PEO vs EOR | What Is the Difference

Human resource is one of the most valuable assets for any organization and organizations need to ensure that they are managed well. Most companies outsource companies providing payroll services and other HR-related functions to enhance their profitability. Companies that opt for payroll outsourcing services commonly choose EOR Company (Employer of Record) or PEO payroll company (Professional Employment Organization).

In this blog post, we will learn what are an EOR company and PEO along with the facts that differentiate them from each other.

What is EOR (Employer of Record)?

Employer of Record, also commonly referred to as EOR is an organization that globally handles matters such as legal affairs, HR, taxation, and compliance with local authorities of your company in any other country. Companies that aspire to expand globally often opt for partnering with EOR. The main reason for doing so is that it creates faster processes of employment for your company in a new country, reducing the cost of creating an in-house entity in a new country.

How Does EOR Work?

Whether it’s a temporary tenure-based partnership or a permanent agreement, the company while appointing an EOR allows them to recruit human resources legally through their local entity. An EOR is capable of hiring, managing, and paying employees on your company’s behalf. It would not be incorrect to say that an EOR acts as a legal employer while you (the client) keep the role of managing this employer. For instance, if you plan a business expansion in various Middle Eastern countries and need a team to be hired there, you may contact an EOR company and provide your requisition about the team. The EOR will then take charge of all the paperwork and onboarding of the team, keeping the local laws and legal compliances in consideration.

Also read: Why You Should Invest in Payroll Outsourcing Services in UAE

What is PEO (Professional Employment Organization)?

Professional Employment Organization commonly known as PEO takes responsibility for a few of the tasks of HR such as managing the benefits and payroll. A PEO payroll company assists an organization by supporting a company’s HR processes which include health care, payroll management, and other benefits such as insurance. A PEO payroll company may also hire or train the organization’s staff. The option of partnering with a PEO suits better to small and medium-sized companies as they allow management and cover various benefits for the employee such as health and pension which could be a huge cost for the company if they choose to do it by themselves through an in-house HR team.

How Does PEO work?

Companies sign a co-employment agreement when deciding to work with a PEO. In this agreement, there is an arrangement where both parties allocate responsibilities and liabilities to each other through the co-employment relationship. This agreement is a legal assurance that PEO will alleviate risks and errors through their role of HR for the company.

What Is the Difference Between EOR and PEO?

EOR and PEO are often used interchangeably however they are different from each other.

The most evident difference between a PEO and an EOR is that EOR is mostly used by organizations who intend to expand globally as EOR takes over the responsibility of the company’s HR on a broader spectrum while PEO is mostly used by small and medium-sized companies as they partner with PEO for allocated HR roles.

Here are a few Pros and Cons that help in understanding the difference between EOR and PEO more clearly.

Employer of Record

Pros:

• Assists in the global expansion of a company visa-compliant hiring of employees in countries where the company does not have an office
• Facilitation of hiring employees overseas
• Payment of wages of employees overseas
• Management and payment of employment taxes to local authorities

Cons:

• May not assure that the visa application will be approved

Professional Employment Organization

Pros:

• Payment of wages of employees on work site
• Management and payment of employment taxes to local authorities
• Support and encourage employees through different benefits

Cons:

• Cannot assist global employees where the company does not have an office
• Co-employment relationship may cause dispute over risks between the company and PEO
• Acts as a third-party service provider to offer HR responsibilities rather than contributing to the company’s global expansion strategies

Trying to Find Suitable Payroll Outsourcing Services for Your Company in Dubai?

At Payroll Middle East, we offer organizations a great deal of HR services that include EOR, PEO, Payroll services, HR outsourcing, and other payroll outsourcing services. Through extensive expertise and command in HR management, our team looks after the HR function of companies throughout the Middle East Region. We define our values through reliability and accuracy which enables us to retain clients for the long run. Our support has let many businesses grow in the UAE and other countries of the Middle East.