Hiring across borders is complicated enough without getting tripped up on terminology. Employer of Record (EOR) and Professional Employer Organization (PEO) are two services that often get conflated, but they solve fundamentally different problems. 

This guide breaks down exactly what each model does, how they differ, and how to decide which is right for your business.

What Is an EOR?

An EOR is a third-party organization that becomes the legal employer for your workers in a given country. 

Your employee works for you day-to-day, but the EOR appears on the employment contract, handles payroll, withholds taxes, manages statutory benefits, and takes on full responsibility for local labor law compliance.

This model exists to solve a specific problem: you want to hire someone in Germany, Colombia, or the UAE, but you don't have a legal entity there. 

Without an EOR, you'd need to set up a local entity. This process typically takes three to six months and costs thousands in legal and registration fees. An EOR lets you skip that entirely.

The best EOR services like RemotePass handle the full employment lifecycle: contracts, onboarding, payroll, time-off, equipment, and offboarding.

What Is a PEO?

A PEO is a co-employment arrangement. You and the PEO share employer responsibilities for your workers.

The PEO handles payroll processing, benefits administration, and HR compliance support,  but you retain the employment relationship.

The critical difference from an EOR: you must already have a registered entity in the country where your employees work. 

PEOs are typically used by companies with an existing domestic workforce who want to outsource the admin burden of HR without giving up control over employment decisions.

PEOs are common in the US, where small and mid-sized businesses use them to access better benefits pools and reduce HR overhead without the cost of a full in-house HR team.

Key Differences Between EOR and PEO

Both EOR and PEO models help businesses manage employment without building large in-house HR teams, but the similarities end there. Here's how they compare:

The sections below break down each of these differences in more detail.

Who’s the Legal Employer?

With an EOR, the EOR is the sole legal employer on record. They sign the employment contract, run payroll, and handle statutory filings. 

With a PEO, both parties share employer status, meaning the employment relationship is co-owned and liability for employment decisions is shared between you and the PEO. 

Do You Need an Entity?

This is usually the deciding factor. EORs are specifically designed for situations where you don't have (and don't want to set up) a legal entity in another country. The EOR already has entities in place and employs your worker through those.

PEOs don't have that capability. They sit on top of your existing entity and manage HR operations through it. If you don't have a registered business in the country where your employee works, a PEO can't help you.

What’s the Geographic Scope?

EORs are built for hiring international employees. They already have entities in place across multiple countries, so you don't need your own. 

PEOs are designed for domestic workforces and require you to have entity presence wherever your employees work. If you're hiring across borders, this difference alone usually settles the question.

Who’s Liable for Compliance?

Under an EOR model, the EOR assumes full legal and financial liability for employment compliance. That means if there's a payroll error, a misclassification issue, or a breach of local labor law, the EOR is on the hook, not you.

Under a PEO arrangement, liability is shared. The PEO handles the administration, but because you're a co-employer, your business retains exposure for employment decisions and some compliance obligations. This matters most in heavily regulated markets where employment law is frequently updated.

What HR Services Are Covered?

Both models cover payroll and HR administration, but the scope differs. An EOR provides end-to-end employment management: contracts, onboarding, payroll, statutory filings, time-off management, and offboarding, all localized to each country you're hiring in.

A PEO supports your existing HR function rather than replacing it. They process payroll, manage benefits enrollment, and help with compliance, but they work within your existing employment structure rather than running it independently.

How are Employee Benefits Handled? 

EORs give employees access to locally compliant statutory benefits in each country, which vary widely. In the UAE, that means gratuity and health insurance. In France, it includes extensive leave entitlements and social security contributions. The EOR knows what's required and handles it.

PEOs typically offer pooled benefits plans for your domestic workforce. This means they group employees across all their client companies to negotiate health insurance and other benefits at rates a small business couldn't access independently. A 15-person company gets coverage more like a 500-person company would. 

What’s the Cost Structure?

EORs typically charge a flat per-employee monthly fee, which covers employment infrastructure, compliance, payroll, and HR operations. This makes costs predictable regardless of salary level.

PEOs often charge either a percentage of total payroll or a per-employee monthly fee. At larger payroll volumes, percentage-based pricing can become expensive quickly.

Total cost comparison should also factor in what you're not paying for: with an EOR, you avoid entity setup costs, local legal fees, and in-country HR infrastructure.

How Fast is Implementation?

