17 Aug The Role of Global Mobility Pros in Managing Employer of Record (EOR) and Professional Employer Organization (PEO) Services

As businesses expand globally, managing a distributed workforce becomes increasingly complex. Navigating compliance, payroll, and benefits across different jurisdictions requires specialized support. This is where an Employer of Record (EOR) and a Professional Employer Organization (PEO) come into play, each offering distinct advantages for companies looking to scale internationally. Understanding the differences between these two options is crucial for HR and global mobility professionals to achieve growth, whether they are recruiting for US companies or other markets.

What is an EOR?
An EOR is a third-party organization that becomes the legal employer of a company’s workforce, handling everything from compliance and payroll to taxes, insurance, and benefits. By acting as the legal employer, an EOR enables companies to hire globally without the need to establish local entities in every country, significantly simplifying the expansion process. This setup allows businesses to focus on growth while the EOR manages the complexities of local labor laws and employment contracts.

The EOR takes full responsibility for employment liabilities, though companies share financial responsibilities arising from their engagement with the EOR. EORs use direct, indirect, and hybrid operating models to manage global teams, offering flexibility and compliance support in various regions.

What is a PEO?
A PEO operates under a co-employment model, partnering with businesses to manage HR tasks such as compliance, payroll, and employee benefits. Unlike an EOR, a PEO requires the company to be registered in every location where it employs staff, and the company remains liable for compliance in those jurisdictions. PEOs specialize in streamlining HR functions, allowing companies to focus on core business activities while ensuring access to competitive benefits and compliance with local laws.

PEOs are best suited for businesses operating within their home country or where they have established entities, providing a seamless way to manage HR-related tasks while retaining control over daily employee management.

Role of global mobility professionals in EOR and PEO

Global mobility professionals play a vital role in navigating the complexities of EOR and PEO models by ensuring compliance, managing risks, and enhancing the employee experience for international workforces. In an EOR setup, they collaborate with the EOR to handle legal responsibilities, manage employment contracts, and ensure adherence to local labor laws, allowing companies to expand rapidly without establishing local entities. 

In a PEO arrangement, global mobility professionals work with the PEO to streamline HR tasks, share compliance responsibilities, and maintain control over day-to-day employee management while ensuring that benefits and HR services align with the company’s strategy. Overall, their expertise helps organizations decide between EOR and PEO solutions, align mobility strategies with business goals, and support the efficient management of a global workforce.

Key Differences Between EOR and PEO Services

Below are the differences between EORs and PEOs culled from both Oyster and Velocity Global, two companies that select the right partner to streamline HR processes, support growth, and achieve business objectives. Here’s a closer look at how these services differ:

• Hiring scope:
  An EOR acts as the legal employer, allowing companies to hire talent worldwide without establishing a local entity. In contrast, a PEO partners with businesses to handle HR tasks while the company manages employees’ daily activities.
• Number of workers:
  EORs are flexible with no minimum employee requirements, making them ideal for small businesses or companies entering new markets with limited hires. PEOs, however, often have minimum employee thresholds, usually requiring at least five to ten workers, making them better suited for established businesses.
• Employee benefits:
  Both EORs and PEOs provide competitive benefits packages. EORs often leverage bulk purchasing power to offer comprehensive benefits at competitive rates, while PEOs manage benefits for co-employed staff, including wellness programs and mental health support.
• Compliance:
  EORs take full responsibility for compliance with local labor laws, reducing the risk of legal issues for businesses. PEOs share compliance responsibilities, providing local expertise and advice, but the ultimate compliance risk remains with the company.
• Business registration:
  EORs do not require companies to have a local business entity, allowing easy management of a global workforce. PEOs, on the other hand, generally require a registered entity in each location where they wish to hire.

Choosing between EOR and PEO
Business needs and long-term vision will determine whether an EOR or PEO is the better fit. An EOR is ideal for companies seeking to expand internationally with speed and flexibility, offering the ability to hire talent globally without the need for local entities. This model is particularly advantageous for small businesses and startups looking to enter multiple markets quickly.

On the other hand, a PEO is best for companies that want to outsource HR services while maintaining more direct control over employee management. This option works well for businesses operating domestically or in countries where they already have established entities.

Adapting to a changing workforce landscape
As global work environments evolve, businesses must consider how their HR strategies align with the new era of work. With rising healthcare costs, changing employee expectations, and an increasing focus on diversity, equity, and inclusion (DEI), companies need flexible, scalable solutions like EORs and PEOs to navigate these complexities effectively. Leveraging the right partner can help businesses stay compliant, manage costs, and support a diverse and distributed workforce.

Ultimately, choosing between an EOR and a PEO comes down to specific needs, goals, and the level of control desired over HR functions. Both options offer valuable support for businesses looking to expand their reach and build a global team, providing the essential infrastructure needed to thrive in today’s competitive market.