Why an EOR is better than a PEO in hiring remote workers

With the world changing to remote work and finding remote workers useful, there comes the issue of HR and payment.

Most businesses when it comes to hiring, everything is easy until running payroll comes into play. This is where an EOR and a PEO come into play.

What is an EOR

An EOR (Employer of Record) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. This includes:

- Handling payroll and taxes

- Managing benefits and insurance

- Ensuring compliance with local labor laws

- Taking on legal liability as the official employer

EORs are particularly useful for companies looking to hire employees in countries where they don’t have a legal entity, making them invaluable for international hiring and remote work arrangements.

What is a PEO

A PEO (Professional Employer Organization) is a third-party organization that provides comprehensive human resource management services to businesses, including payroll processing, benefits administration, and compliance with employment laws. PEOs act as the employer of record for their clients’ employees, handling all HR-related tasks and responsibilities.

PEOs are particularly useful for small to medium-sized businesses looking to outsource their HR and payroll functions, allowing them to focus on their core competencies while leveraging the PEO’s expertise and resources.

Why use any of these

Companies choose to use EORs or PEOs for several reasons:

1. Simplify compliance: Both services help ensure adherence to complex labor laws and regulations, especially when hiring across different jurisdictions.

2. Cost-effectiveness: They can often provide better rates on benefits and insurance due to economies of scale.

3. Time-saving: Outsourcing HR and payroll tasks allows companies to focus on core business activities.

4. Risk mitigation: These services take on much of the legal liability associated with employment.

5. Global expansion: EORs, in particular, facilitate hiring in countries where a company doesn’t have a legal entity. Remote is an example of an EOR.

6. Expertise: Both offer access to specialized knowledge in HR, payroll, and local employment laws.

Which one is better to use between the two

The choice between an EOR and a PEO depends on your specific business needs:

1. International hiring: EORs are better for hiring employees in countries where you don’t have a legal entity. PEOs typically operate domestically.

2. Legal liability: EORs take on more legal responsibility as the official employer, while PEOs share some liability with the client company.

3. Flexibility: EORs offer more flexibility for short-term or project-based hiring, while PEOs are better for long-term employment relationships.

4. Control: With a PEO, you retain more control over day-to-day employee management. EORs have more control as they are the legal employer.

5. Compliance: EORs are typically better equipped to handle international compliance issues, while PEOs excel in domestic compliance.

6. Cost: EORs can be more cost-effective for small-scale international hiring, while PEOs may offer better economies of scale for larger domestic workforces.

For companies focusing on hiring remote workers internationally, an EOR is generally the better choice due to its global capabilities and expertise in cross-border employment.

Which two are the most popular EOR to use and why

While popularity can vary depending on specific needs and regions, some of the most widely recognized and used EORs include:

1. Remote: Known for its user-friendly platform and global coverage.

- Pros: Supports hiring in 180+ countries, transparent pricing, built-in compliance tools.

- Why popular: Strong focus on remote work, modern tech-driven approach.

2. Deel: Rapidly growing EOR with a strong presence in the tech industry.

- Pros: Covers 150+ countries, offers both contractor and employee solutions.

- Why popular: User-friendly interface, quick onboarding process.

The “most popular” EOR can vary based on factors such as company size, industry, and specific international hiring needs. Remote and Deel have gained significant traction in recent years, particularly among tech startups and companies embracing remote work. Their popularity stems from their user-friendly platforms, extensive global coverage, and focus on modern work arrangements.

Happy reading!

Karl