What does PEO stand for, and how is it different to an EOR?

In a perfect world, you could  hire international remote workers  without worrying about compliance and payroll across borders.

In reality, the complexities of international law make it difficult for businesses to hire workers abroad.

To hire globally, businesses need to work with an employment partner, such as an employer of record (EOR) or professional employer organization (PEO).

In this article, we’ll explore what PEO stands for, how it differs from an EOR, and how it can positively impact your business. So let's jump straight in.

What does PEO stand for in HR?

In human resources, PEO stands for “professional employer organization.” It's a type of company (or provider) that provides HR services to businesses, and acts as a co-employer. How does co-employment work?

PEOs take on specific employer responsibilities, such as:

• Payroll
• Tax
• Benefits
• Compliance with employment law

Partnering with a PEO allows your business to focus on growth and core operations, while time-consuming HR and administrative burdens are handled by experienced professionals.

However, it's crucial to note that you can only work with a PEO in countries where you already have a legal entity. For instance, if your company is registered in the US and you have employees there, you can use a PEO.

But if you decide to hire someone in France, 

How much does a PEO cost?

The cost of partnering with a PEO can vary depending on how many employees you have, and the specific HR services required.

Typically, PEOs use one of the following two methods for setting their fee:

1. A percentage of your company’s total payroll.
2. A flat fee for each employee per month.
   
   

Why are PEOs used?

Companies choose to partner with PEOs when they want to streamline their HR operations, save time on administrative tasks, and provide better benefits to their employees.

Working with a PEO can help in the following ways:

• Cost savings: PEOs can help you save money by contributing to reduced employee turnover, removing the expense of having to hire an internal HR team, and avoiding costly legal mistakes.
• Risk management: PEOs can help you manage workplace risks, such as workers’ compensation and employee safety.
• Employee benefits: PEOs can provide access to better insurance and benefits plans, which can help you attract and retain top talent.

Linking up with a PEO can be a wise decision for businesses that are looking to scale their workforce.

What types of businesses can benefit from PEO services?

Business of all sizes can — and do — benefit from using a PEO, but it's particularly helpful for small and medium-sized organizations.

Often, these businesses have limited resources and simply can’t afford to hire a dedicated HR department. Partnering with a PEO can give them access to a range of HR services without having to hire additional staff.

It’s vital, however, that the PEO you’re working with understands your vision and goals for the future so they can work alongside you to complete them.

That’s why it’s so important to choose the right PEO service for your business from the very beginning, taking into account:

• Your own workplace needs
• The PEO’s cost and reputation 
• The PEO’s customer service standards
• Whether the PEO has relevant technology

So, what is the difference between an EOR and a PEO?

PEOs and EORs are similar in terms of the services they provide, but there are key differences.

The most important thing to understand is that an EOR can employ people in other countries on your behalf; you don’t have to open your own entity in those countries. This is because the EOR provider acts as the legal employer on paper. How does an EOR work?

By contrast, you can only use a PEO if you have established a legal entity in your hire's country. This is because the PEO acts as a co-employer.

Both models handle payroll, benefits, compliance, and other key HR functions.

If you already own a legal entity in the country you want to hire in, working with a PEO may be the more affordable option. But if you don’t already own an entity there, working with an EOR is likely to be significantly more affordable and faster than opening a new entity.

What are the advantages of using an EOR?

As mentioned, an EOR is typically a better option when you want to hire a full-time employee in a country where you don’t have a legal entity.

Your EOR partner becomes the legal employer of your team member(s) in that country, taking care of onboarding, payroll, taxes, and compliance. But they still work for you in practice, just the same as your other employees.

Some benefits of using an EOR include the following:

• It's often more cost efficient
• It offers flexibility for companies looking to hire across the globe
• It helps ensure compliance with local labor laws and regulations
  
  

Factors to consider when deciding between a PEO and EOR

Let's say that you want to hire a talented worker in another country, like Germany or France, but you don’t have any other employees in that region.

Perhaps you have contractors there, but you are concerned about the quality of the experience your employees receive or your company’s compliance with local laws.

Where should you turn next?

Remote is intimately familiar with the different challenges companies face when hiring international workers (after all, our own team includes thousands of people across six continents).

Therefore, if you are not sure what kind of help you need to work with global talent, we recommend starting by considering a few basic questions:

1. Do you own a legal entity in the country where the employee lives?

To legally employ full-time workers in a country where you do not own a legal entity, you must either set one up (which can be costly and time-consuming), or use an EOR.

If you do have an entity, you can use a PEO.

Important: Some EOR providers are partner-dependent, meaning they use local third parties to employ your workers in other countries. As these EORs don’t own their own legal entities, you will likely encounter hidden fees, long delays, and an inconsistent employee experience. At Remote, we own all our legal entities in every country we operate in, guaranteeing the best experience for your team, and transparent, flat-rate pricing.

2. How many employees do you want to hire?

Starting local legal entities gets expensive quickly, and companies that provide these services may tell prospective client businesses that they require a minimum employee count to begin a partnership.

For startups and small businesses, this barrier usually makes international hiring unreasonably expensive, forcing them to hire only local talent.

Companies looking to open an entity in a new country likely want to hire many employees to work there. In these situations, a local PEO can help manage HR functions through a co-employment arrangement.

3. Are you hiring full-time employees or contractors?

Technically, you don’t need either an EOR or a PEO to work with international contractors.

All you need is a compliant contractor management and payment solution.

Fortunately, Remote makes it easy to pay and manage contractors all over the world. As the most knowledgeable international contractor management solution in the industry, we help companies of all sizes pay contractors all over the world.

Is it time to partner with a PEO or an EOR?

If you need HR and compliance support and your plans are refined to one country, a PEO may be a solid option.

If you are considering hiring internationally, an EOR will give you more flexibility.

Luckily, Remote offers the best of both worlds. We provide a fully-fledged PEO service in the US, as well as dedicated payroll and HR management services around the globe. We also offer EOR services , enabling you to focus on expansion without worrying about administration and compliance issues.

Simplify HR with Remote's PEO expertise 

Managing HR across borders is complex — but Remote makes it simple. Our PEO services take care of payroll, benefits, compliance, onboarding, and more, so you can focus on growing your business.

Why choose Remote:

• End-to-end HR support, from onboarding to offboarding
• Local compliance expertise to reduce legal risk
• Access to competitive, country-specific benefits
• Lower admin costs and faster scaling

Discover how Remote's PEO services can transform your global HR operations. Whatever your global HR needs, Remote has you covered, helping you to stay ahead of the competition and unlock new opportunities for growth.

If you’re unsure which approach is the right one for your business and you want to learn more — including how Remote can help — speak to one of our friendly experts today.