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What's the Difference Between PEO vs. Employer of Record?

Posted by Stacey Jones

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Jul 11, 2019 10:54:16 AM

 

Did you know businesses that partner with a professional employer organization can expect to grow up to 9 percent faster than those who don’t?

These statistics may have you wondering if a PEO (professional employer organization) partnership is right for your business. Within HR circles, though, you might have heard the term “employer of record.” Some people use these two terms interchangeably, but they’re actually two very different entities.

What can you expect working with a PEO vs employer of record? The differences might surprise you.

PEO vs Employer of Record Relationships

The most fundamental difference between a PEO and an employer of record is how either organization relates to your business and your workers.

An employer of record assumes all legal responsibility for the people who work for you. They are, in effect, the employer. They’ll handle almost every task related to hiring, termination, and everything in between. Your workers will answer to the employer of record.

A PEO, on the other hand, becomes your co-employer. Together, you’ll handle HR tasks related to employment.

Who’s Driving?

Another way to think through the differences between a PEO vs employer of record is to consider the subject of control.

With an employer of record, you have relatively little say. The EOR assumes responsibility for hiring and employment contracts, as well as benefits, insurance, and even business registration. This can be a good option for employers who want to enter a new state or country, but don’t necessarily want to set up shop there.

When you work with a PEO, you’ll have much more control over HR processes. The PEO offers valuable advice, but you generally have full control over hiring and employment contracts. The PEO may offer you access to insurance or benefits plans as well.

Think about Your Needs

The best way to settle the PEO vs employer of record debate in your business is to ask what you need.

If you plan to open a new branch office or establish a subsidiary, a PEO might be the right partner for you.

A PEO is also the better choice when you want to stay in the driver’s seat, but expand your HR capabilities. The PEO is there to help you maintain compliance with local employment laws and enhance your HR capabilities.

For this reason, a PEO is a better long-term solution than an EOR. If you just want to get people hired on quickly, an EOR might be the right move for your business.

An employer of record also reduces your liabilities when you enter a new market. Since they assume the employment relationship, the EOR alone is responsible for compliance, insurance, and employment contracts.

Expanding Your HR Operations

Perhaps the biggest advantage of working with a PEO is that it could help expand your HR team almost instantly. Many small and medium-sized businesses can offer much more to their employees when they work with a PEO than they could otherwise.

The employer can also find a balance between managing their responsibilities on their own or giving up control.

A great example is payroll. A PEO will administer payroll for your employees in compliance with all the local laws. Your HR team doesn’t need to get bogged down in the details of learning Canadian payroll, but they can rest assured it will be done correctly every time.

Which Is Better?

Many HR experts ask this question, and the answer is always “it depends.” Choosing to work with either a PEO or an employer of record means carefully examining your business needs.

If you haven’t determined which is the best choice for you, get in touch with the experts. They can help you assess what your business needs and goals are, then help you decide which solution is the right fit.

 

Topics: PEO, Professional Employer Organizations, Pay International Employees, Employment of Record Services

Stacey Jones

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