Who serves as the legal employer of their employees is one of the most obvious distinctions between an EOR & PEO. This will result in a co-employment arrangement with the second, making your company the official contractor. As a result, you are legally accountable for your employees, and the company solely supports HR-related tasks.
An Employer of Record, on the other hand, employs workers and serves as their legal representation. In this instance, the workers sign the contract with the business offering the services, even if they work for you. However, you are still in charge of deciding on the wages and methods of performance review for your staff.
However, the EOR, as a legitimate employer, is able to make the necessary hires wherever it is present. Additionally, the majority of employers of record are able to provide HR services to businesses. Additionally, the following distinctions emerge from this primary characteristic.
1 Employment management
With some restrictions, a Professional Employer Organization handles the human resources duties for your company. They can manage evaluations, hiring, and other associated services, for instance. While a PEO can assist you in streamlining the hiring procedure, managing employees fall under the purview of your company.
On the other side, the Employer of Record can assist you in simplifying the employment management and hiring processes. Additionally, as you can see, they are legitimate employers that control every aspect of their workers’ jobs. They do this for both small businesses and those looking to expand globally.
2 Employee benefits
The perks that your employees may receive through an EOR vs. PEO are another difference between the two. For instance, it can be necessary for your business to offer your employees some kind of insurance with the latter. A Professional Employer Organization, however, may offer health insurance to its employees.
Keep in mind, nevertheless, that a PEO might not pay for employee wages.
On the other side, an Employer of Record can manage risks better and offer greater benefits to its employees. As a result, your business won’t have to worry about dealing with the tiresome paperwork or getting insurance. This is so because the EOR offers many forms of insurance, including general liability and worker’s compensation.
In addition, they assume all the responsibilities related to each of these aspects.
3 Business registration
For your organization to use global PEO services, the location where you intend to hire employees must be a legal entity. This is due to the fact that, in contrast to the Employer of Record, they are co-employees of your business. If the hires are from the area where your company is located, this is not a major concern.
However, you must go through the complete process of creating a legal corporation if you wish to enter into foreign contracts. Another distinction between an EOR and PEO is that the former already has a legal company, therefore you are not required to have one. By doing this, you can have the best employees and better facilities to join a global market.
Since these organizations work internationally, they can easily serve the needs of small businesses. They can also provide their services to companies that have larger staffing needs. In addition, this can be accompanied by more flexible offers in terms of comprehensive solutions or only HR.
