HR third-party solutions like the Employer of Record (EOR) and Professional Employer Organization (PEO) are often mistaken and used interchangeably, yet distinct from one another.
Today, they’ve evolved into effective HR tools for companies that aim to capture top talents remotely. In addition, a recent study shows that 90% of employees say that more flexible working arrangements boost their morale. Hence, hiring a remote workforce is the trend in the world of work today.
In this article, we will tackle the difference between EOR and PEO. We will also discuss how did they adapt to the ever-changing business environment and digital transformation.
The Evolution of EOR
Employer of Record (EOR) solutions can help you hire a global remote workforce. It allows companies to employ full-time employees in any country without setting up their legal entity. Hence, EOR serves as the employer of your workforce on paper and takes the entire legal liability of the employment arrangement. In addition, they will facilitate hiring, contract signing, and arranging benefits and insurance on your behalf.
In this cloud-based era, EOR solutions utilize technologies within the scope of their services. Hence, they’ve eliminated the complexities of HR functions regarding tax, labor, payroll, benefits, and other legal requirements. This streamlined process makes EOR one of the better options when you need to expand globally and hire top talents overseas.
Moreover, we all know that even large organizations find opening legal entities in another country expensive. An EOR solution will waive that cost as they are the legal employer of your workforce. In that sense, if you want to expand your roster fast and get the best talents onboard wherever they are, an EOR solution is perfect for your requirements.
The Evolution of PEO
A Professional Employer Organization (PEO) service acts in a co-employment relationship with your company and becomes part of your HR team. However, it means that your organization is still liable to any legal responsibilities of the employment. For example, when signing work contracts under the Professional Employer Organization service, the contract is between your company and the employee.
Further, a PEO service allows you to have control over the driver’s seat while they’re doing some major HR work for you. It’s ideal if you’re looking forward to reinforcing your HR process with external expertise.
Today, it’s estimated that PEOs serve around 173,000 companies in the U.S. each year. In addition, it has become the hiring tool of choice of companies in the U.S. for their inter-state expansion. Since its humble beginnings in the 1970s, PEOs have grown into an industry that roughly employs four million people.
Best of Both Worlds
We can agree that EOR and PEO help companies that seek staffing and HR administration solutions. Employer of Record offers international expansion opportunities, while Professional Employer Organization offers expertise within reach of their demographics.
In our humble opinion, these two HR services look ahead to the future as they optimize to serve their clients better. As we approach the new normal at the height of the COVID-19 pandemic, we expect some innovations and new functions of these two HR services in the coming days.
If you want to know more about how you can benefit from these HR solutions, especially with Employer of Record, please feel free to contact us, and we are more than happy to connect with you today.
Olivia Yu has decades of experience in the Human Resources industry. She’s the Regional Director for Asia Pacific of a famous international HR company. Olivia’s international experience inspires her to write articles about human resources and global staffing.