What Exactly Is The Difference Between EOR and PEO?
EOR and PEO help companies expand their HR offerings, from hiring and onboarding to employee benefits. Read on to understand the key differences between EOR and PEO, and see which is best for you.
Differences Between EOR and PEO
EOR and PEO are both options for businesses that want to outsource their HR functions. They are both considered third-party businesses that can partner with your business and take care of all your HR tasks. Both of these options can offer robust HR management solutions to improve your work situation and help grow your business. Both of them will also allow you to focus on the more important aspects of your business. When it comes to EOR and PEO, both of them can help businesses in similar ways. So, how exactly are they different, and does it even matter to know the difference?
To answer the second question above, yes it does matter to know the difference between the two because mixing them up can put you at legal risk. As for the first question, it will take some time to answer it. The main differences between EOR and PEO are listed below.
Key differences between EOR and PEO:
Employer of record (EOR)
EORs can provide legal protection for your business, company expansion opportunities, and more. They will also put a share of your company, and your employees, on their payroll. Typically, EORs will tend to keep the employment contract and engage you with an agreement for their services.
In addition to the above, EORs also take care of the hiring and employment process for you. What this means is that they are the legal employers of anyone that you may hire through them. This is because the employees will be signing their contract with the EORs and not with your company. However, this does not mean that you will not be the one setting their wages or dealing with them as your own employees; you will definitely be the one evaluating them and their work. Also, since the EOR is technically the legal employer, you can work with anyone anywhere that the EOR is registered.
Several EORs offer many HR services that are similar to the ones PEOs offer. This includes payroll, benefits, talent management, task management, compliance, on-boarding, and more. However, EORs can provide better services in terms of employee benefits, insurance options, and risk management.
There are a few more differences between EOR and PEO. In addition to the above, EORs can also spare you from having to deal with insurance paperwork and providers. They can provide well-rounded insurance that includes liability in general, workers’ compensation, and more types of insurance. They also take on full liability regarding the employment arrangement, take care of international compliance and handle legal responsibilities.
Professional employer organization (PEO)
PEOs, on the other hand, are slightly different from EORs. A PEO will legally need to be registered as one. This means that an EOR cannot work like a PEO in this case. The main difference between the two, however, is which party is doing the employing.
Businesses tend to turn to PEOs when they find their plates full and need a team of experts on hand to take care of certain, or all, HR tasks. So, with a PEO, you are basically entering into a co-employment relationship. This means the people that you hire are your business’ employees, unlike with an EOR. This also means that you are legally responsible for these employees; the PEO is mostly there to train, support, and assist with your HR functions. Another thing that sets PEOs apart from EORs is that you hold all of the contracts for employment.
A PEO usually needs at least five to ten employees, which is relatively reasonable. PEOs handle a lot of, if not all, HR functions. Some of the most important aspects taken care of by PEOs include onboarding and hiring, terminations, staff reviews, compliance, State Unemployment Tax Act (SUTA) and Federal Unemployment Tax Act (FUTA) rates, health insurance plans, and so much more.
There is a wide array of advantages to outsourcing with a PEO for your business. It is no wonder that most businesses do, in fact, these days. With a PEO, you can have much more control over all of your HR functions, your employees, and more; unlike EORs which are limited in this respect.
PEOs function more or less like an HR department that is a part of your company. By outsourcing with a PEO, all of your HR-related functions are taken care of entirely.
Compliance is also one of the most essential things that will be guaranteed when it comes to PEOs. With a PEO, you will not have to worry about staying up to date with all of the current or changing labor laws, whether local or federal.
In addition to the above, PEOs also take care of the following tasks: staff background checks, reviews, preparing contracts, an array of HR services, and more. If the PEO you choose to outsource with is really good, then they will also provide training, consultation, support, useful advice for management, and other ways for you to improve your business.
By the end of the day, however, you are the one who is solely responsible for your business in terms of management, employment, and all other important aspects of your company in general.
So, Which Is Better?
As can clearly be seen above, when it comes to the differences between EOR and PEO, each option has its own pros and cons. You will need to keep this in mind when choosing the solution your business will need in the long run. With that being said, PEO solutions are typically much more popular and in use in most businesses today, even though EOR and PEO have many similarities. If you are looking for a good PEO solution to outsource with, then look no more. Below is a list of excellent recommended PEOs that we have fully reviewed.
Recommended PEO Solutions
There are many different PEO solutions to choose from on the market. That is why it may seem difficult to find a good one for your business at first. However, with our help, the daunting challenge of finding the right PEO will not seem so difficult anymore! So, without further delay, here is our summarized list of recommended PEO solutions that are perfect for businesses of any size to outsource with.
Paychex is a prominent B2B service provider in the industry. They offer top-notch PEO solutions to businesses of all shapes and sizes. With their PEO, you will be provided with extensive HR support and guidance, as well as the following features:
- Payroll Processing
- Employee Benefits and Administration
- HR Services
- Time and Attendance
- Business Insurance
- Learning Management System and Training
- Risk Management
- Employee Performance Management
Unfortunately, Paychex does not publicly advertise its PEO plans and prices. Instead, they provide custom quotes based on your business's needs and size. Also, it offers three subscription plans for its payroll software solution, which comes with its PEO services. The payroll software plans are:
- Paychex Flex Essentials - $39/month, + $5 per employee
- Paychex Flex Select – Quote-based
- Paychex Flex Pro – Quote-based
Each of these plans comes with a different set of features and services based on how much you pay. You can read our full Paychex payroll review to know more about its well-rounded features!
Coming in second on our list of recommendations, we give you BBSI! They are an accredited ESAC professional employer organization (PEO). This means that you will be receiving the best of the best with their services and solutions. They provide a selection of comprehensive features, some of which include:
- Business Strategy Development
- Human Resources
- Payroll Administration
- Retirement Benefits
- Risk and Safety
- Staffing and Recruiting
- Technology Solutions
- Workers' Compensation
- And more
BBSI is also quote-based when it comes to its prices and plans. You can contact their team to request a quote by calling them at 1-800-494-5669, or by filling in and submitting a form on their website.
Last but not least on our list of recommended solutions is Justworks. Justworks is an excellent employee leasing company, as well as a standalone payroll service provider. Some of their best PEO services include the following:
- Hiring and onboarding for remote teams
- Employee self-service
- Payroll services
- Taxes and compliance
- Benefits administration
- Software integrations
- Contractor payment
- Employment Practices Liability Insurance Plans
- And more!
Justworks has flexible plans and prices for each business based on their number of staff. These plans listed below are excellent for small businesses with a range of 25-99 workers:
- Basic plan: starts at $44 per month per employee
This plan provides you with Payroll services, Benefits, HR tools, and Compliance.
- Plus plan: starts at $89 per month per employee
This plan has everything in the previous plan, in addition to access to Medical, Dental, and Vision health insurance plans as well.