Employer of Record (EOR) vs PEO: Key Differences, Costs & Which to Choose
An employer of record and a professional employer organization both help companies manage employees — but they work in fundamentally different ways. This guide breaks down the key differences, costs, and when to use each model.
Key Takeaways
- An EOR is the sole legal employer of your workers in a foreign country; a PEO co-employs workers alongside your existing entity
- PEOs require you to have a legal entity in the country — EORs don't, making EOR the only option for companies without foreign entities
- PEOs are most common in the US market; EORs are the standard model for international hiring
- Cost: EOR typically $400-$699/employee/month; PEO typically $40-$160/employee/month (but requires entity overhead of $20K-$100K+ per country)
In This Guide
What Is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party organization that becomes the legal employer of your workers in a foreign country. The EOR handles payroll, taxes, benefits, and compliance with local labor laws — while you retain full operational control over the employee's day-to-day work, responsibilities, and performance management.
The critical advantage of an EOR is that your company does not need a legal entity in the country where the worker is based. The EOR already has entities established in 80-180+ countries, allowing you to hire compliantly in days rather than spending months (and $20,000-$100,000+) setting up your own foreign subsidiary.
From the worker's perspective, they are technically employed by the EOR on paper — but they work exclusively for your company. You decide what they work on, how they're managed, and what their career path looks like. The EOR handles the legal and administrative side of employment.
Want a deeper dive?
Read our full guide: What Is an Employer of Record? The Complete Guide
What Is a PEO (Professional Employer Organization)?
A Professional Employer Organization (PEO) is a company that provides HR outsourcing through a co-employment model. Under co-employment, both your company and the PEO share employer responsibilities for your workers. The PEO typically handles payroll processing, benefits administration, workers' compensation, and HR compliance — while you manage the employee's work, performance, and day-to-day operations.
The key requirement: you must have a legal entity in the country where the worker is based to use a PEO. The PEO doesn't replace your entity — it partners with it. Your company remains a co-employer, meaning you share responsibility (and liability) for employment compliance.
PEOs are most common in the United States, where companies use them to access pooled benefits plans (especially health insurance), offload HR administration, and reduce compliance risk. Major US PEO providers include ADP TotalSource, TriNet, Justworks, and Insperity.
What PEOs Handle
- - Payroll processing & tax filings
- - Benefits administration (health, dental, 401k)
- - Workers' compensation insurance
- - HR compliance & employment law
- - Employee onboarding paperwork
What You Keep Control Of
- - Hiring & firing decisions
- - Day-to-day work assignments
- - Performance management
- - Company culture & policies
- - Business strategy & operations
EOR vs PEO: The Core Difference
The fundamental difference between an EOR and a PEO comes down to one question: who is the legal employer?
Employer of Record (EOR)
- EOR owns the employment relationship
- Your company has no entity needed
- EOR assumes compliance liability
Professional Employer Organization (PEO)
- Both share employment responsibilities
- Your entity is required
- Compliance liability is shared
The key distinction in one sentence: With an EOR, the provider is the sole legal employer. With a PEO, you and the provider are co-employers. This means EOR is the model for international hiring without entities, while PEO is the model for domestic hiring efficiency with your existing entity.
Side-by-Side Comparison
| Factor | EOR | PEO |
|---|---|---|
| Legal entity required? | No | Yes |
| Employment model | Sole employer | Co-employment |
| Primary use case | International hiring | Domestic HR outsourcing |
| Country coverage | 80-180+ countries | Usually 1 country (US-centric) |
| Compliance liability | EOR assumes liability | Shared liability |
| Setup time | 1-2 weeks | 2-4 weeks |
| Typical cost | $400-$699/employee/month | $40-$160/employee/month |
| Best for company size | 1-200 international employees | 5-500 domestic employees |
| Benefits purchasing power | Local market rates | Pooled purchasing power |
| Control over employment | Day-to-day operations only | Shared control over HR |
| Worker experience | Employed by EOR (may feel indirect) | Co-employed (feels more direct) |
| Termination process | EOR manages per local law | Joint decision, less complex in US |
When to Use an EOR
An Employer of Record is the right choice when you need to hire internationally but don't have (or don't want to set up) legal entities in every country. Here are the five most common scenarios:
Hiring in countries where you have no legal entity
This is the primary use case. If you want to hire a developer in Poland, a support agent in the Philippines, or a designer in Colombia — and you have no entity there — an EOR is your only compliant option (short of setting up a subsidiary).
