Tech businesses tend to delegate their People Ops to other companies. It’s not surprising. Such a shift helps you focus on the core operations.
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.
EOR vs PEO: Visual Comparison
Let’s put them face to face! We have found 11 differences between PEO and EOR.
Payrolls
Benefits for staff: managing
Benefits for staff: coverage
Risks management
Co-employment relationships
Your partner is a single employer
Compliance check
Employee-related taxes
Secure workplace organization
Payroll research and local adaptation
No minimal number of hires
Short contracts (from 3 months)
Hiring
Onboarding
only in those countries where
You have the rights to work
You share this responsibility
Options Covered
Payrolls
Peo
Eor
Benefits for staff: managing
Peo
Eor
Benefits for staff: coverage
Peo
Eor
Risks management
Peo
Eor
Co-employment relationships
Peo
Eor
Your partner is a single employer
Peo
Eor
Compliance check
Peo
Eor
Employee-related taxes
Peo
Eor
Secure workplace organization
Peo
Eor
Payroll research and local adaptation
Peo
Eor
No minimal number of hires
Peo
Eor
Short contracts (from 3 months)
Peo
Eor
Hiring
Peo
Eor
Onboarding
Peo
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.
In some countries, like Germany, there is a risk of triggering local obligations when you collaborate with an EOR for a long time. So companies establish legal entities and employ a PEO.
Need to Know
Here is key PEO information for you to check your compatibility with that HR model.
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.
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.
If such a scenario doesn’t suit you for some reason, you may think of making the EOR your official representative in the target country. Then, your EOR partner acts on behalf of your company, being an independent entity and single employer for your tech staff.
Who Chooses EOR and Why
Did you know, for instance, that by choosing PEO vs Employer of Record carefully, companies can contribute to their tax optimization strategies?
As we have already mentioned, the employer of record covers more work off than PEO. Taking into account that the price for both models can be similar, the financial benefits of EOR might make you curious. When the recession is rampant throughout Europe and America, you can track layoffs news and prepare to freeze your new hires. Or you can build a distributed workforce and fit it into your budget.
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 EOR services providers:
- 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, 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, contact us. We will be happy to help!
FAQ
What does EOR mean in a company?
EOR essentially serves as the official employer of record for the team members who actually work for your company. You would have only 1 contract with EOR as an independent entity. This collaboration model can be useful when you operate in foreign jurisdictions or when engaging team members as independent contractors is not feasible due to local employment laws. Once you partner with EOR, no contracts with employees are needed.
What does EOR mean in outstaffing?
An employer of record acts as a third-party service provider that takes care of the outstaffed team members. EOR handles all HR-related obligations and tasks, including payroll management, tax withholding, benefits administration, compliance with employment laws, and other HR functions. While the client company controls operations and directs over the assigned work. Benefits of EOR: you access talent and scale your workforce without taking on the liabilities of direct employment.
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