PEO vs. EOR: Which works best for your business?
The article defines Professional Employer Organizations (PEO) and Employers of Record (EOR).
Hiring a Professional Employer Organization (PEO)
Globally, Professional Employer Organizations (PEOs) have provided many companies support in managing both HR and related administrative functions.
The PEO Market provides services across North America, Europe, Asia-Pacific, Latin America, and the Middle East and Africa, with North America and Europe as the primary markets for PEO services.
If you already have expanded offshore and have set up local entities, but require local HR and administrative assistance, hiring a PEO is the right solution for you. Hire a PEO to continue local hiring compliant to local tax regulations, payroll compliance, administrative support, onboarding, and other employee support services.
The global professional employer organization market had a market share of USD 41,997.4 million in 2017, according to a new report of StraitsResearch. It is predicted to increase at a CAGR of 11.10% from 2017 to 2030. (Globe News Wire)
By End-User, the [PEO] market is segmented into small, medium, and large businesses. The large businesses acquired ~50% of the market in 2021. It is expected to grow at a CAGR of 8.77%. (Globe News Wire)
Setting Up an Offshore Legal Entity
When expanding in foreign markets, the first thing that comes to mind is to set up a legal entity offshore.
However, setting up a legal entity offshore requires extensive budget.
Also, depending on the type of legal entity and location, there are a number of registration procedures and fees especially for corporations, regional headquarters and LLCs. You will also need to deal with property registration and construction permits which require a lot of paperwork. Not to mention the required paid-in capital.
In the Philippines, subsidiaries which are domestic corporations with more than 40% foreign capital (which are considered 100% foreign) are generally required to remit US$200,000 as initial paid-in capital.
Employer of Record (EOR)
Employers of Record (EOR) of global talent are considered the legal employer and can continue local hiring and provide comprehensive services such as handling Payroll Administration and Tax Compliance, Tax Filing, conducting Employee Onboarding, handling Employment Contracts and other employee support services.
They have required expertise in local employment and tax regulation laws and ensure local compliance in tax regulations and employment and hiring laws.
The Employer of Record Market size is projected to reach USD 6794.5 million by 2028, from USD 4235.8 million in 2021, at a CAGR of 6.9% during 2022-2028. (PR Newswire)
If you do not have an offshore legal entity in place, the budget-friendly solution is to have an Employer of Record (EOR) as a partner. Instead of setting up an offshore subsidiary, EORs can help companies who want to expand globally by hiring global talent compliant to local hiring laws.
Professional Employer Organizations or PEOs and Employers of Record or EORs can benefit from a third-party outsourcing vendor by enabling them to help fill critical staffing positions.
Currently, offshore staffing provider Connext Global Solutions supports several PEOs with back office offshore staff across a variety of functions. Learn more about Connext here.
