People sometimes use the terms “PEO” and “EOR” interchangeably, and they may seem quite similar…but there are some significant differences you need to understand if you’re considering either of these options as an HR solution for your business. 

The differences between PEOS and EORs

About EORs 

When you work with an employer of record (EOR), the EOR becomes the official company that hires your workers. Your employees truly work for the EOR and simply provide services to you as their client. And for some businesses, that’s okay. 

About PEOs 

With a professional employer organization (PEO), you enter into a co-employment relationship. This means that employment responsibilities are shared between the two of you. Your PEO provides HR services and expertise, while you retain 100 percent control of your company and set the direction for its culture. For instance, you continue to have a role in selecting benefits and establishing values, which are reflected in those benefit plans. Working with an EOR, this falls under the realm of that third party. 

• PEOs work with their clients to strengthen their workforces and enhance people’s work experience. They provide HR platforms and tools and help establish culture and support it through handbooks and other materials and direction. A PEO can have a lot of leeway if that’s your preference, but you continue to strengthen your company through relationship building with team members. 
• A PEO allows you to outsource any or all your HR functions, share employment liability, and gain economies of scale when it comes to offering competitive benefit packages to your employees. In addition to benefits, PEOs typically handle workers’ compensation, payroll processing, tax compliance, unemployment insurance claims, HR policies and procedures, and possibly additional functions such as training and risk management. EORs can provide similar services. In both cases, your employees fall under your third-party partner’s federal employer identification number (FEIN). 

In essence, think of a PEO as a co-employer, and working with an EOR as being on equal footing with a company that hires employees. 

Which is Best for You? 

Are you still undecided or need more information before you can make the right choice for your growing business? If so, contact Key HR today. We’re aligned with a full spectrum of preferred partner companies to offer new and innovative ways of meeting our clients’ payroll, employee leasing, benefit, and insurance needs. With specialists in every area of HR, we can customize a solution to help your company cut costs, save time, optimize your workforce, boost revenue and minimize risk.