There’s a whole other workforce population that doesn’t fit in the typical employee vs independent contractor jobs. A popular employment model these days is the PEO or Professional Employer Organization.
But are there differences between PEO vs EOR organizations? An EOR handbook doesn’t mean as much to an employee as one might think.
Let’s explore the differences between a EOR and PEO and how your organization can benefit.
Purpose
A co-employment approach is how a Professional Employer Organization works. In this setup, the PEO and the client company are the employers. The PEO takes care of tasks that have to do with human resources, such as handling payroll, managing benefits, making sure HR rules are followed, and helping with employee management.
On the other hand, an Employer of Record’s main job is to manage the whole employment career of workers. This includes everything from hiring people, ensuring taxes are taken out, managing benefits, and following labor rules.
Employment Relationship
A co-employment agreement is set up in a PEO arrangement. This means the PEO and the client company are responsible for some workers’ needs. The PEO takes care of HR tasks, but the client controls how its workers are managed daily.
When a company hires an Employer of Record, the link between the two is easier to understand. The EOR acts as the workers’ official boss and handles all employment-related tasks, such as ensuring the law is followed, paying workers, and managing benefits.
Control and Management
Clients who use a PEO still have much power over their employees. They decide who to hire, who to fire, who gets what job, and how to handle employees. The PEO is a support function that helps with HR jobs and ensures rules are followed.
With an Employer of Record, the EOR usually has more direct control over the workers. The client company has less say in HR choices and day-to-day workforce management. In this case, the EOR gets more power and duty.
Geographical Scope
Most of the time, PEO services are for local HR outsourcing. They are usually used in the country or area of the client and focus on HR functions in a single, often national, location.
Employers of Record specialize in managing employment matters on a global scale. When expanding internationally or hiring workers in multiple countries, you should get the best employer of record solutions.
Compliance and Legal Responsibility
While PEOs assist clients with HR compliance and provide guidance, the client company retains some legal responsibilities and liabilities associated with employment matters. In a co-employment relationship, both parties share certain legal obligations.
An Employer of Record takes on full legal responsibility for compliance with local labor laws, payroll taxes, and employment regulations in the foreign jurisdiction where the workers are located. This can be a substantial advantage for clients, as it minimizes legal risks and complexities.
Deciphering Between PEO vs EOR Suits You
Overall, choosing the right employer services can be daunting. But understanding the differences between PEO vs EOR services and how they benefit your business can make the decision easier.
PEO and EOR services can be used separately or combined to get the most out of your employer’s services. Talk to an expert today to determine which option is best for your business.
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