July 3, 2021

PEO vs. EOR: Key differences

By Yorachel

The key differences between PEOs and EORs fall into the below categories:

Structure
A PEO acts as your co-employer, whereas an EOR is essentially your legal substitute for employee-facing matters. While this distinction means little as far as day-to-day operations go, it can have substantial implications for liability.

Because PEOs are your co-employer, you share all risks and liabilities with them daftar judi slot. This is why PEOs will help manage your risks, such as facility security and workplace safety. EORs, on the other hand, entirely cover your areas of risk, since they’re fully responsible for, and liable to, your employees.

Growth
The structural and risk distinctions between PEOs and EORs are especially important as your company grows. The co-employer arrangement of PEOs incentivizes a long-term relationship between the PEO and its clients, meaning that the PEO acts as a partner for your team. Using a PEO favors the continuous hiring of full-time employees over independent contractors.

For companies that instead prefer to hire seasonal or temporary employees, project-specific employees, or independent contractors, EORs may be better. Since an EOR understands federal, state, and local labor laws thoroughly, you take on less risk as employees come and go. Without an EOR, someone on your staff would need to know these laws and oversee compliance – a substantial burden – instead.

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Services
A PEO is a great choice if you want a service to handle your payroll, benefits administration, taxation, workers’ comp, and risk management, and you want access to higher-quality insurance with lower premiums. Through a PEO, you can offload a sizable chunk of your HR administrative work and take comfort in the knowledge that your co-employer is handling your HR tasks in a compliant and fair manner. Some experts say, however, that EORs can more easily obtain workers’ comp for small businesses in nonclerical industries.

An EOR can also offer all the aforementioned services, though it often takes on fewer tasks than a PEO. Your EOR may help you hire temporary employees or independent contractors. Since the EOR acts as your legal employer, your employees are covered under the EOR’s insurance. You won’t pay out-of-pocket costs to cover your insurance premiums. And like PEOs, EORs are large companies that can access higher-quality plans.

Additionally, only an EOR can register your business in new locations. These registration services are huge timesavers, since, without an EOR, you must personally register your company in all states where you employ people. For corporations and LLCs, this registration process is especially tedious, which makes an EOR partnership even more valuable.

Cost
Depending on the PEO you select, you pay either a flat fee per employee per month or a percentage of your payroll per pay period. Per-employee PEO fees typically cost $150 to $200 per employee per month, with payroll percentage fees hovering around 15% of your gross wages paid. Some PEOs charge a one-time setup fee.

EORs have similar fee structures and rates, but they cost less overall than PEOs. That’s because EORs fully cover your benefits and insurance plans, thereby saving you a substantial amount of money.

Flexibility
EORs generally handle fewer HR functions than PEOs, but the HR responsibilities they handle for companies can often be more complex than what a PEO handles.

Some PEOs do not accept microbusinesses (companies with fewer than 10 employees) as clients. EORs, though, are flexible working with small companies. Additionally, microbusinesses may prefer EORs, given the EOR’s ability and experience in overseeing temporary employee or independent contractor arrangements.