Testing a new market with 1-20 employees
Before committing to the cost and complexity of entity setup, companies use EORs to "test the waters" with a small team. If the market works out, you can establish an entity later and transition employees.
Need to onboard international employees in days, not months
Entity setup takes 2-6 months in most countries. An EOR can onboard employees in 1-2 weeks. When speed matters — a key hire is ready to start, or a client contract requires fast staffing — EOR eliminates the wait.
Want to eliminate compliance risk in unfamiliar jurisdictions
Every country has unique labor laws, tax obligations, mandatory benefits, and termination rules. An EOR assumes the compliance liability, so you don't have to become an expert in Brazilian labor law or Indian provident fund requirements.
Building a global team across multiple countries simultaneously
If you need employees in 5, 10, or 20 countries, setting up entities in each one is impractical. A single EOR provider can employ your workers across all target countries from one platform, with one contract and one invoice.
Comparing EOR providers?
See our detailed comparison: Best Employer of Record Companies in 2026
When to Use a PEO
A PEO makes sense when you already have a legal entity and want to outsource HR complexity — especially in the United States, where benefits administration is particularly burdensome for small and mid-sized companies.
You already have a legal entity in the country
PEOs don't replace your entity — they augment it. If you have a US LLC or a UK Ltd, a PEO can take on your HR administration, payroll, and benefits while you focus on running the business.
You want to pool benefits purchasing power
This is the biggest PEO advantage in the US. PEOs pool thousands of employees together to negotiate health insurance, dental, vision, and 401(k) plans that a 50-person company could never access on its own. This can save 10-20% on benefits costs.
You need HR administration support for domestic employees
If your company has 10-500 employees and no dedicated HR team (or a lean one), a PEO provides instant access to HR expertise, compliance guidance, and administrative support without hiring a full HR department.
You have 10-500 employees in one market
PEOs deliver the most value for mid-sized companies concentrated in a single market. The per-employee cost savings on benefits and HR admin scale well in this range, making PEO a cost-effective alternative to building out in-house HR infrastructure.
Important: If you need to hire internationally and don't have entities abroad, a PEO cannot help you — you need an EOR. PEOs are fundamentally a domestic solution.
Cost Comparison: EOR vs PEO
At first glance, PEOs look dramatically cheaper. But the comparison isn't apples-to-apples because PEOs require you to have (or create) a legal entity — and entity costs change the total picture significantly.
EOR Costs
- Per-employee fee$400-$699/month
- Entity setup cost$0
- Ongoing entity maintenance$0
- First-year cost (10 employees)$48K-$84K
PEO Costs
- Per-employee fee$40-$160/month
- Entity setup cost$20K-$100K+
- Ongoing entity maintenance$5K-$20K/year
- First-year cost (10 employees)$25K-$119K+
The Key Insight
EOR is more expensive per-employee but eliminates entity costs entirely. For small international teams (under 20 employees in one country), EOR is almost always cheaper when you factor in the total cost of entity setup, legal fees, registered agents, annual filings, and local accounting.
For larger teams (50+ employees) concentrated in one country, the math shifts: entity setup becomes a one-time cost that's amortized across many employees, making PEO (or direct employment) more cost-effective long-term.
Break-Even Analysis
The crossover point is typically 20-30 employees in a single country, where entity setup + PEO (or direct employment) becomes cheaper than EOR. Below that threshold, EOR wins on total cost. Above it, the per-employee savings of PEO or direct employment start to outweigh the upfront entity investment.
