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PEO vs. EOR: Which is Better for Your Business?

HR Solutions • Jan 31, 2024 3:00:00 PM • Written by: Ongresso - Business Beyond Border

What is a PEO and an EOR?

If you’re a US company looking to expand and grow your business to Latin America, you’re probably wondering how to handle the hiring process. A few different options are available to you, but two of the most popular are PEOs and EORs.

A Professional Employer Organization (PEO) offers comprehensive HR services to its partners, encompassing payroll management, regulatory compliance, and other related functions. By serving as an outsourced HR department, a PEO enables client companies to access specialized expertise while retaining accountability for their legal and day-to-day operational responsibilities. It is essential for the client company to maintain its own distinct legal entity when engaging with a PEO.

An Employer of Record (EOR) is a third-party entity that assumes the role of the legal employer for your workforce. Unlike a PEO, an EOR does not necessitate the client company to have its own legal entity. The EOR manages tasks associated with the employment of personnel, such as payroll, taxes, and benefits, facilitating agile and compliant hiring processes with reduced administrative burden and costs.

So, which is right for your business? It depends on your specific needs and circumstances. If you want to retain some control over HR decisions and are willing to share some of the risk and liability, then a PEO may be a good option. If you want to outsource all of your HR responsibilities and want to avoid any risk or liability, then an EOR may be a better option.

Key Differences Between PEOs and EORs

In Latin America, it is customary to establish a company or legal entity before engaging in HR outsourcing. Ongresso, on the other hand, offers customized solutions that fit your particular needs and objectives.

Benefits of PEO:

  • Utilizes local HR knowledge.
  • Effective payroll and benefits management.
  • Adherence to local labor laws.
  • Minimizes administrative work.
Considerations with PEO:
  • May involve relinquishing some control over HR duties.
  • Adjustment to the procedures of the selected PEO.
Benefits of EOR:
  • Eliminates bureaucratic processes and paperwork.
  • No legal entity registration or related expenses.

Considerations with EOR:

  • Possible drawback of having less control over HR procedures.

Focus Areas:

  • EOR: Manages administrative and legal aspects, including payroll, taxes, and compliance.
  • PEO: Offers comprehensive ongoing HR support beyond employment administration.

    Bildschirmfoto 2024-01-30 um 10.09.29

When to Use a PEO

Here are some reasons why you might want to use a PEO, Professional Employer Services:

  • You’re a small business with grow objectives and don’t have the resources to handle HR in-house.
  • You have high turnover and need help with compliance.
  • You’re in a regulated industry and need help staying compliant.
  • You want comprehensive HR services beyond employment administration, such as ongoing HR support, employee development, and performance management.
  • You prefer to outsource the entire HR function, including payroll, benefits administration, and compliance.
  • You want to share employer responsibilities and liabilities with the PEO.
  • You are looking for a long-term strategic HR partnership.
  • You are willing to have less direct control over HR processes and policies.

When to Use an EOR

Here are some reasons why you might want to use an EOR, Employer of Record:

  • You’re a large business with complex HR needs.
  • You need to outsource all of your HR responsibilities.
  • You want to avoid any risk or liability.
  • You want to quickly establish a presence in a new country without the need for legal entity registration.
  • You primarily need assistance with legal and administrative aspects of employing talent, such as payroll, taxes, and compliance.
  • You want flexibility in managing HR processes while retaining more control over policies and procedures.
  • You are looking for a shorter-term solution for employing workers in a specific country.
  • You are willing to take on more employer responsibilities and liabilities compared to a PEO

We invite you to read this full article with deeper information.

Case Study – International PEO Services – Exfreight Zeta Inc.

Here are some reasons why you might want to use an EOR:

  • You’re a large business with complex HR needs.
  • You need to outsource all of your HR responsibilities.
  • You want to avoid any risk or liability.

Challenge: Exfreight sought a new provider for International PEO services in Latin America, that matched their business model and offered personalized support.

Solution: Ongresso was chosen as the provider due to our alignment with Exfreight’s needs and exceptional client support. Ongresso informed the different alternatives for the business, based on its growth objective. The advantages of PEO, the benefits of EOR and also its risks and complications were evaluated in a timely manner.

Result: In the end, the business decided that the best strategy to grow in Latin America was through PEO, in this way, Exfreight experienced high satisfaction with the sales process and timely support. Ongresso’s fair treatment, transparent cost structure, and accurate information led to increased client satisfaction and a continued partnership.

You can rad the full case study here.

Conclusion: Choosing the Right PEO or EOR

The best way to choose between a PEO and an EOR is to talk to a few different providers and get quotes. It is important to understand the specific services that each provider offers and to choose the one that best meets the needs of your business.

Additional Considerations for US Business Expanding to Latin America

If you’re a US business expanding to Latin America, there are a few additional considerations you should keep in mind when choosing a PEO or EOR.

  • Language: Make sure the PEO or EOR you choose has experience working with businesses in Latin America. This will ensure that they can communicate effectively with your employees and understand the local culture.
  • Legal: Make sure the PEO or EOR you choose is familiar with the employment laws in the countries where you plan to hire employees. This will help you avoid any legal issues down the road.
  • Cost: The cost of using a PEO or EOR will vary depending on the size of your business, the number of employees you hire, and the services you need. Make sure you get quotes from multiple providers before making a decision.

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Ongresso - Business Beyond Border

We assist your company with successfully establishing and growing your operations in Latin America.