Did you know that there are 33.2 million small businesses exist across the U.S.? Perhaps you also want to run a small business. However, you may not know how to start.
Many small businesses hire a PEO company to manage the company benefits. You may wonder what separates the PEO company from an employer of record.
This guide covers the differences in the employer of record vs PEO service. Read on to learn more.
Key Differences Between EOR and PEO Services
Employer of Record (EOR) and Professional Employer Organization (PEO) services are two popular options for businesses looking to outsource their human resources functions. While both EOR and PEO services offer similar benefits, there are some key differences between the two that business owners should be aware of before deciding which option is right for them. Here are some of the main differences between EOR and PEO services:
Legal Relationship with Employees
An employer record is a company or organization that hires and pays employees, while PEO services act as co-employers and take care of administrative tasks such as payroll and employee benefits. In terms of the legal relationship with employees, PEO services may have a more direct involvement as they handle HR and compliance issues.
On the other hand, employers of record have a greater responsibility and liability over the employees. Companies must determine which option best fits their needs and consider the legal implications of their decision.
HR Responsibilities
EOR refers to a company that takes on all legal and administrative responsibilities of being an employer, such as:
- payroll
- benefits
- employment taxes
This relieves the burden of these tasks from the client company, allowing them to focus on their core business operations. On the other hand, PEO services provide a co-employment relationship. It is where the PEO handles HR responsibilities while the client company maintains control over daily operations. Businesses need to understand the differences to choose the best fit for their specific needs.
Payroll and Benefits Administration
EOR and PEO services are two options used by companies to manage payroll and employee benefits administration. The main difference between the two is the level of control a company has over its employees. While EOR allows for complete control, PEO services offer a more shared responsibility.
Compliance and Risk Management
There are some key differences between the two that you should understand to make the right choice for your business. An EOR acts as the official employer for the employees. It also handles all legal and administrative tasks such as:
- tax withholding
- insurance
On the other hand, a PEO acts as a partner to the employer and shares employer responsibilities. It also provides HR solutions and benefits administration. Both business services offer benefits to businesses. Understanding their distinct roles and responsibilities can help employers make an informed decision.
Benefits of a Global PEO Partner
When it comes to global expansion, there are many benefits of a global PEO partner. It includes adhering to regional laws, having access to local knowledge, and quick onboarding procedures. This can let businesses focus on their core competencies and get around the challenges of hiring people from other countries.
Know the Difference Between Employer of Record vs PEO
The key to maximizing your business’s potential lies in understanding the difference between an employer of record vs PEO services. Both options have their unique advantages, and it’s crucial to choose the right one for your specific needs.
Don’t hesitate to consult with professionals and make an informed decision for the growth of your organization.
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