Can You Use Both an EOR and a PEO?
Yes — and many companies do. Using both an EOR and a PEO is a common strategy for companies that have domestic operations and are simultaneously expanding internationally.
PEO for Domestic
Use a PEO for countries where you have an entity. Pool benefits, outsource HR admin, and reduce compliance burden for your established operations.
EOR for International
Use an EOR for countries where you don't have an entity. Hire compliantly in new markets without the cost and complexity of foreign subsidiaries.
Example: A Typical Hybrid Setup
A US-based SaaS company with 200 employees in the US uses TriNet (PEO) for domestic HR, benefits administration, and payroll. At the same time, they use Deel (EOR) to employ 30 workers across 8 countries — engineers in Poland and India, customer support in the Philippines, and sales reps in the UK, Germany, and Australia.
This hybrid approach gives them the best of both worlds: pooled benefits and HR outsourcing domestically, plus compliant international hiring without setting up 8 foreign entities.
Consolidation trend: Some providers now offer both EOR and PEO services on a single platform. Deel, Rippling, and Remote all have some form of combined offering, allowing companies to manage domestic and international employees in one system.
Frequently Asked Questions
What is the main difference between an EOR and a PEO?
An EOR becomes the sole legal employer of your workers, meaning you don't need a local entity. A PEO enters into a co-employment relationship alongside your existing entity. The EOR model is designed for international hiring without entities; the PEO model is designed for domestic HR outsourcing with your existing entity.
Do I need a legal entity to use a PEO?
Yes. A PEO operates under a co-employment model, which requires your company to have a registered legal entity in the country where the employee works. Without an entity, you cannot enter into a co-employment arrangement. If you don't have an entity, you need an EOR instead.
Which is cheaper, an EOR or a PEO?
PEOs have lower per-employee fees ($40-$160/month vs $400-$699/month for EORs). However, PEOs require a legal entity that costs $20,000-$100,000+ to set up per country. For small international teams (under 20 employees in a single country), EOR is almost always cheaper in total cost. The break-even point is typically 20-30 employees in one country.
Can a PEO help me hire internationally?
Only if you already have a legal entity in the target country. PEOs are primarily a US-market solution for domestic HR outsourcing. If you need to hire in a country where you have no entity, a PEO cannot help — you need an Employer of Record (EOR). Some companies use a PEO domestically and an EOR for international hires.
Is co-employment risky?
Co-employment with a PEO carries some inherent risk because both your company and the PEO share employer liability. If the PEO mishandles tax filings, benefits administration, or compliance obligations, your company can be held jointly liable. Reputable, IRS-certified PEOs (known as CPEOs) mitigate this risk significantly, but it's a structural feature of the model. With an EOR, the provider assumes sole employment liability, which some companies prefer.
How do I switch from a PEO to an EOR (or vice versa)?
Switching typically involves terminating employees under the current arrangement and re-hiring them under the new model. For PEO to EOR, the EOR provider onboards workers as their own employees and you can optionally wind down your entity. For EOR to PEO, you first establish a legal entity, then transition workers from the EOR to co-employment with the PEO. Most transitions take 2-8 weeks depending on the country and number of employees. The key is ensuring there are no gaps in employment for the workers.
About the Author
Vik Chadha
Founder & CEO, Globalify
Vik Chadha is the Founder & CEO of Globalify and CEO of HiveDesk, a workforce management platform for contact centers. He previously co-founded GlowTouch (now UnifyCX), a global BPO company he helped scale to operations across 6 countries. With over 15 years of experience in the CX industry, Vik combines deep operational knowledge with technology innovation to help companies build and optimize global teams.
Need Help Choosing Between an EOR and a PEO?
Globalify helps companies navigate international hiring with compliant operations across 6 countries. Whether you need an EOR, a PEO, or both — our team can guide you to the right solution.
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