PEO vs EOR: What is The Difference?

Omer Faruk Aydin

Omer Faruk Aydin

6 min read

2021-04-13

PEO vs EOR: What is The Difference?

Many new terms entered our lives with the spread of remote work. PEO (Professional Employment Organization) and EOR (Employer of Record) are the most common terms heard by managers who want to hire full-time employees worldwide. I have witnessed these terms being used interchangeably.

It was confusing at first, and most of the time, I had to ask, “What do you mean by that?”.

As a result of hard work and long time research, I have decided to prepare this guide to define these terms. Clarifying the difference between these terms will help you identify which service is the best for your needs.

I have found that the term “PEO” is often used instead of both. This is partly because “PEO” has a more inclusive meaning.

PEO is used as an adjective for a company; EOR is the name given to the service they provide. So when negotiating with a PEO company, you should ask them if they provide EOR service as well.

PEO in the most basic terms

PEO simply means the company that organizes the employee-employer relationship. PEO companies are often helpful in preparing payrolls and meeting tax obligations. Many PEO companies do not actually provide EOR services; they only provide payroll and tax support. Therefore, for this type of service, you must have a business registered in that country. PEO companies’ payroll and tax services are often priced at a flat rate per employee.

EOR in the most basic terms

EOR is a service you can get from a PEO company if you want to employ staff outside your company’s country of origin. As part of this service, your employee is officially registered with the PEO company, and the PEO company rents the staff’s service for you. The EOR service is often priced in proportion to the employee’s salary with a minimum limit.

PEO & EOR, here are my recommendations; which one should you choose?

Costs… This is the most important issue we pay attention to when choosing. We all want to manage the human resources process at the most affordable cost. For this goal, first of all, it is necessary to determine; do you need EOR service or not?

If you have a business registered in the target country;

If you have a business registered in the country where your employee is located, and you have someone else interested in this business, you can get the service you need from all PEO companies at very reasonable rates. The main cost here is related to the establishment of the company and other needs for its management.

In short, if you have a registered and active business, you do not need EOR service. A suitable service to meet your payroll and tax needs will do the trick.

If you do not have a registered business in a country and your number of employees in that country is less than 10;

In this case, establishing a company from scratch and assigning other personnel to the management of that company, and obtaining that PEO service will be much more costly than EOR service. Therefore, if you do not have a registered business in a country and your number of employees in that country is less than 10, the best choice for you would be to get EOR service.

If you do not have a registered business in a country and the number of employees in that country is more than 10;

In this case, the best method will be to establish a business from scratch in that country and manage the entire human resources process through that company. Having more than 10 employees will result in a cost of more than $6,000 per month for EOR. Instead of incurring these amounts of expenses, it would be much more logical and reasonable to get PEO service by assigning a staff member who will deal with the establishment and accounting of the company in that country. Working order with all the ropes in your hands will be more appropriate.

Let the RemoteTeam handle PEO selection for you!

RemoteTeam is a service provider developed to determine the best solution for you and meet all your PEO & EOR solutions’ needs, thanks to our extensive partnerships with PEO and Local Law Firms in more than 50 countries. It offers you an all in one solution with a wide range of services such as payments, tax, payroll, EOR, inventory assignment, receipt, and expense reporting. RemoteTeam helps you find the right solution for your cross-border business relationship with different local partnerships for different options.

Omer Faruk Aydin
Written by Omer Faruk Aydin

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