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EOR or PEO What are the differences and which one is right for you?
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EOR or PEO? What are the differences and which one is right for you?
When organizations are looking to expand globally, or simply want to hire international talent, they will invariably need to work with an employment partner. The choices are essentially either an Employer of Record (EOR) or a Professional Employer Organization (PEO). So, what is the difference and which one should you choose?
The Main Difference
An EOR can employ personnel in another country on your behalf. They will become the full legal employers of your employees, and there is no requirement for you to establish your own entity in the country.
A PEO requires you to own your own local legal entity in the country. If you work with a PEO, you will have a co-employment arrangement, which involves the contractual allocation and sharing of employer responsibilities between you and your PEO.
In a Nutshell: If you want to employ people in countries where you don’t own a legal entity, you need the services of an EOR. If you do own a legal entity in the country, but you want help and support with employee and HR management, you need the services of a PEO.
What This Means in Practical Terms
Both EOR and PEO Partners manage your key HR tasks, including payroll, benefits, tax deductions and reporting. However, while an EOR will be legally responsible for your employees, with a PEO you will be their employer and responsible for compliance with local employment and labor laws.
Your EOR partner will handle the legal employment of your workers in other countries, becoming their employer and ensuring compliance with all prevailing laws and regulations. The partnership allows you to engage with international employees in the same way as you would with other employees, and allowing you to employ full-time staff in countries where you do not own a legal entity.
Your PEO partner can help you to recruit and manage employees in other countries, but you must have an established entity there. They will be able to provide the same HR services as an EOR, but they cannot act as the legal employer of your workforce.
What Your EOR Partner Can Do
The EOR acts as the legal employer of your staff, hiring them to work for your company. This means the EOR will enter into an employment agreement with the employee and will take on all administrative responsibilities, including management of everything employer/employee related, from visa processing and onboarding, to payroll, benefits and offboarding.
What Your PEO Partner Can Do
You can think of a PEO partner as your outsourced HR department. Your company enters into employment agreements with employees, being ultimately responsible for compliance with all employment and labor laws and regulations, while your PEO partner manages all the administrative employer/employee and HR functions, ensuring they are carried out compliantly.
Choosing the Right Partner
Opening legal entities in new foreign territories is a time-consuming and often expensive process. For businesses looking to test multiple new markets, who require flexibility and agility, and who do not foresee including an actual physical local entity as part of their mid to long-term expansion strategy, then using the services of an EOR is the sensible option.
For businesses that own legal entities in their target countries, but may not have the infrastructure, resources, or local knowledge and expertise to deliver all the required employment, HR and compliance functions, then a PEO is the best option.
Other Considerations
You may also want to consider other factors when looking to choose an employment partner, including:
• Minimum Workforce
Most EORs do not require a minimum number of workers. This is particularly helpful for startups and small businesses, and for organizations looking to test new markets as part of their expansion and scaling strategy.
PEOs often require that businesses have a minimum employee count, but the minimum can be quite low, from just five to ten employees.
• Employee Benefits
Both EOR and PEO partners arrange and provide all necessary employee benefits, including health, workers’ compensation, and other insurances. They can also provide additional benefits on request, often at competitive rates due to the economies of scale.
• Compliance
Your EOR partner assumes responsibility for all employer-related compliance issues, while under a PEO agreement you retain ultimate responsibility, However, your PEO should handle all the administrative functions in a compliant manner.
Talk to Auxilium
If you are considering expanding your business into new territories, or if you are looking to recruit international talent to help grow your business, then you should talk to Auxilium, one of the leading EOR and outsource staffing solutions providers in the GCC Region. We help organizations to expand and recruit staff in the UAE, Qatar, Bahrain, Saudi Arabia, Kuwait and Oman.
When organizations are looking to expand globally, or simply want to hire international talent, they will invariably need to work with an employment partner. The choices are essentially either an Employer of Record (EOR) or a Professional Employer Organization (PEO). So, what is the difference and which one should you choose?
The Main Difference
An EOR can employ personnel in another country on your behalf. They will become the full legal employers of your employees, and there is no requirement for you to establish your own entity in the country.
A PEO requires you to own your own local legal entity in the country. If you work with a PEO, you will have a co-employment arrangement, which involves the contractual allocation and sharing of employer responsibilities between you and your PEO.
In a Nutshell: If you want to employ people in countries where you don’t own a legal entity, you need the services of an EOR. If you do own a legal entity in the country, but you want help and support with employee and HR management, you need the services of a PEO.
What This Means in Practical Terms
Both EOR and PEO Partners manage your key HR tasks, including payroll, benefits, tax deductions and reporting. However, while an EOR will be legally responsible for your employees, with a PEO you will be their employer and responsible for compliance with local employment and labor laws.
Your EOR partner will handle the legal employment of your workers in other countries, becoming their employer and ensuring compliance with all prevailing laws and regulations. The partnership allows you to engage with international employees in the same way as you would with other employees, and allowing you to employ full-time staff in countries where you do not own a legal entity.
Your PEO partner can help you to recruit and manage employees in other countries, but you must have an established entity there. They will be able to provide the same HR services as an EOR, but they cannot act as the legal employer of your workforce.
What Your EOR Partner Can Do
The EOR acts as the legal employer of your staff, hiring them to work for your company. This means the EOR will enter into an employment agreement with the employee and will take on all administrative responsibilities, including management of everything employer/employee related, from visa processing and onboarding, to payroll, benefits and offboarding.
What Your PEO Partner Can Do
You can think of a PEO partner as your outsourced HR department. Your company enters into employment agreements with employees, being ultimately responsible for compliance with all employment and labor laws and regulations, while your PEO partner manages all the administrative employer/employee and HR functions, ensuring they are carried out compliantly.
Choosing the Right Partner
Opening legal entities in new foreign territories is a time-consuming and often expensive process. For businesses looking to test multiple new markets, who require flexibility and agility, and who do not foresee including an actual physical local entity as part of their mid to long-term expansion strategy, then using the services of an EOR is the sensible option.
For businesses that own legal entities in their target countries, but may not have the infrastructure, resources, or local knowledge and expertise to deliver all the required employment, HR and compliance functions, then a PEO is the best option.
Other Considerations
You may also want to consider other factors when looking to choose an employment partner, including:
• Minimum Workforce
Most EORs do not require a minimum number of workers. This is particularly helpful for startups and small businesses, and for organizations looking to test new markets as part of their expansion and scaling strategy.
PEOs often require that businesses have a minimum employee count, but the minimum can be quite low, from just five to ten employees.
• Employee Benefits
Both EOR and PEO partners arrange and provide all necessary employee benefits, including health, workers’ compensation, and other insurances. They can also provide additional benefits on request, often at competitive rates due to the economies of scale.
• Compliance
Your EOR partner assumes responsibility for all employer-related compliance issues, while under a PEO agreement you retain ultimate responsibility, However, your PEO should handle all the administrative functions in a compliant manner.
Talk to Auxilium
If you are considering expanding your business into new territories, or if you are looking to recruit international talent to help grow your business, then you should talk to Auxilium, one of the leading EOR and outsource staffing solutions providers in the GCC Region. We help organizations to expand and recruit staff in the UAE, Qatar, Bahrain, Saudi Arabia, Kuwait and Oman.