Employer of Record vs Professional Employer Organization: Who’s Better for Your Business?

The world of remote hiring is growing fast. Not only is this related to the post-pandemic effect but also the shift in the mindset of employers and employees. The flexible work-life balance and the opportunity to talent from anywhere in the world have made remote work the new normal.

A recent report from Owl Labs with around 10,000 respondents from Europe revealed that 37% of workers would not accept a job offer if they are not allowed to work in flexible hours, 28% would decline the offer if they are not allowed to work from the flexible location, and another 28% won’t take the job if they are required to work in the office full-time.

Source: Owl Labs: State of Hybrid Work 2022: Europe

Hence, it’s more important than ever for businesses to have a flexible work environment accommodating any lifestyle. And that’s when the two providers of HR services, Employer of Record (EOR) and Professional Employer Organization (PEO), come into play. 

As a golden middle of the two, let Collab Fabrik guide you through the unknown world of remote hiring and change your perspective on hiring processes once and forever!

What Is an Employer of Record (EOR)?  

An Employer of Record (EOR) is a company that takes on the legal responsibility of employer-employee relationships. This means that they act as the official employer on behalf of their client and are responsible for managing payroll, benefits, taxes, and compliance.

Key Employer of Record Services 

• Creates a legal entity. Employer of Record service includes acting as a legal employer in a foreign country on your behalf, so you don’t have to set up a new legal entity yourself. Further, EOR acts as an intermediary between you and the employee, allowing you to maintain control over the working relationship and set up a working arrangement that best meets your needs.

• Ensures compliance with local labor laws. This includes keeping up with changing regulations and local laws, which can be challenging for a hiring company if unfamiliar with the area. EOR will make sure your hiring practices are compliant, so you don’t have to worry about unintentionally breaking the law.

• Organizes legal documentation of hiring. EOR will help with the paperwork and gathering of necessary documents for hiring, such as work visas, permits, and other compliance-related items. This can be time-consuming if done on your own, so having EOR take care of it for you can save a lot of headaches.

• Registers and files payroll taxes. Employer of Record services ensure that all the proper taxes are withheld from employee paychecks and remitted to the government. This includes income taxes, social security contributions, and other required deductions. In some cases, EOR can also provide your employees with benefits such as health insurance, retirement plans, and other perks.

• Completes payroll processing. EOR will take care of all the behind-the-scenes work of processing payroll, such as calculating hours worked, preparing pay stubs, and issuing payments. This is one of the most complex and time-consuming tasks, so having EOR handle it for you can free up your time to focus on other aspects of running your business.

Which Services EOR Does Not Provide? 

• Does not recruit new employees. EOR will not find potential candidates for you to hire – that is something you will need to do on your own. However, they can help with the legal aspects of hiring once you have found someone you would like to bring on board.

• Does not form a co-employment relationship with a hiring company. EOR does not become a co-employer with the hiring company, meaning they do not have any say (unless negotiated differently) in day-to-day employment decisions.

• Does not support team building and similar HR activities. EORs do not typically provide team-building exercises, company culture initiatives, and other HR activities. These are things that are best handled internally by the hiring company.

Is EOR the Right Choice for Your Company?

Yes, if…

You want to hire an employee in a foreign country but are not familiar with the local employment laws and regulations and do not plan to establish a legal entity in the hiring country.

Also, if you do not want intervention in your corporate culture and just want assistance in the legal and financial aspects, EOR is your go-to choice.

No, if…

You are looking to outsource your entire HR function and hope EOR will take care of everything related to employment, from recruiting new hires to managing payroll and benefits.

Also, if you are planning to have a legal entity in the hiring country that will carry out administrative and legal functions, an EOR may not be the most efficient solution for your company.

What Is a Professional Employer Organization(PEO)? 

A professional employer (PEO) acts as a co-employer with your business. This means they take on full-scale HR activities, from recruiting and onboarding new employees to teambuilding exercises and company culture initiatives. 

