliance expertise, you can streamline your various administrative and operational procedures without having to manage them yourself. 

Our skilled team handles the back-office for you so that you can focus on growing your business and exploring new opportunities. In short, outsourcing compliance to People2.0 with our EOR solution helps drive worker satisfaction, cost savings and operational growth in ways that traditional PEO solutions can’t match. 

We’d love to see what your business could do with access to a global talent pool. 

Want to know more? Download our free guide to PEO v. EOR here

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