Human resources (HR) can be complicated, especially when your company starts to grow. It’s tough to keep up with payroll, benefits, and other legal and compliance issues — but you’re not alone.
Many mid-sized businesses turn to Professional Employer Organizations (PEOs) or Employers of Record (EORs) for help. These services can make your life easier, but they’re not the same thing.
In this article, we’ll discuss the differences between PEOs and EORs, the pros and cons of each, and how Mosey can assist mid-sized businesses with corporate compliance.
What Is a Professional Employer Organization (PEO)?
A professional employer organization (PEO) is a company that partners with yours to handle HR compliance and other tasks. They manage the headaches of payroll, make providing benefits a breeze, and keep you in line with employment laws.
However, PEOs offer more than just help with legal requirements. Because they work with many companies, they can often get you better deals on health insurance and other benefits for your employees. They’re also current on employment laws, meaning you don’t have to worry about missing anything important.
What Is an Employer of Record (EOR)?
Unlike PEOs, which act as co-employers, an employer of record (EOR) takes on the full legal responsibility of being the employer. This might sound like a big deal, and it is, especially when you’re looking to expand your business into foreign markets.
EORs are the go-to solution if you want to hire employees in other countries without establishing your own legal entity there. They handle everything from payroll and benefits to ensuring you comply with local laws and regulations. They even take care of the onboarding new hires and offboarding processes, making it seamless for you to hire talent from across the globe.
For example, let’s say you find the perfect candidate for a position, but they live in a country where you don’t have a physical presence.
Instead of jumping through hoops to establish a new branch or subsidiary, you can simply partner with an employer of record. They’ll legally employ the person on your behalf, handling the hassles and potential legal pitfalls of international hiring.
However, EORs aren’t just for global expansion. They can be a lifesaver if you want to hire remote workers from different states within the U.S. or if you need temporary staff for a specific project. They offer flexibility and peace of mind, knowing you’re not accidentally breaking any laws in unfamiliar territories.
But the benefits don’t stop there. By handling compliance for you, EORs significantly reduce the risks of hiring in new markets. They’re well-versed in local labor laws and regulations, so you can rest assured that you’re doing things right. Plus, you’ll save money and time by not having to set up separate legal entities in every location where you want to hire.
If you’re thinking about expanding your business or hiring remotely, EORs are worth considering. They’re like having a legal and HR expert on your team without the long-term commitment.
What Are the Differences Between PEOs and EORs?
Now, let’s look at the differences that separate PEOs and EORs. As you’ll see, they’re wildly different, even though they might initially seem similar.
Legal Relationship
With a PEO, you share the employer role. Think of it as co-ownership, where you and the PEO work together to raise your workforce. You still make the big decisions, but the PEO handles the daily caretaking.
On the other hand, an EOR becomes the sole legal employer of your workers. This difference is crucial when hiring in places where your company is not established.
Control and Responsibility
When you partner with a PEO, you keep control over your HR decisions. You’re still involved in hiring, firing, and managing your employees. An EOR takes on more responsibility, especially regarding international employees, and ensures everything aligns with local laws and regulations.
Cost Structure
PEOs and EORs charge fees for their services, often based on your number of employees or a percentage of your payroll. It’s important to compare prices and services to find the right fit for your budget and needs.
What’s the Right Tool for the Job?
PEOs are your best bet if you need help managing your HR in the U.S. They’re experts at streamlining payroll, benefits, and compliance while keeping you in the driver’s seat.
EORs, however, are the way to go if you want to expand globally or hire remote workers in different states. They take on the legal burden of employment in those locations, making building a diverse team much more straightforward.
How Hands-On Do You Want To Be?
With a PEO, you’re still involved in HR matters. You collaborate with them on decisions and strategies. However, with an EOR, you take a step back. They handle most HR issues independently, allowing you more time to focus on your core business.
As you can see, PEOs and EORs offer different solutions for different needs. Understanding these differences is key to choosing the right partner for your business.
What Are the Pros of PEOs for a Midsized Business?
What are the specific pros and cons of using PEO vs. EOR for growing a midsized business?
In the next few sections, we’ll break down each, starting with the pros of PEO:
Streamlined Efficiency and Expertise
PEOs are like having a seasoned HR team in your corner, minus the hassle of hiring them. They’re pros at handling the day-to-day tasks that often bog down businesses, giving you back valuable time and energy to focus on your big-picture goals.
Premium Benefits
We know good benefits attract good people. PEOs often have the muscle to negotiate better rates on health insurance, retirement plans, and other perks, making your company a more appealing place to work.
Confident Compliance
Employment laws can be a headache, but with a PEO, you can breathe easily. They’re experts at keeping up with ever-changing regulations, so you don’t have to worry about getting slapped with fines or lawsuits.
What Are the Cons of PEOs for a Midsized Business?
Despite these advantages, there are also some drawbacks to PEOs that you should keep in mind:
Sharing Control
With a PEO, you’re not the only one calling the shots on HR matters. You’ll need to collaborate to make decisions for your business.
Costs Can Creep Up
While PEOs can save you money in the long run, their fees often increase as your company grows. Be sure to factor this into your budget as you plan for the future.
Location Limitations
PEOs can only help you where you’re already established. They won’t be able to provide support if you want to expand to new states or countries.
What Are the Pros of EORs for a Midsized Business?
With the pros and cons of PEOs out of the way, let’s shift our attention to the advantages of EORs:
Effortless Expansion
Want to tap into talent across borders without the headache of setting up foreign entities? EORs are your answer. They handle everything from hiring and payroll to legal compliance, making global expansion a breeze.
Easy Compliance
International laws can be a minefield, but EORs are experts at managing them. They’ll ensure you follow all the rules, reducing your risk of costly legal issues.
Less Liability
When you work with an EOR, they become the legal employer of your international workers. That means they assume most of the liability, giving you one less thing to worry about.
What Are the Cons of EOR for a Midsized Business?
Despite these advantages, there are still some cons to EORs that mid-sized businesses should be aware of:
Less Direct Control
With an EOR, you’ll have less direct control over your employees, especially those in other countries. If you prefer a hands-on approach, this might not fit you best.
Possible Restrictions
Depending on local laws, you might face some constraints on how you operate in certain countries. Be sure to research these limitations before partnering with an EOR.
Not for Domestic Needs
EORs are designed for international and remote hiring. A PEO might be a better option if you’re only looking for help with domestic HR.
In summary, PEOs and EORs offer valuable solutions, but their strengths lie in different areas. A PEO is your go-to for streamlining domestic HR, giving you expertise and peace of mind without sacrificing control. EORs, on the other hand, are your ticket to hassle-free global expansion, simplifying international hiring and compliance.
Choose the Right Solution With Mosey
Deciding between a PEO and an EOR isn’t the same answer for every business. You need to find the perfect fit for your specific needs. With this guide to the differences between these two options, you can feel empowered with the knowledge you need.
While you’re at it, be sure to check out Mosey. Our compliance management platform can take the stress out of compliance issues and allow you to focus on what matters most. Mosey is a valuable tool for your business whether you’re using a PEO, EOR, or neither.
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