Global hiring is a great way to build on your company’s successes and expand its operations into new markets. However, managing your growing team’s HR needs can be challenging if you run a small-to-medium-sized business (SMB) or startup.
You’ll need to:
- Create contracts
- Onboard new hires
- Manage benefits
- Pay staff
- And more
It can get complicated quickly, especially if you’re employing a mix of employees and contractors or hiring in countries where you don’t have a local entity.
That’s where an HR service provider like a Professional Employer Organization (PEO), Employer of Record (EOR), or Agent of Record (AOR) can help — by taking HR tasks off your plate.
But which one is right for your business? We’ll break down the differences between a PEO, EOR, and AOR to help you decide which one might be the right fit for your business.
Key takeaways:
- PEOs offer a co-employment model and share the responsibility of managing and supporting your company’s talent.
- EORs function as the sole legal employer of your international employees and manage HR functions such as payroll and benefits administration.
- AORs do not employ your in-house staff; instead, they manage your relationships with independent contractors.
What Is a PEO?
A Professional Employer Organization (PEO) provides comprehensive HR services to businesses. Together, your business and the PEO act as co-employers, with the PEO taking on human resources responsibilities such as payroll, benefits, tax administration, compliance with employment laws, and employee onboarding. Meanwhile, your company still maintains control over day-to-day employee management.
Working with a PEO can be particularly beneficial for small businesses and startups, which may lack the time and resources required to handle HR duties for a growing number of employees.
Limitations of a PEO
However, PEO services are often only available for employees in countries where you already have a legal entity.
For example, suppose your company is based in France. In that case, you can typically use a PEO for all of your French employees but not necessarily for any employees you may have, say, based in Spain — unless you have a legal entity there.
If you don’t already have a base of operations in every country you want to hire, you’ll have to establish a new entity for each international employee. Otherwise, you may not be able to use a PEO.
Additionally, co-employment may be illegal in some countries, which could lead to liability issues if the PEO breaches local employment laws. A PEO may also offer more limited support to employees than other services can offer.
What Is an EOR?
An Employer of Record (EOR) is a service provider that enables companies to expand internationally by legally employing and paying global employees on their behalf.
The EOR provider takes on all formal employment responsibilities, including creating employment contracts, managing onboarding and benefits, payroll processing, and ensuring compliance with local labor laws and regulations. This allows businesses to compliantly operate in foreign markets without establishing a legal entity.
EOR services are similar to those offered by PEOs in that they each manage HR responsibilities for a company’s employees. However, there are some key differences.
- An EOR allows you to manage employees across many countries while limiting your business registration to your home country. Meanwhile, a PEO requires you to register your business in every country where you plan to hire.
- Since the PEO is serving as your co-employer, they may require you to have a minimum number of employees to take you on as a client. EORs, on the other hand, don’t necessarily have minimums. You can often partner with an EOR to hire and manage just one international employee.
- Both PEOs and EORs can provide benefits packages. However, while it’s optional for employers to offer benefits through their EOR, PEOs typically mandate that they manage employee benefits.
Unlike a PEO, EORs often assume additional HR functions such as managing international employee visa applications.
Ultimately, an EOR simplifies the process of employing international talent. With an EOR, your business can confidently navigate all aspects of global hiring — from onboarding to offboarding — and scale as you need to, when you need to, no matter where talent lives.
What Is an AOR?
An Agent of Record (AOR) functions as an intermediary between your company and contractors. In this role, the AOR handles the day-to-day administration of your contractors, including creating contracts and ensuring your contractors are correctly classified and paid on time — and in their local currency.
This allows you to leverage the flexibility of freelance talent without the administrative burden of managing contracts, payments, and legal compliance.
If this sounds a lot like what a PEO or EOR does, it’s because the services are quite similar in some ways. But there’s one key difference.
As intermediaries, AORs only handle contractor relationships, whereas PEOs and EORs serve as the co-employer (PEO) or legal employer (EOR) of a company’s employees.
Which One Is Right for My Business: PEO, EOR, or AOR?
The answer depends on your business needs.
For example, if your staffing needs fluctuate quite a bit based on workload, an AOR would help you streamline the process of hiring and managing contractors to help out during busy periods.
On the other hand, if you need an organization to take on HR duties for your full-time employees, then a PEO or an EOR would be the better fit.
Here’s a breakdown to help you decide which would be the best fit for your business:
PEO
- Ideal for: Companies seeking help administering their HR functions while maintaining a co-employment relationship with their employees. PEOs excel at handling payroll, benefits, and compliance for businesses operating within their registered countries.
- Not suitable when: You need to recruit employees in countries where your business doesn’t have a legal entity. PEOs require you to register in every location where you plan to hire employees. Also, PEOs don’t manage independent contractors.
EOR
- Ideal for: Expanding your workforce internationally without the complexities of setting up international entities. EORs serve as the legal employer for your international talent, ensuring compliance with local labor laws and handling all employment-related responsibilities.
- Not suitable when: You need a service provider to employ local staff on your behalf and don’t have plans to hire international employees.
AOR
- Ideal for: Management of your independent contractor workforce.
- Not suitable when: You hire full-time employees, either domestically or internationally.
Employ Talent in 180+ Countries with RemoFirst
Building a global team takes a lot of work — but it doesn’t have to be a headache.
RemoFirst makes it easier to employ remote talent in 180+ countries compliantly. We can help you employ both global full-time employees as well as international contractors by handling:
- Global payroll: Pay your international team accurately and on time in their local currency. We handle all tax calculations, deductions, and compliance requirements.
- Background checks: Enhance the safety and security of your organization with comprehensive background checks for international candidates.
- Benefits administration: Offer competitive benefits packages to your global team, including health insurance, retirement plans, and more.
- Legal compliance: Navigate the complexities of international labor laws and offer visas and work permit support for talent in 80+ countries.
Book a demo today and discover how RemoFirst can help you build a world-class team anywhere in the world.
