Choosing Between an EOR and PEO: What’s Right for Your Business?

You’re not alone if you’ve ever felt overwhelmed by HR paperwork, payroll taxes, or compliance headaches. Running a business is hard enough without getting bogged down in the back office. That’s where outsourcing HR support can make a real difference. Two common options are partnering with an EOR (Employer of Record) or a PEO (Professional Employer Organization). Let’s break down the differences so you can choose which one is right for your business.

A PEO is a company that provides full-service HR support for small and mid-sized businesses. This includes everything from payroll processing and benefits administration to risk management, compliance, and workers’ comp coverage.

What sets a PEO apart is a unique concept known as co-employment. This means that your employees are technically employed by both your business and the PEO. You retain control over day-to-day operations, hiring, and management decisions, while the PEO handles HR-related responsibilities.

Partnering with an EOR doesn’t mean handing over the reins to someone else. It just means getting the support you need behind the scenes. You still make all the decisions that matter most, like who to hire, how to train, when to promote, and what goals to set. The EOR handles the administrative and compliance-heavy aspects of employment.

An EOR goes a step further. In this model, the EOR becomes the legal employer of your workers for tax, benefits, and compliance purposes. Unlike a PEO, an EOR does not require you to register your business in each state where you employ people, making it ideal for companies with remote workers or teams spread across multiple states or countries.

The EOR takes on all compliance risk, handles payroll, manages benefits, pays employment taxes, and ensures all employment laws are followed in each location. You still manage your team day-to-day, but the EOR handles everything from onboarding paperwork to offboarding.

Both PEOs and EORs take a lot off your plate, but they differ in how much responsibility they assume. Here’s what both typically offer:

• Payroll Administration: Accurate, on-time payroll processing, tax filings, and W-2 management
• Employee Benefits: Access to affordable health insurance, dental, vision, retirement plans, and other benefits
• HR Compliance: Help navigate labor laws and workplace policies
• Workers’ Compensation: Coverage and claims management to protect your business
• Risk Management: Guidance on safety protocols, employee handbooks, and HR best practices

The difference is that with a PEO, you share liability through co-employment. With an EOR, the EOR assumes full employer liability for compliance and taxes.

Both models offer advantages, whether you choose an EOR or PEO.

• Time Savings: Managing HR can eat up hours every week. An outsourced partner handles the details, allowing you to focus on running your business.
• Better Benefits: Because EORs and PEOs work with multiple businesses, they can offer group rates on benefits that are usually out of reach for smaller companies.
• Compliance: With constantly changing regulations, staying compliant can be challenging. Both services keep you up to date and helps avoid costly mistakes.

• If you’re hiring across multiple states or internationally and don’t want to set up new legal entities, an EOR is likely the best fit.
• If you’re a small to mid-sized business looking for help with HR, payroll, and benefits in one location, a PEO can give you the back-office support you need.
• If you already have an HR person or team, a PEO can support their efforts, while an EOR is better suited for companies without an existing HR structure or companies entering new markets.