EORs are faster to get started because the infrastructure is already in place. The EOR has existing entities, local payroll systems, and compliance frameworks in every country it covers. Onboarding your first employee in a new market typically takes days.

PEOs take longer to set up because they work through your entity. Before anything else can happen, your business registration needs to be in place and integrated with the PEO's systems. Once that's done, ongoing onboarding is straightforward, but the initial setup is a meaningful time investment.

Who Has Operational Control?

With an EOR, you retain full control over your employees day-to-day work: what your employee does, how they're managed, their goals, their day-to-day responsibilities. What you hand to the EOR is the administrative and legal layer. For example, how the contract is structured, how payroll is processed and which statutory benefits apply.

With a PEO, you retain control over day-to-day work and ownership of the HR layer. This includes how contracts are written, how HR processes like onboarding are designed and which benefits you offer beyond statutory minimums.The PEO executes those processes on your behalf rather than owning them. 

Quick Decision Guide: When to Choose EOR or PEO

If you're still weighing up which model fits your situation, here's a simple decision tree to think through it.

First: Are you hiring outside the country where your business is based?

• No → An EOR isn't relevant. A PEO is your option if you want to outsource HR administration for your domestic workforce.
• Yes → Do you have a legal entity in the country where you want to hire?
  
  • Yes → An EOR isn't relevant — you've already paid for the infrastructure an EOR would otherwise provide. A PEO is your option for outsourcing HR administration while keeping ownership of your employment structure.
  • No → Is it worth setting one up? Entity setup typically takes three to six months and costs thousands in legal and registration fees.
    
    • You're testing a market, hiring up to five people, or building a distributed team → That investment rarely makes sense. An EOR is your most practical compliant option.
    • You're committing to a market long-term and hiring volume justifies the overhead → Setting up an entity may make sense. A PEO becomes an option for HR administration once you're established.

The example below walks through how that decision might play out in practice.

Using an EOR and a PEO together is also an option. You can use a PEO for an established domestic team and an EOR for international hires where no entity exists.

Platforms like RemotePass unify EOR employees, contractors, and direct employees in one system, so you're not managing separate tools for different types of workers.

Final Thoughts on Employer of Record vs PEO

EOR and PEO solve different problems. An EOR is the right tool when you need to hire across borders without establishing local entities. A PEO works when you have an existing entity and want to outsource HR administration.

The fastest way to get clarity on which model you need: ask where you're hiring and whether you have entities there. The answer usually points you in the right direction immediately.

If international hiring is part of the picture, RemotePass can help you move fast and stay compliant without the entity setup overhead. Book a 15-minute demo to see how an EOR works for your company.

FAQs About Employer of Record vs PEO

Is an EOR or a PEO Better for Global Hiring?

An EOR is the better choice for global hiring. PEOs require you to have a registered entity in every country where your employees work, which makes them impractical for international expansion. An EOR like RemotePass already has that entity infrastructure in place, so you can hire compliantly in a new country in days.

Can You Use an EOR and a PEO at the Same Time?

Yes. Many companies use a PEO for domestic employees and an EOR for international hires. The two models aren't mutually exclusive; they cover different parts of your workforce.

What’s the Difference Between an EOR and a GEO?

A Global Employment Organization (GEO) is another name for an international EOR. Both terms describe a service where a third party becomes the legal employer for your global workers. The terminology varies by vendor, but the underlying model is the same: no entity required, full compliance handled locally.

What Does EOR Stand For in HR?

EOR stands for Employer of Record. In an HR context, it refers to a third-party service where an external organization takes on the legal employer role for your workers. The EOR appears on employment contracts, manages payroll and taxes, and handles local compliance on your behalf.

How Long Does It Take to Onboard Through an EOR vs a PEO?

EORs typically enable onboarding in days, since no entity setup is required. PEOs require your entity to be established and integrated first, which adds time to the initial setup. Once a PEO relationship is active, ongoing onboarding is straightforward, but getting started takes longer.

Can an EOR Help with Visa Sponsorship and Employee Relocation?

Many EOR providers offer visa sponsorship and relocation support as part of their global employment services. 

What’s the Difference Between HRO and PEO?

HRO (Human Resources Outsourcing) is a broad category covering any outsourced HR service, for example payroll processing or recruitment, without a co-employment arrangement.

A PEO is a specific type of HR outsourcing that creates a co-employment relationship, with shared employer liability between your company and the PEO. HRO is transactional; PEO involves a legally defined shared employer status.