Updated: Dec 20, 2021
Both South Africa PEOs (Professional Employer Organisations) and EORs (Employers of Record) are options for businesses expanding globally without an entity in the international market they're entering. Outsourcing the tasks and operations required to set up an overseas workforce is quicker and less costly for these companies and enables them to grow faster in global markets. Small to medium-sized businesses are most likely to partner with PEOs or EORs to help them expand. However, it might be difficult to tell and understand the differences between a PEO and EOR. Here, we'll explain what they are and which is better for your workforce goals and strategy.
The differences between a PEO and an EOR
While a PEO manages all of a company's outsourced HR functions for its entire workforce, essentially acting as its whole HR division, and EOR only takes on a portion of these, for a portion of the company's workforce.
A PEO becomes co-employers of their client's workforce; EORs become legal employers.
A co-employer (PEO): is an outsourced service that manages all accounting, tax-compliance, payroll, employee HR, and legal tasks for the client company. They share the rights and management of employees with their client in line with a unique contract, but the employees still work for the client organisation, not the co-employer (PEO).
A legal employer (EOR): serves as the formal employer of their client's employees on paper (contract) and is responsible for managing official employment duties.
A PEO advises their client on hiring employees and empowers them to make an informed choice on who to hire; an EOR selects candidates and hires employees on behalf of their client, meaning their client is completely uninvolved in the process. This can be preferable for some companies that don't have an HR department and want to lessen the time spent setting up their global workforce.
A PEO only covers some of a client's insurance, such as tax insurance; an EOR has its own insurance and provides insurance for its client.
What PEOs and EORs BOTH do:
Ensure employment compliance in the workforce's country, reducing their clients' risk of expanding overseas
Save companies time and costs involved in setting up a global workforce
Assist in boosting the efficiency of their clients' international operations
Perform allocated HR functions on behalf of their clients
Help to grow talent in their clients' workforce
The bottom line
There are many things for organisations to consider when choosing between hiring a PEO or an EOR, but at the end of the day, companies that wish to outsource all HR tasks to another company should join with a PEO, while companies setting up a contingent global workforce should choose to partner with an EOR.