Key PEO Services 

• Recruiting talent. Unlike EORs, PEOs can help with the entire recruiting process – from finding potential candidates to conducting background checks and everything in between. Consequently, they also get involved in the hiring decision, evaluating employee performance, etc.

• HR support. You can rely on PEOs for all your HR needs, from onboarding and training new employees to enhance your corporate culture. PEOs can also help with more complex HR tasks such as employee relations, compliance, and benefits administration.

• Employee education.  PEOs often provide educational resources for employees on topics ranging from financial wellness to work-life balance. This can help boost employee morale and engagement and reduce turnover.

• Perks and benefits.  PEOs can help your company offer competitive benefits and perks, such as health insurance, retirement plans, and paid time off. This can help you attract and retain top talent without your active involvement.

Which Services PEO Does Not Provide? 

• PEOs do not provide the main EOR service, establishing a legal entity and acting on behalf of the hiring company. PEOs usually do not provide payroll processing services because they have no legal relationship with employees.

Is PEO the Right Choice for Your Company?

Yes, if…

You plan to have a legal entity in the country you want to hire from, and you need assistance in HR needs rather than just hiring.

Also, if you need comprehensive HR support enhancing your corporate culture, employee education, and benefits administration but do not want to be actively involved in these processes, PEO will be the best solution.

No, if…

You do not want intervention from a third party in your corporate culture and team management approach.

Also, if you are not planning to establish a legal entity in a foreign country, PEO can’t provide you with the necessary support. In this case, you should look for an EOR provider to carry out legal formalities on your behalf.

Collab Fabrik | The Full-Scale HR Solution 

If you’re looking for a comprehensive Outscoure HR solution that offers the best of both worlds, you may want to consider a full-scale provider like Collab Fabrik. We provide a custom-fit hiring solution for small and middle-size businesses in Europe who want to outsource their HR services and benefit from the talent in the Caucasus.

Here is a quick recap of what your company gets when collaborating with Collab Fabrik.

We have a legal entity to hire top talents in the region. Entering a new market is a risky and time-consuming process. So, we have an established legal infrastructure to hire top-talents on your behalf, handle the payroll and all other legal responsibilities. Should you grow and need to set up your legal entity in the region, we help you do that as well. In this way, you can get your foot in the Caucasus market easily and efficiently.

We analyze your needs to link you with the best talent. We take the time to understand your business, values, and needs. Through localized job postings, we then screen and select the most relevant candidates for your company. You can rely on us for sourcing and carefully assessing candidates to shortlist most suitable talent for your organization.

Your team gets the necessary onboarding. We provide an initial onboarding for your new hires, regular teambuilding activities, and educational resources to help them excel in their roles. You are bridged with the local market if you’re not physically here.

You get the necessary support. Rest assured your local team has the center of inquiries and requests that is always there to assist them. You’re always in the know. As the employer, you have full transparency and control over the hiring process and your team’s performance.

A Letter from Founder:
How to Start Remote Hiring for Your Business? 

 

 

Hi! I’m Armik, the CEO of Collab Fabrik, and I have once felt what you experience now. 

Back in 2018, I faced the challenge of remote hiring for my startup in Germany. We needed qualified employees to come on board quickly; meanwhile, hiring skilled talent in another country was hard without an established company image. Added the length and high costs of remote hiring, it felt nearly impossible to set up the dream team for the timeframe I needed. 

This inspired me to create a full-scale HR solution that combines the functions of EOR and PEO and helps companies like mine to remote hire from a yet hidden talent pool – the Caucasus. We bridge local talent with European companies and provide the necessary support for long-term success.

Do you feel like this is what you need for your company? I’m here for a free consultation. Just let’s talk about employer of record vs PEOl or write to us at  info@collabfabrik.com. I would be happy to hear your story and see how we can help you. 

Best,

Armik