When companies look to outsource HR responsibilities, payroll, and legal compliance—especially in international hiring—two terms often come up: Employer of Record (EOR) and Professional Employer Organization (PEO). While both services offer valuable support in managing employees and reducing administrative burdens, they are not the same. The differences between EOR and PEO can impact how you structure your international expansion, manage risk, and comply with local labor laws.
In this blog, we’ll explore what each model means, how they work, and when it makes sense to choose one over the other. If you’re planning to hire globally or outsource HR operations, understanding the EOR vs. PEO distinction is essential.
What Is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party service provider that legally employs workers on your behalf in a country where you do not have a legal entity. The EOR takes full responsibility for employment compliance, including drafting labor contracts, processing payroll, remitting taxes, managing statutory benefits, and staying compliant with local labor laws.
What makes an EOR especially powerful is that it allows you to hire full-time employees in foreign countries without the need to set up a subsidiary or branch. The EOR becomes the legal employer for tax and regulatory purposes, but the employee still works for you on a day-to-day basis.
This model is particularly useful for companies entering new markets, hiring remote talent across borders, or testing international expansion without committing to long-term infrastructure.
Learn more about our comprehensive Employer of Record services designed to streamline your global hiring process.
What Is a Professional Employer Organization (PEO)?
A Professional Employer Organization (PEO) is a co-employment model where the PEO shares certain employer responsibilities with your company. You and the PEO both act as employers: you manage day-to-day operations, while the PEO handles HR administration, payroll processing, employee benefits, and tax filings.
However, a PEO typically requires that you already have a legal entity in the country where you’re employing staff. This makes the PEO model ideal for domestic employment outsourcing, but it falls short when it comes to international hiring unless your business has registered operations in those countries.
While both models streamline HR tasks, only the EOR can employ on your behalf in countries where you don’t operate directly. Our global payroll solutions ensure accurate, localized payments no matter where your team is located.
Key Differences Between EOR and PEO
To help you decide which service model fits your business needs, let’s break down the main differences between an Employer of Record and a PEO:
Legal Employer Status
The most critical difference is who acts as the legal employer. In an EOR model, the provider becomes the official employer for tax, benefits, and compliance. In contrast, with a PEO, your company remains the legal employer, while the PEO supports HR and payroll functions.
Entity Requirement
Using a PEO requires that you have a legal business entity in the country where your employees are based. An EOR, however, eliminates that need. This makes EORs the go-to solution for international hiring, especially for companies that want to scale without borders.
Scope of Use
A PEO is best suited for domestic workforce management, helping with employee benefits administration, insurance, and HR support. An EOR is built for cross-border hiring, ensuring compliance in markets where you lack physical infrastructure.
Liability and Compliance
With an EOR, the service provider bears the full burden of employment compliance, tax remittance, and regulatory risk. A PEO shares these responsibilities with your business, which means you’ll still need to stay updated on local labor laws and HR regulations.
Companies can also benefit from advanced HR tools to enhance employee experience and streamline operations.
When Should You Use an EOR?
Use an Employer of Record if:
- You want to hire employees in a country where you don’t have a registered entity
- You’re testing new markets before committing to a full setup
- You want to quickly onboard international employees
- You need to convert contractors to full-time staff compliantly
- You want to eliminate global payroll, legal, and HR complexities
1EOR provides end-to-end EOR services in over 100 countries, helping you employ talent anywhere without borders, barriers, or compliance concerns.
In addition to EOR services, our Global RPO solutions support full-cycle international recruitment.
When Should You Use a PEO?
Use a PEO if:
- You already have a registered business entity in the country
- You want help managing HR, payroll, and compliance for domestic employees
- You need assistance with employee benefits and insurance
- You want to simplify employment operations without giving up legal employer status
PEOs are ideal for companies focused on domestic growth or improving internal HR efficiency, especially in countries like the United States where PEO models are mature.
Why the Difference Matters for Global Hiring
Choosing between an EOR and a PEO is not just about who runs your payroll—it’s about who takes legal responsibility for your employees. If your business is expanding globally or operating without a registered presence in the target country, choosing a PEO would expose you to legal risk and employment violations. An EOR offers a legally compliant, scalable solution for growing global teams fast.
At 1EOR, we help businesses expand internationally without setting up legal entities. Our EOR services allow you to hire in days, not months, with guaranteed compliance, localized payroll, and access to statutory benefits.
For companies managing large contingent workforces, our Managed Service Provider (MSP) solutions offer centralized oversight and cost control.
Frequently Asked Questions (FAQs)
- Is an EOR the same as a PEO?
No. An EOR is the legal employer of record for your overseas staff, while a PEO is a co-employment partner that requires your company to have a local entity. - Can I hire internationally using a PEO?
Only if you already have an entity in that country. Otherwise, an EOR is the appropriate model for international employment. - Do both EOR and PEO handle payroll?
Yes. Both models provide payroll processing, but only the EOR takes on legal employment responsibilities. - Can I transition from EOR to PEO?
Yes. Many companies start with an EOR to test a market and later switch to a PEO once they’ve established a local entity. - Which is faster for hiring?
An EOR is generally faster because you don’t need to set up a legal entity. Employees can often be onboarded within 1–2 weeks. - Who holds the employment contract in an EOR model?
The EOR holds the employment contract, but the client directs the employee’s work and performance. - Are both models compliant with local labor laws?
Yes, but with a PEO, your company shares responsibility for compliance. With an EOR, the provider assumes full responsibility. - Can EOR employees receive benefits?
Absolutely. EORs manage statutory and optional benefits, just like a direct employer. - What is the cost difference between EOR and PEO?
Pricing varies based on country and service scope. EORs often charge a monthly fee per employee plus benefits, while PEOs may charge based on payroll percentages. - Does 1EOR provide both services?
1EOR specializes in Employer of Record solutions, helping companies hire globally without setting up a legal presence.
Conclusion
While EORs and PEOs both help companies simplify HR and payroll operations, they serve very different purposes. If you’re looking to hire internationally and don’t want to open a legal entity, an Employer of Record is the solution that gives you speed, compliance, and flexibility. If your focus is domestic HR management with an existing legal setup, a PEO may be sufficient.
For growing companies, startups, or enterprises entering new markets, the EOR model is often the smarter, faster, and safer choice. At 1EOR, we make international hiring easy—so you can focus on building your team, not navigating red tape.
