Definitions

A Professional Employer Organization (PEO) is a third-party service that enters into a co-employment arrangement with a business, handling HR tasks such as payroll, benefits administration, tax filings, and compliance, while the client company remains the primary employer and retains day-to-day control over employees.

An Employer of Record (EOR), also known as a global EOR, acts as the legal employer for a company's workforce, assuming full responsibility for employment-related duties including hiring, payroll, compliance with local laws, benefits, and taxes, allowing the client to hire without establishing a local entity.

Key Differences

The primary distinctions between PEOs and EORs revolve around employment structure, liability, geographic scope, and operational requirements. Here's a comparison:

ASPECT

PEO (Professional Employer Organization)

EOR (Employer of Record)

Employment Model

Liability

Geographic Scope

Entity Requirement

Employee Minimums

Benefits and HR Control

Co-employment: Shares employer responsibilities with the client company.

Shared: Client retains some legal risks, such as workplace safety and compliance issues.

Primarily domestic (e.g., within the U.S. or where the client has an entity)

Client must have a registered business entity in the hiring location.

Often requires a minimum number of employees (e.g., 5-10).

Typically mandates participation in pooled benefits plans; client retains HR decision-making authority.

Sole legal employer: Becomes the official employer on paper, while the client directs daily work.

Full assumption: EOR takes on all employment liabilities and risks.

Global/international: Enables hiring in countries without a local entity.

No local entity needed; EOR provides the legal framework.

No minimum; suitable for hiring even one employee.

Benefits are optional; EOR handles HR admin, but client may have less direct control.