PEO vs. EOR: Which One Fits Your Global Hiring Needs?

Maybe you’re thinking about building a local HQ in a Latin American country for the first time? Or maybe you simply need to hire a few independent contractors in Canada? Unless you’re planning to build an HR team abroad and establish native payroll, you’ll have to decide if you want to work with a PEO vs. EOR service to start onboarding workers. 

An employer-of-record in Canada can help you build out your team in a few days without the need to incorporate a costly entity.

Need to decide exactly what your business could use for global hiring? Keep reading as we break down the key difference between international EORs and PEOs.

PEO vs. EOR: At a glance

The key difference between a Professional Employer Organization (PEO) and an Employer-of-Record (EOR) is the level of involvement each entity has in the employment relationship. 

• A PEO provides an HR outsourcing solution, while an EOR offers comprehensive payroll and employment compliance services in accordance with local labor laws. 

• With a PEO, you will still need to set up a full legal local entity and build a small HR department in order to hire and manage employees, since your business will still be engaging in direct employment.

• An employer-of-record (EOR) acts as the official employer for tax and legal purposes for a worker or group of workers who are hired by a client company, since the client doesn’t have a local HR team or entity. 

What do PEOs and EORs have in common? 

While PEOs and EORS have key differences (more on that later), the two services share many qualities in common, including: 

• PEOs and EORs are two types of companies that provide services related to employment.

• Both PEOs and EORs are businesses that help other companies manage their employees.

• PEOs and EORs can handle a wide range of HR functions for their clients, including payroll processing, benefits administration, compliance with employment laws, and risk management. 

• Both PEOs and EORs can help companies hire workers across North America, South America, and Europe, including countries such as Canada, Mexico, Colombia, Portugal, Spain, and many other countries 

Key differences between EORs and PEOs

While both PEOs and EORs provide employment-related services, they differ greatly in scope and the amount of upfront investment you’ll need. 

Scope of Services:

• PEOs typically focus more on providing HR services to their clients, such as payroll processing, employee benefits administration, tax compliance, and risk management.

• EORs, on the other hand, focus more on helping companies hire and manage employees in foreign countries. EORs act as the legal employer of record for the client's employees, handling compliance with local employment laws, payroll, taxes, and other administrative tasks.

Legal Structure:

PEOs and EORs have different legal structures. 

• PEOs typically enter into a co-employment relationship with their clients, which means that the PEO and the client share certain employer responsibilities. 

• On the other hand, EORs act as a legal employer of the client's workers, taking full responsibility for all employment-related legal and regulatory requirements.

• With a PEO, you will need to open an entity, which means registering with local government institutions and opening a bank account.

Geographic Coverage:

• PEOs typically operate within a single country, such as the United States, and provide services to clients operating within that country. 

• EORs, on the other hand, specialize in helping clients hire and manage employees in foreign countries, which requires extensive knowledge of local employment laws and regulations.

Outsourcing services

• PEOs hand off much of their service to third-party providers, which means workers are not receiving benefits or payments directly from the PEO itself.

• EORs like Via manage payments and benefits in-house, which means you are paid directly by Via’s back accounts and receive health care coverage from Via’s best-in-class group benefits plan.

What to consider before opting for an PEO or EOR

As you expand into a new country, you’ll want to consider exactly what your business needs are and if you can afford to set up an entity if you want to partner with a PEO provider. 

Business goals and needs

The first thing to consider is your business goals and needs. 

• Do you need comprehensive HR services for employees in a country where you already have an entity? If so, then a PEO makes sense.

• Or do you need help managing employees in foreign countries without an entity or local HR team? If this is the case, an EOR may be a better solution, since EORs like Via have a more extensive knowledge base about employment laws and compliance. 

Converting contractors to full-time employees

Many businesses begin hiring international employees as contractors, but this approach is fraught with misclassification risks. An EOR is better suited to help determine the correct classification of workers and can assist you with converting contractors to full-time employees status. 

Legal and Regulatory Requirements

If you are hiring employees in foreign countries, you will need to comply with local employment laws, regulations, and tax requirements. 

• With an EOR, you do not need to worry about your entity maintaining compliance. The EOR is responsible for ensuring ongoing compliance with local HR processes

• Companies that partner with PEOs, on the other hand, must still ensure that their entities remain compliant with all local employment laws and regulations.

Cost

The cost of using an EOR or PEO should be taken into account. 

PEOs typically charge a percentage of the total payroll cost, while EORs usually charge a fixed fee per employee or a percentage of the employee's salary. Via, for instance, charges a flat rate per employee, with no hidden or foreign transaction fees. 

An EOR might charge higher fees, but this is because your business does not need to pay for setting up and maintaining a local entity, which can cost upwards to $200,000 per year. 

Service quality and reputation

It's important to consider the reputation and service quality of the provider you choose. 

Before making the decision of who you want to work with, you should consider: 

• Services offered: Consider the range of services offered by the EOR or PEO and how they align with your company's needs. Make sure they can provide the HR functions and support you need, such as payroll processing, benefits administration, and tax compliance.

• Reputation: Research the EOR or PEO's reputation in the market. Look for references and reviews from current and former clients. Consider reaching out to these references to get a better understanding of the EOR or PEO's service quality.

• Compliance: Ensure that the EOR or PEO is compliant with all relevant employment laws and regulations. They should have a solid understanding of labor laws and be able to help your company stay compliant.

• Cost: Compare the costs of different EORs or PEOs and consider the value they provide. Be mindful of hidden fees and other costs that can add up over time. Via, for instance, never includes hidden costs in the pricing.

• Flexibility: Consider the level of flexibility the EOR or PEO provides. Make sure they can adapt to changes in your company's needs and provide support as required.

• Customer service: Evaluate the level of customer service provided by the EOR or PEO. Look for a partner that is responsive, proactive, and provides regular communication and support.

Why companies choose a hyperlocal EOR like Via over other PEO and EOR providers

Unlike other service providers on the market, Via is an EOR solution that focuses on delivering in-depth services. 

• Add-on services & benefits: Via allows you to add services such as equipment distribution, co-working space rentals, grocery allowances, and other services

• On-the-ground customer support manager: By partnering with Via, you have access to an on-the-ground customer support manager who is available to answers your questions and offer advice about growing your international team

• Scalable: Unlike other PEO or EOR solutions on the market, Via offers the hyperlocal features you need to build a hub of 20-100+ workers without opening an entity or hiring a local HR team

• Speed: Via enables you to onboard workers in as little as 1-2 business days

• Immigration support: As your worker’s official employer, Via is eligible to sponsor work visas & permits in a number of countries, including Mexico and Canada 

• Support with structuring your team: Via can help you hire workers from top to bottom, from an entry-level customer support representative to members of the C-Suite