In an ideal scenario, the recruitment of international remote workers would be seamless, free from concerns about compliance and cross-border payroll issues. However, the intricate nature of international law presents challenges for businesses looking to onboard overseas employees. To facilitate global hiring, businesses must collaborate with an employment partner, such as an Employer of Record (EOR) or a Professional Employer Organization (PEO).
Here’s a concise overview of the distinctions between an EOR and a PEO:
1. An Employer of Record (EOR) can hire workers in other countries on your behalf, eliminating the need for you to establish your own entity in that country.
2. PEOs require you to have your own local legal entity in the respective country or region.
3. Both EORs and PEOs handle HR tasks such as payroll, benefits, and tax-related responsibilities.
4. In an EOR arrangement, the legal employment of your workers is held by the EOR. In contrast, with a PEO, a co-employment structure involves your company, your employee, and the PEO.
5. Compliance with local labor laws is solely your responsibility with a Professional Employer Organization.
6. If you already have a legal entity in the country, working with a PEO might be the more cost-effective option.
7. If you lack an entity, collaborating with an EOR is notably more cost-effective and faster than establishing a new entity.
 Navigate directly to a pivotal section:
• Distinctions between an EOR and a PEO?
• Choosing the right partner for your needs?
• Overview of the services provided by Remote?
The primary distinction lies in the fact that PEOs mandate ownership of a local entity and involvement in a co-employment agreement. Conversely, an EOR enables hiring in foreign countries without the necessity of a local entity or co-employment status. While there are additional nuances to consider, comprehending these distinctions can be challenging. This guide aims to clarify the disparities between an EOR and a PEO, emphasizing their significance and providing insights on determining the type of partner your business requires for global remote talent acquisition.
Distinctions between an EOR and a PEO?
While the terms EOR (Employer of Record) and PEO (Professional Employer Organization) are sometimes used interchangeably, there are crucial distinctions between them. PEOs primarily manage HR functions for businesses with existing entities, whereas EORs take on the role of employing workers on behalf of client companies, eliminating the need for them to establish their own entities.
For those without an entity in the desired employment country, an EOR is the appropriate choice. If a global employment partner insists on entity ownership before hiring, they are likely providing PEO services rather than EOR services, often referred to as “global PEOs” or providers of “global PEO services.” Opting for an EOR is particularly advantageous when hiring a small number of employees in the target country, as it is faster and often more cost-effective.
An EOR manages the legal employment of workers in other countries, serving as the employer on paper while facilitating compliance paperwork. This allows businesses to engage full-time workers in countries where they lack a legal entity. While PEOs may assist in hiring in other countries, they typically require entity ownership and may lack the legal expertise of EOR providers.
It’s crucial to note that EORs can also offer comprehensive HR services, including payroll and benefits management, with the added benefit of always acting as the local employer of record. Having an all-in-one EOR partner for expanding your team globally simplifies key processes and ensures compliance with ease.
Choosing the right partner for your needs?
If you’re looking to hire a skilled worker in a foreign country like Germany or France, but lack an existing employee base in that region—perhaps relying on contractors—you may have concerns about ensuring a high-quality experience for your employees and maintaining compliance with local laws. In such a scenario, the next step is to explore solutions.
Remote, drawing on its extensive experience, understands the diverse challenges that companies encounter when bringing on international talent. With a team spanning hundreds of individuals across numerous countries and continents, we are well-versed in navigating these complexities. If you’re unsure about the kind of assistance needed to engage global talent effectively, consider starting by addressing a few fundamental questions.
Do you possess a legal entity in the country where the employee resides?
To employ full-time workers in a country where you lack a legal entity, utilizing an Employer of Record (EOR) becomes imperative as it is the only viable option without establishing your own legal entity. In some cases, contracting workers may be an alternative, but caution is necessary to avoid inadvertently misclassifying employees as contractors. While creating a legal entity is a possibility, it often incurs significant costs and time, making it a less practical choice.
Even for enterprises with existing legal entities in target countries, there may be resource constraints to meet all employee needs. This is where a Professional Employer Organization (PEO) proves valuable. PEOs manage various HR functions, ensuring employees receive their pay and access benefits, all within a co-employment arrangement with your business.
However, it’s essential to exercise caution, as some EORs work through third parties to employ workers in other countries, adding extra fees to their own provider costs. This not only creates a confusing experience for employees but can also escalate costs for your company rapidly. Remote, on the other hand, owns its legal entities in all serviced countries, ensuring a seamless experience for your team and transparent, flat-rate pricing for your company.
In summary, if you lack a legal entity where your potential employee is based, EOR services are necessary. If you own a legal entity but require HR management assistance for employees in a specific country, PEO services are the appropriate choice.
What is the number of employees you intend to hire?
Many PEOs and several EORs have minimum employee count requirements. Establishing local legal entities can rapidly become costly, and service providers may stipulate a minimum employee count for initiating a partnership. This can pose a significant challenge for startups and small businesses, making international hiring prohibitively expensive and limiting them to local talent.
Notably, Remote does not impose any minimums for its services. Whether you intend to hire a single employee in a specific country or have more extensive hiring plans, Remote is always ready to assist. Refer to Remote’s Fair Price Guarantee for additional details.
For companies aiming to open an entity in a new country and intending to hire a substantial number of employees, a local PEO can be instrumental in managing HR functions through a co-employment arrangement.
Are you looking to hire full-time workers or contractors?
Indeed, to collaborate with international contractors, neither an EOR nor a PEO is technically required. What’s essential is a compliant contractor management and payment solution. Fortunately, Remote simplifies the process of paying and managing contractors globally. As a leading international contractor management solution, we provide expertise to companies of all sizes, facilitating seamless payment processes for contractors worldwide.
Overview of the services provided by Remote?
Remote serves as an employer of record, assisting companies in employing workers in countries where they lack local legal entities. Additionally, we provide a global contractor payment and management product seamlessly integrated into our platform. Our employer of record services are offered exclusively in countries where we own legal entities, ensuring the optimal experience for you and your team at competitive rates. As contractor payments don’t necessitate entities, we can facilitate payments for your contractors worldwide.
For an overview of the countries where Remote currently offers employer of record services, you can explore our Country Explorer. This resource provides information on covered countries, including details on employment laws and taxes globally.
While Remote doesn’t presently provide PEO services (payroll and benefits for companies with established entities in a country), stay tuned for updates. We’re actively working to extend our top-notch global payroll solutions to companies with established entities worldwide.
If you’re ready to expand your business by hiring workers in other countries, you can sign up now to start onboarding international employees and contractors within minutes. For any questions or assistance, feel free to reach out to our team, and our experts will promptly respond.