EOR vs PEO vs International PEO

PEO vs EOR vs International PEO: What’s the difference?

The era of globalization has encouraged organizations to explore fierce global competition. The international expansion helps businesses tap into new customer segments and culturally diverse workforce. It also gives access to a new market, capital source, and advanced technology infrastructure.

While global expansion is an attractive and lucrative proposition, it can be challenging as the learning curve is usually steep. In a perfect world, hiring international remote workers without worrying about compliance and payroll across borders looks easy. But in reality, the complexities of international law make it difficult for businesses to hire workers abroad.

When you look at hiring globally and building a remote workforce, you need to work with a local partner, such as an employer of record or professional employer organization. Service providers use the terms PEOs and EORs interchangeably. It is important to know the difference between the two when you have to decide which option is best for you and your company. 

Let us help you decode the difference between the functions based on the services provided:

What is an EOR?

An Employer of Record is a service provider that manages HR, tax, legal and local compliance responsibilities of employees in countries where you lack a local entity. It also accelerates overseas operations in an affordable way than forming entities in the countries you want to hire from.

How does it work?

When you partner with them, it becomes an agreement where they act as the legal employer while you retain the role of managing employer. An EOR service provider onboards, manages and pays a contractor or the employee whether it is for a six-month assignment or a permanent position. It also supports the staff to make them operational and productive as you would not have a presence in that country.

Benefits of using this model

For instance, when you need to hire a team in India – you provide them with information about who, where, and the remuneration details. The EOR navigates the local laws and handles all the paperwork for onboarding the employees. This eliminates your cost, time, and distraction from bureaucracy.

What is a PEO?

A Professional Employment Organization facilitates and manages the responsibilities of onboarding and managing both full-time employees and independent contractors. This model requires you to own a local entity in the target country. 

How does it work?

When you collaborate with this model, you enter into a contractual arrangement to share the employer’s responsibilities and liabilities. This legally ensures that the partner will facilitate your HR requirements as a co-employer. 

Benefits of using this model

Businesses that do own legal entities in their target countries don’t always have the resources to meet all their employees’ needs. They handle a variety of HR functions to ensure employees can receive their paychecks and access benefits, like health care and paid time off. They can come in handy for employee onboarding, employee reviews, and contract termination, and sometimes offer valuable suggestions that will help you make informed decisions about global HR management.

What is an International PEO?

In the United States, co-employment between a service provider and its client is a common practice.  But when it comes to availing similar services in countries where you do not have a legal entity, the term International PEO is used. In this case, it’s not a co-employment as you do not have an entity in that country. 

It manages monthly payroll, taxation, insurance, HR admin and related compliance with local and international laws on your behalf.

What is the difference between PEO, EOR and International PEO?

When you target expanding to India, Remunance qualifies as the best service provider as it has its own legal, registered entity in India. We would define Remunance as a one-stop for EOR and International PEO as it also offers the services to build your entity in India and make you successful in India whenever you find it fit.