Difference between Employer of Record and PEO (Professional Employer Organization)

Both PEO and EOR are synonymous with common people. But, do you know these two terms are slightly different from each other? The employer of record (EOR) refers to a third-party company that makes business expansion pretty easy for companies. In simple words, the PEO or Professional Employer Organization becomes EOR of the employees of the client company. The PEO is also a partner company that provides a number of facilities to the company, such as Human Resources, Insurance, management of legal issues, and so on. The Professional Employer Organization provides comprehensive HR services to small scale, medium scale, and large-scale companies. Let us know in detail about the role of EOR and PEO and where they differ from each other.

Services offered by PEO and EOR

PEO-

·         Professional Employment Organizations are mainly known for their HR-related operations. However, they are also willing to provide customized services as per the requirement of the clients.

·         Payroll processing falls under the services of PEO. They take care of everything related to employee benefits such as retirement funds, health insurance, medical assistance, etc. In addition, the PEO conducts record maintenance and payroll compliance on behalf of the company.

·         The Professional Employment Organization plays a major role in the campus recruitment and hiring process of new talents. The PEO is responsible for the initial training of the newly hired candidates.

·         The PEO conducts almost all the HR-related administrative tasks and tries its best to reduce the cost of the HR department. In addition, the Professional Employment Organization strategically plans how it can attract more talent.

EOR-

·         The employer of record helps a big deal in case of workers mobility and business expansion to a foreign land. They help the newly hired candidates with their visas, work permits, residential permits, and so on.

·         The Employer of Record tries to maintain a positive and healthy work culture in the office. They take the local culture very seriously and encourage the employees to participate on the sharing platforms. This way, there develops trust between the employees, which is good for work progress and business performance.

·         The Employer of Record takes care of the local labor laws, employment contracts, etc.

·         The team of EOR also drafts the termination letter of the employees and set the ground for employment termination. All these services really save the company's valuable time and focus on its core business.

Where does PEO or EOR differ?

·         Insurance Coverage

The best thing about the Employer of Record is that it keeps the employees protected from all kinds of damages. These damages include property damages, illness happened at the workplace, other injuries, etc. In addition, the team of Employer of Record is responsible for providing Workers' compensation insurance coverage and General Liability.

But, when it comes to the Professional Employment Organization, insurance is their biggest hidden cost. Those who work in the non-clerical industry will not avail of Workers' compensation security from the Global PEO.  If your company partners with a PEO, the employees will have to insure themselves on their own.

·         Registration

Business registration is a crucial part of business organizations everywhere around the world. Do you know that the Employer of Record allows you to recruit and employ workers in a foreign country even before you apply for registration or even without setting us a subsidiary? As the Employer of Record is familiar with the local laws and has networking or contacts in the foreign land, they help smooth running of international business

The Professional Employment Organization does not possess any such power. If your company collaborates with a Global PEO, it must apply for business registration first thing after setting up the branch offices.

·         Employee minimums

The Employer of records is generally used for contract-based workforces or gig companies. The team of EOR is more willing to work with small-scale business organizations. They are quite familiar with the host country's labor laws and deals with one or two regular employees pretty effectively. The EOR prefers working with shortly-employed freelancers.

But, the Global PEO services are quite different from the EOR's, and they can't focus on the contracts of gig workers over the short term. So, the PEO prefers working with large and medium scale companies where there are regular employees in large numbers.

Now that you know about both EOR and PEO, it will be easier to choose one for your company, depending on the nature of the business. It is suggested to go for PEO if you are planning to make some profit in your own country first. For further business expansion, it would be better to go with an Employer of Record.