The era of globalization has encouraged organizations to explore fierce global competition. The international expansion helps businesses tap into new customer segments and culturally diverse workforce. It also gives access to a new market, capital source, and advanced technology infrastructure.

While global expansion is an attractive and lucrative proposition, it can be challenging as the learning curve is usually steep. In a perfect world, hiring international remote workers without worrying about compliance and payroll across borders looks easy. But in reality, the complexities of international law make it difficult for businesses to hire workers abroad.

When you look at hiring globally and building a remote workforce, you need to work with a local partner, such as an employer of record (EOR) or professional employer organization (PEO).

Service providers use the terms PEOs and EORs interchangeably. It is important to know the difference between the two when you have to decide which option is best for you and your company. 

Let us help you decode the difference between the functions of a PEO, EOR, and International PEO. 

What is an EOR?

An Employer of Record (EOR) is a service provider that manages HR, tax, legal and local compliance responsibilities of employees in countries where you lack a local Entity. It also accelerates overseas operations in an affordable way than forming entities in the countries you want to hire from.

How does an EOR work?

When you partner with an EOR, it becomes an agreement where they act as the legal employer while you retain the role of managing employer. An EOR service provider onboards, manages and pays a contractor or the employee whether it is for a six-month assignment or a permanent position. EOR will also support the staff to make them operational and productive as you would not have a presence in that country.

Benefits of partnering with an EOR

For instance, when you need to hire a team in India – you provide the EOR with information about who, where and the remuneration details. The EOR navigates the local laws and handles all the paperwork for onboarding the employees. This eliminates your cost, time, and distraction from bureaucracy.

What is a PEO?

A Professional Employment Organization (PEO) facilitates and manages the responsibilities of onboarding and managing both full-time employees and independent contractors. The PEO model requires you to own a local entity in the target country. 

How does a PEO work?

When you partner with a PEO, you enter into a contractual arrangement to share the employer’s responsibilities and liabilities. This legally ensures that the PEO will facilitate your HR requirements as a co-employer. 

Benefits of partnering with a PEO

Businesses that do own legal entities in their target countries don’t always have the resources to meet all their employees’ needs. PEOs handle a variety of HR functions to ensure employees can receive their paychecks and access benefits, like health care and paid time off. A PEO can come in handy for employee onboarding, employee reviews, and contract termination, and sometimes offer valuable suggestions that will help you make informed decisions about global HR management.

What is an International PEO?

In the United States, co-employment between a PEO and its client is a common practice.  But when it comes to availing similar services in countries where you do not have a legal entity, the term International PEO is used. In this case, it’s not a co-employment as you do not have an entity in that country. 

An International PEO manages monthly payroll, taxation, insurance, HR admin and related compliance with local and international laws on your behalf.

What is the difference between PEO, EOR and International PEO?

1. Employment model and location of entity –  

• EOR  is a direct employment model. It allows you to hire in other countries without an entity.
• PEO acts as a co-employment partner. It requires you to own a local entity.
• International PEO does not require you to own a local entity as they have a registered entity in the target country. 

2. Local presence – 

• EOR facilitates global expansion even if the company is not incorporated in a country. It provides visa-compliant placement of employees in different countries.
• PEO cannot facilitate global employees in countries where the client company is not already incorporated.  It provides the remittance of wages and withholdings of worksite employees.

3. Services –

1. Compliance

• EOR is suitable for businesses planning to expand their operations and employ overseas staff in a fully compliant and rapid manner. It also offers employee support services and employee recruitment services in the foreign land.
• PEO service organization is beneficial to businesses in need of a service provider to manage their HR-related tasks. They share your responsibilities. 
• International PEO is responsible for all the HR services and you are free from all the worry. 

2. Add-ons

• PEO services include onboarding, payroll processing and benefits. 
• International PEO also supports you with services similar to PEO.
• EOR service providers give add-on services like recruitment, IT support, infrastructure and efforts to retain your employees. 

When you target expanding to India, Remunance qualifies as the best International PEO or EOR service provider as it has its own legal, registered entity in India. We would define Remunance as a one-stop for EOR and International PEO as it also offers the services to build your entity in India and make you successful in India whenever you find it fit.

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