Whenever you consider global expansion, PEO and EOR services will always be among the most highly recommended and beneficial options available to you. These options allow companies to operate in a foreign market without establishing a separate legal identity or incorporating a new company in that market, thus saving time and money. PEOs and EORs also allow companies to avoid the problems and pitfalls associated with Joint Ventures or any option that involves ties to partners with wildly different values or goals.
The Differences Between PEOs and EORs
While on the surface, both options allow companies to achieve the same goal, the two approach this solution from different angles. Which of these is best for you and your company will depend on how your want your relationship with the PEO or EOR service provider to function.
According to many national regulations, the two services are effectively the same, though, by definition, several key distinctions may apply depending on the country you are operating in.
A PEO (Professional Employer Organization) is a service provider that offers a form of “co-employment” where an agreement is made between you, the employer, and the PEO services provider. The employment contract remains between you and the employee. Typically, PEOs have their own branch or entity in a country where they offer services, and your employees are “seconded” or managed by that entity.
This allows the PEO to take charge of many day-to-day HR functions like payslip and payroll services while leaving the contract and final employment agreement between you and your employee.
An EOR (Employer of Record) service is when a provider makes a contract directly with the employee to become their legal and liable employer at the direction of a client company. EORs are responsible for all the HR services a PEO provides. At the same time, they are also fully responsible for every aspect of compliance with local labor laws.
Typically, EOR agreements are for companies that only wish to hire employees for temporary projects or those that require less direct management. EORs may also be preferred by smaller companies with no specified HR department or ability to provide HR services to their employees .
Many PEO service providers require a minimum of five or more employees to form an agreement, but this is not something typical within an EOR agreement. This means an EOR may be of more benefit to a smaller company looking to hire less employees.
INS Global can offer any elements of either service according to your requirements.
PEOs and Why They Give You More Control
Both PEOs and EORs provide excellent benefits for companies seeking to expand internationally. Still, one will likely be better for your company in the long run.
In this way, the most crucial element to consider in the debate may be the greater control that a PEO gives you, the employer, over an EOR. Alternatively, for companies that want to hand over more day-to-day functions and allow their services provider more scope in terms of hiring and terminating contracts, an EOR may be preferable.
Some companies may prefer a services provider to take care of time-consuming or complex legal tasks. Payroll outsourcing services, for example, might be the priority for a company that already has a presence in a foreign market but wants to outsource HR operations to save time. In this case, a PEO offers much more flexibility. You, the employer, will always be in control of key aspects of employment.
The Problem of Health Insurance
Ensuring proper health insurance for employees is a constant concern for companies hiring globally. Many international health insurance providers are massively overpriced or don’t offer plans that offer tangible benefits for traveling employees. One possible solution may be searching for a PEO services provider that provides a health insurance services plan.
A PEO can potentially offer health insurance plans that provide health insurance for your employees, whether you have a legal entity in your target market or not. At the same time, you can still be fully in control of your employee’s employment contract.
In most cases, the insurance options available to PEOs are typically opt-in and cost a lot more. EORs offer clients the same kinds of insurance they would provide for their own employees. This might be something to consider in countries lacking good social insurance plans, or perhaps even in situations where the insurance option offered by a PEO is expensive or doesn’t cover all desired areas.
INS Global offers a range of insurance plans as part of their PEO/EOR service to suit your individual requirements. As INS Global offers a service that combines the best of both PEO and EOR, these plans are built to offer the best possible protection in the most cost-efficient way.
Knowing the differences between PEOs and EORs is your first step to understanding how best to solve your global recruitment or expansion problems. Both offer much more straightforward and practical solutions than company incorporation.
For the most part, these services operate in the same way. Still, suppose you find yourself in a country where EORs and PEOs are subject to different restrictions or a different range of available operations; in this case, it’s important to understand their differences to know which is best for you.
Fortunately, INS Global’s PEO solution offers the benefits of both PEO and EOR in most countries worldwide. INS Global can legally hire employees on your behalf or provide HR services as needed in China and 80+ countries.
Contact our PEO services today to find out more about how INS Global can be your local partner for all your PEO/EOR and HR outsourcing service needs in your target market.