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Differences between employer of record and PEO

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In the previous series, we learned about the two concepts of employer of record vs peo. In general, both are forms of human resource outsourcing services provided by consulting and human resource management companies to businesses in need of hiring. So in terms of characteristics, what is the difference between EOR and PEO? S4B Vietnam will be the “messenger” to bring the exact answer to readers right away (EOR/PEO/RPO services of S4B Vietnam in Vietnam: PEO, EOR, employer of record vs payroll provider)

1. Differences between PEO vs EOR

PEO – Professional employer organization – Professional labor service provider
EOR – Employer of Record Service – Contractual human resource management service

Both of these phrases refer to human resource outsourcing services, both ensuring compliance with local labor laws and regulations, but each concept still has its own identity with the following differences:

Employer of Record vs. PEO: Which Is Right For Your Organization?

>>>Read more: The Role of professional employer organisation( PEO) in Recruitment

1.1. Scale of business users

PEO is suitable for small and medium-sized enterprises, where the HR department is small and does not have much in-depth experience in handling HR operations and synchronously managing HR work.

EOR is suitable for all business sizes, but with the criteria of multinational operations, most of EOR’s customers are medium and large enterprises.

1.2. Business operating area

PEO serves customers who are businesses operating in the same country where PEO provides services. For example, it can be a foreign enterprise investing in Vietnam or a Vietnamese enterprise, as long as they have a headquarters / branch operating in Vietnam.

EOR serves businesses in other countries that operate with it, for example, a business headquartered in the US (which has not yet established a branch in Vietnam) signs a contract with an EOR company in Vietnam to manage Vietnamese human resources in accordance with Vietnamese labor laws on their behalf.

1.3. Signing contracts with employees

PEO does not sign contracts with employees, the signing of this contract is still between the business and the employee. PEO only represents the business in implementing human resource management operations according to the agreement with the business.

EOR will sign labor contracts with employees that the business recruits. The labor contract will only have the signatures of the EOR company (the role of the legal Employer) and the employee, the business only signs an outsourcing service contract with the employer of record vs staffing agency.

PEO vs. EOR: Differences, Pros & Cons, and More

1.4. Scope of responsibility for employees

Using PEO, the hiring enterprise and the PEO company share responsibility for the employee’s benefits.

EOR is different, all responsibilities, benefits or obligations to the employee will belong to the EOR company. The enterprise is only responsible to the EOR company according to the signed outsourcing contract.

1.5. Service fee

The PEO service fee will be lower than that of EOR. Because in addition to the service cost that the EOR company receives, the enterprise must also pay another fixed amount for the EOR company to pay salaries, bonuses, benefits, commissions, taxes, etc. to the employee.

The PEO company also performs these tasks, but they only worry about the procedures and processes, and the “cash on delivery” is still transferred from the enterprise to the employee without going through the PEO company’s account. Therefore, the business only pays the outsourcing service fee to the PEO

2. Which is better PEO or EOR?

Having grasped the similarities and differences between PEO and EOR, now look at the business you own, if you are still confused, the objective answers to the following questions will help you make the right decision. Which is better peo or eor?

2.1. Does the business have a legal entity in the country where the employees live?

If so, you should choose PEO to manage human resources on your behalf

If not, EOR is definitely what you should do.

In the second choice, the business must be careful when choosing an EOR partner. It is necessary to make sure that the EOR has legal status and is qualified to directly sign labor contracts with employees in that country, not through a third party. If you choose wrongly, in addition to having to pay a high service fee, businesses can easily lose talent because of the cumbersome and inconsistent human resource management experiences they receive from EOR.

2.2. Number of employees that the business needs to hire a human resource manager

PEO only undertakes a part of the human resource management tasks, mainly procedural tasks that take a lot of time to process. This is also the reason why PEO service companies often require a minimum number of employees for each outsourcing service contract with corporate clients. Therefore, if the business needs to manage a large number of employees, it should choose this form.

On the contrary, most of the international employee management responsibilities are entrusted to EOR, so in order for employees to have the best experience and retain multinational talent most effectively, the business should choose EOR. At least until the business establishes a legal entity in the country where the employee lives, then it can switch to PEO

2.3. The level of control over employees that the business wants to assume

If you want to share a part of the human resource management activities rather than completely entrust them to the service company, and ensure that you maintain a level of proactive control over your employees, then the business should choose PEO.

In case your business is located in a remote country where the employees live, the goal is only to ensure full legal responsibility for employees so that they can work with peace of mind, and the business itself can avoid related human resource legal risks, then boldly choose EOR as the most resource-saving solution.

Both PEO and EOR are two important outsourcing services that help businesses manage human resources effectively and comply with labor laws. Depending on the scale and actual management needs, businesses will base on the differences between PEO and EOR to choose which service to use. According to S4B Vietnam, for small and medium scale, PEO should be the priority, and for businesses with overseas recruitment needs, EOR service is the most effective solution.

Contact S4B Vietnam’s EOR/PEO/RPO services in Vietnam: PEO, EOR, Payroll and Corporate service in Vietnam

S4B Vietnam

Address: Unit 701B – 701C, Tower A, Handi Resco 521 Kim Ma Street, Ba Dinh District, Hanoi, Vietnam.
Tel: + 84 24 3974 4181
Email: service@s4b.com.vn

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