In a highly competitive world today, for expanding business in overseas markets, it is important than ever to hire and manage talent beyond boundaries; because eventually, it’s the knowledge workers that drive success for companies and bring you the competitive edge you’ve been looking for.
In an ideal world, you should be able to easily achieve that with a strong online presence and a fair employer reputation. However, when you start expanding business outside of your home country, other factors like incorporation of local entity, tax registration, legal compliance issues kick inn. Your new overseas entity must comply with local regulations with employment laws, social contributions, taxes etc. Now, how would you ensure compliance for these elements without having much technical knowledge of local regulations and then manage employment contracts and payroll processing of local employees of overseas business?
This is where the services of a PEO (Professional Employer Organization) and EOR (Employer on record) come into play. These two are very commonly thrown around HR services lately, but what’s the difference between the two? And how to know which one would you require for your organization?
Often used interchangeably they have some clear differences. Let’s analyze.
An EOR would employ resources on your behalf without you needing to have an entity in that region. It would assume all responsibilities of employment, including the employee’s onboarding, all legal documentation compliant to the employment laws in the country. In simple words, an EOR would allow you to efficiently engage talent in any part of the world without you having to set up a legal entity and risking violation of local labor laws.
PEO too, shares similar employee related responsibilities like payroll deductions, tax deductions, and employee benefits. However, in contrast to EOR, PEO would only enter into an agreement with you if you own an entity in that particular region or country.
Another clear distinction between the two is employer on record (EOR) is the third-party organization which acts as a legal employer of your workers on paper. In contrast PEO, enters into a joint-employment relationship by leasing employees to employer. As a co-employer you share risks and liabilities with them unlike an EOR which assumes complete responsibility of covering all risks being a legal employer. But in reality EOR facilitates paper work for the sake of compliance, and you continue to work with your employees like all other employees.
How to decide whether you need PEO or EOR services?
- Do you own an entity in the country you want to employ someone? If not, you need a EOR and not a PEO.Opening new entities can be time consuming and expensive process even for the bigger organizations, EOR is faster and more cost effective. More so, if you only hire a limited no of employees in that country.
- If you are looking to hire a continuous stream of full time employees in a certain country, PEO favors you. Hiring seasonal, project specific or independent contracts make EORs an optimum choice.
- Many PEO’s and EOR’s have a minimum employee count requirement to enter into a partnership with you. Making it harder and expensive for startups to penetrate into international markets for workers. However, most EOR’s are generally okay with onboarding and managing a smaller no of employees too
- EOR’s generally take on fewer HR tasks than PEO’s, which can be often complex. However, EOR’s are comfortable working with small scaled organizations unlike PEO’s. Small businesses too prefer EOR’s. Given their ability to handle temporary/ independent contractor arrangement.
What kind of services does HRBS offer?
HRBS provides both EOR and PEO services. We are a global EOR service provider, with a network of over 3 million resources in our talent pool specializing in multiple domains.
If you are looking for effective and less painstaking ways for global hiring and employee benefits, HRBS has you covered. We help you simplify everything- For e.g. saving on taxes, Minimizing legal compliance issues, Managing digitization of records, engaging top talent for your needs (Remote and on-site), helping you take payroll off your plate and letting you enjoy stress free days, and all that comes with the perks of working with a trusted partner.
HRBS is your go-to ideal business partner. Enquire now by clicking below: