In today’s world, jargon changes as rapidly as technology does. Jargon is an issue in all industries, as new technology and terminology are constantly emerging.
As a recent Harvard Business Review article about jargon puts it, “People love to complain about jargon…however, jargon continues to thrive in most professions.” Understanding the latest terms you encounter has to be a priority for anyone working in a competitive market, because these terms can have vastly different implications for your business.
The Human Resources arena is constantly evolving and growing, with new words and terms being added to an already-overwhelming list of terminology. You’ve probably heard of a PEO or an EOR, but what do these acronyms mean? Can you use them interchangeably? How about International PEO, AOR, or GEO? In this article, we’ll cover the differences between these terms and what they refer to.
The Main Differences
There are many companies out there that offer helpful services when it comes to outsourcing or managing payroll, but how do you know what kind of service is best for your company? That’s where knowing the difference between a PEO and an EOR comes in.
For clarity’s sake, we’ve put the main differences between a PEO and EOR into the chart below. Under the chart you can read more about each of these terms specifically.
| PEO | EOR | |
| Employee Minimum | YES | NO |
| Assumes Liabilities | NO | YES |
| Serves as Legal Employer | NO | YES |
| Shares Responsibilities | YES | NO |
| Payroll Funding | NO | YES |
| Requires Payment Prior to Payroll | YES | NO |
| Allows Globalization | NO | YES |
| Need’s to Report Under Client’s Tax ID | YES | NO |
| Provides Worker’s Comp | NO | YES |
Professional Employment Organization (PEO)
A Professional Employment Organization, or PEO, is a company that teams up with your business to provide HR services like payroll processing, benefits, and tax filing. PEOs provide a great way for companies to access the benefits of having an HR department without the hassle and cost. PEOs provide a range of services that can help companies and their employees more effectively manage the workplace.
Unlike an EOR, PEOs don’t assume a full legal employment role: they co-employ. The PEO takes responsibility for the administration of the payroll and HR support — leaving you to take care of your employees’ daily tasks and focus on what matters most in order to make a difference.
If you’re looking for more control, the co-employment offered by PEOs can be an advantage. However, you miss out on the insurance benefits and the ability to not need registration in other states and countries.
Employer of Record (EOR)
An Employer of Record, or EOR, is the legal employer of anyone you hire through them. They are the company that is solely responsible for paying an employee wages and taxes, as well as managing benefits, timekeeping, and compliance. They take on complete liability and report taxes under their own tax ID. If you don’t have an EOR, then your employees will be working in a gray area that could lead to more complications down the line.
One of the significant benefits of an EOR is that they handle payment based on payment terms–unlike a PEO which requires payment prior to payroll being made. Plus, you are able to hire anyone, anywhere in the world through an EOR, regardless of whether you are a registered business entity there. If you’re looking to expand to new markets or hire top tier global talent, an EOR is the way to go.
Many companies who are growing rapidly have hiring needs but don’t want to add additional headcount. Using an EOR is a way to get work done for your business as an expense because the EOR is the legal employer.
An EOR takes care of nearly all your HR needs. You don’t have to worry about healthcare, labor laws around the world, or worker’s compensation because they will do everything for you – from payroll and onboarding to filing taxes and offering benefits.
Additional
Agency of Record (AOR)
An Agency of Record (AOR) is a company that is contracted to provide services for an extended period of time. The AOR might be hired by the employer or by the employee, and they are typically tasked with creating marketing material, managing social media accounts, designing graphics, and other day-to-day tasks related to branding.
Global Employment Outsourcing (GEO)
A Global Employment Outsourcing, or GEO, acts like an EOR in that it can help you if you’re conducting business in a country where your company is not registered. A GEO is valuable if you are looking to operate internationally but don’t have the staff, expertise, or registration abroad to legally expand your team. It functions like an EOR in that it is the sole, legal employer of your hires.
International PEO
International PEOs are often confused for GEOs. However, International PEOs are still simply co-employers and only share some of the responsibilities with your company. In addition to the usual PEO qualities, an International PEO does offer reduced compliance risk across state and national borders. If you’re looking to expand globally, check out our recent article, 4 Tips for Creating a Global Workforce Strategy.
In Conclusion
An Employer of Record, or EOR, is the most advantageous option for maintaining a contingent workforce in today’s world. If you’d like talent from around the globe without the stress of compliance, and benefits for your remote workforce, consider an Employer of Record like GreenLight.
In a world where the skills gap is only growing, you need to focus on retaining the great freelancers you do find. Statista reported that “16 percent of gig economy workers reported having assets in employer-sponsored retirement plans, compared to 52 percent of full-time employees.” Offering benefits is an excellent way for large and small businesses to become a much more attractive option to top-tier freelancers.
GreenLight can offer benefits like 401(k) and healthcare to your contractors at no additional cost to you. When you hire through GreenLight, our 401(k) partner, Human Interest, will give you a leg up on the competition.
You can focus on your team while we take care of the rest. We handle payroll, benefits, risk mitigation, and compliance so that you have more time to build a world-class team. Schedule a call with our team of experts today.
