Did you know businesses that partner with a professional employer organization (PEO) can expect to grow up to 14 percent faster than those who don’t?

These statistics may have you wondering if a PEO partnership is right for your business. Within HR circles, you may have heard the term employer of record, or EOR. It is a common mistake to use the terms PEO and EOR interchangeably, but they’re two very different services.

When choosing between a PEO vs EOR, what differences should you be aware of to ensure you make the right decision?

PEO vs EOR Relationships

The most fundamental difference between a PEO and an EOR is the relationship they have with your organization and employees. An EOR 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, processing payroll, and everything in between. Businesses often use an EOR when expanding internationally to help hire international talent, perform background checks, and manage payroll.

A PEO, on the other hand, becomes your co-employer. They specialize in managing HR-related tasks like payroll services, benefit plan administration, and workers’ compensation administration, while you continue to manage the day-to-day activities of employees.

Who’s Driving?

Another way to think through the differences between a PEO vs EOR is to consider who controls the employee relationship. When looking to hire contract workers, most of the employee relationship is managed by the EOR. They assume 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 retain more HR responsibilities. The PEO offers valuable advice and access to services like insurance or benefits plans, but you generally have full control over hiring and employment contracts. 

Think About Your Needs

PEO’s and EOR’s each have different strengths and are best suited to different situations. If you plan to open a new branch office or set up a subsidiary to establish a permanent presence, 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. They are there to help you maintain compliance with local employment laws and enhance your HR capabilities, potentially making a PEO 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 EOR 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, minimizing the red tape and regulation you would otherwise need to navigate yourself when hiring internationally.

Expanding Your HR Operations

Perhaps the biggest advantage of working with a PEO is their ability to 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.

When working with a PEO, employers can outsource administrative functions to focus on what they do best. A great example is payroll. A PEO will administer payroll for your employees in compliance with all the local laws. For example, your HR team doesn’t need to get bogged down in the details of learning Canadian payroll and instead can provide more value to your business by focusing on what they know best.

Which is Better?

When it comes to deciding on a PEO or EOR for your business, the only question is which service is better for you. Carefully examine your current needs and future goals to understand what makes the most sense for your unique 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.