PEO vs. EOR: Which is Wise for Tech Hiring?

Tech businesses often delegate their People Ops to other companies, and it’s no surprise. Such a shift helps them focus on the core operations and improve their hiring processes.

The world knows 2 main types of partnering with HR agencies — PEO and EOR. A lot of services provided match. Still, there are some options PEO doesn’t cover.

Keep reading to reveal those assets and decide if they are necessary for your business structure and goals.

In Case the Terms Confuse You

Don’t worry if the PEO vs EOR sounds exotic for you, just like SaaS vs IaaS for your grandparents. We are here to make the terms usual and delimited.

PEO is a Professional Employer Organization, a company that provides comprehensive human resources solutions to other businesses. They handle payroll, employee benefits administration, compliance with employment laws, do taxes and manage risks. In this case, you have 2 contracts: with an employee and with PEO.

The EOR meaning should be deciphered as Employer of Record — a service provider that acts as the legal employer for your workforce. Any record is not fixed anywhere that, let’s say, a developer John Smith or a designer Sally Jones work for you as they have signed a contract with the EOR. While you have a separate contract with the same EOR.

With both hiring models:

• You are free of administrative tasks, while you control the day-to-day activities and set compensations;

• Your relationships with your tech team remind you of in-house employment.

• Your payroll processing time reduces by up to 50% as your partners automate it, that boosts team loyalty

• You reduce errors, cut indirect costs of misclassification and late filings by up to 40% and your team runs smoothly, accelerating time to market. All — because your partner conducts milestone talks and wisely uses AI for candidate matching, retention and predictive analytics

EOR vs PEO: Visual Comparison

Let’s put them face to face! We have found 10 differences between PEO and EOR.

*only in those countries where you have the rights to work.
** you share this responsibility

When Search for a PEO Partner?

When you require formalizing your connection with the tech team members. It happens mainly when:

• You want more control over HR-related issues, participate in more activities;

• You already have an established legal entity in the region where you plan to hire tech specialists.

By choosing PEO vs Employer of Record carefully, companies can contribute to their cost optimization strategies.

Keep in mind, all tech specialists you “share” with PEO, would go through both your and PEO’s tax reports within the strictly regulated jurisdiction.

Moreover, ​​setting up a legal entity can cost anywhere from $10,000 to upwards of $50,000 depending on the country, with ongoing annual costs exceeding $50,000 in highly regulated markets. EOR solutions eliminate these upfront costs, offering pay-per-employee monthly service fees with full compliance.

Why Choose EOR

To make it easier to imagine an example of a professional employer organization, think of outsourcing People Ops. They provide you with services, but in the end, you are ultimately responsible for the result to all external authorities.

Wonder how to hire international employees simply? Then, make the EOR your official representative in the target country. Your EOR partner will act on behalf of your company, being an independent entity and single employer for your tech staff.

Ready to catch a couple of hiring lifehacks?

Flexibility, Flexibility, and… Flexibility

The EOR hiring model has no limitations on your company size, the number of your existing employees, as well as on the number of new hires.

You can engage the EOR partner even if you need software engineers or designers for a seed-stage startup. Yet, growing startups might also lack the people to maintain sophisticated HR procedures. At the same time, hiring a full-time HR specialist is not reasonable when the list of positions is quite short.

When you deal with EOR, you can have more chances to hire qualified people to join your project for a few months or up to a year. The HR agency takes care of their general career path and highlights which aspects of your job offer may be most appealing. From our experience, such a scenario is a bit more common when you hire designers than software engineers.

You have fewer responsibilities on your side than with PEO with its 2 contracts and 2 times more points you must follow. Plus, it’s possible not only to choose whether it will be an office or remote hire, but also get help in arranging safe working conditions — it’s on your partner.

Your agreement with EOR can turn into an all-inclusive strategy in hunting for tech talent. You can ask the HR agency to make tailored candidate search for your vacancies. Then, they organize the onboarding of approved candidates, and launch talent management services to retain your workforce.

Tricky Local Law: Can’t Beat it, EOR it

The tech community often calls EOR a global PEO. And now we will shed some light on the Employer of Record vs PEO in the global context.

Even established businesses require local expertise when hiring in new regions. As for the startups, they have all the chances to join the EOR fun club after exploring the following ideas.

Access to the global job market means more maneuvers in skill sets and salaries.

FAANG are well-known adepts of this approach. It’s not a big secret that Apple, Meta, Alphabet, and many more are shaping their international tech teams to get the right price/quality combination.

Your collaboration with EOR makes it easier to hire tech workers worldwide. Here are some explanations of why.

With EOR on board, you:

• Don’t have to establish a legal entity in those regions where your tech specialists live. Because the EOR, usually, has the right to work everywhere.

• Don’t need to study the local minimal wages, overtime policies, leave notice periods, or vacations limits to adapt your compensation packages, as your talent partner does it every day;

• Don’t pay local tax fines, as you don’t pay local taxes. For example, in Poland, you need to send a PIT report to the tax office yearly. Preparation of such reports could “eat” not one week. If you do local taxes yourself, you might be frustrated when navigating official websites or struggling with following the tax calendar and other specific requirements;

• Are free from long-term expenses like leave notices — it’s when you should pay salary 1–3 months after you let go an employee;

• Know that your team members have complete agreements, including their duration, scope, and enforceability;

• Have no need to personally check compliance with strict regulations governing the collection, storage, and processing of personal information.

We suggest you respect all the laws and local requirements above and might be interested in saving time on paperwork related to them while focusing on development of your product.

It Works for Many Domains and Roles

87% of Outstaff Your Team clients choose the EOR model. They are satisfied with outstaffing services in general. Also, companies partnering with EOR note less bureaucracy with more delegated responsibilities.

From our experience, there is a high demand for EOR-hired tech teams within FinTech, E-commerce, SaaS, HealthTech, Edtech, Real estate tech, PaaS, and Gaming.

The most popular requests are related to hiring UI/UX designers and developers (frontend, back-end, blockchain, ML, AI, mobile, VR).

What About Security?

Could any privacy risks become an obstacle to a partnership with the employer of record? It depends on the company you consider as a partner.

If you think of organizations with a strong expertise on the market, like Outstaff Your Team… Well, their reputation is their All. That’s why they:

• Invest in reliable infrastructure;

• Store only essential personal information about tech candidates (like name, job experience) and remove the data when it’s not relevant anymore;

• Share private data only with authorized people;

• Stick to the requirements of PCI, DSS, GDPR, EU AU Act and CCPA;

• Pass ISO certification;

• Take care of cybersecurity daily (using data encryption, multifactor authentication);

• Sign NDA agreement with all the team members;

• Don’t control your data.

If you’d like to learn more about EOR at its best, consider our services. We will be happy to help!

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