What is a PEO and an EOR?

If you’re a US company looking to expand and grow your business to Latin America, you’re probably wondering how to handle the hiring process. A few different options are available to you, but two of the most popular are PEOs and EORs.

A PEO, or professional employer organization, is a third-party company that takes on all of the HR responsibilities for your business. This includes things like payroll, benefits, and compliance with employment laws. An EOR, or employer of record, is also a third-party company, but they are the legal employer of your employees. This means that they are responsible for everything related to employment, including payroll, benefits, and compliance.

So, which is right for your business? It depends on your specific needs and circumstances. If you want to retain some control over HR decisions and are willing to share some of the risk and liability, then a PEO may be a good option. If you want to outsource all of your HR responsibilities and want to avoid any risk or liability, then an EOR may be a better option.

Key Differences Between PEOs and EORs

Typically, in order to access HR outsourcing or PEO services in Latin America, it is customary to establish a company or have a legal entity. However, Ongresso offers alternative solutions tailored to your specific expectations and objectives. Engaging a PEO service offers several key advantages, including access to local HR expertise, streamlined management of payroll and benefits, compliance with local employment laws, and a reduction in administrative burdens. It is important to note that potential disadvantages may involve a reduced level of control over HR functions and potential challenges in aligning with the processes of the chosen PEO.

On the other hand, the most significant benefit of an EOR service is the ability to circumvent the need for legal entity registration, extensive paperwork, associated costs, and bureaucratic processes. Nevertheless, it is important to consider that a potential disadvantage of using an EOR service is the limited control over HR processes.

An EOR service primarily focuses on managing the legal and administrative aspects of employing talent, such as payroll, taxes, and compliance. Conversely, a PEO service typically provides a more comprehensive range of ongoing HR services, extending beyond employment administration. Here there is a table that summarize main points:

Legal employerBusinessEOR
Control over HR decisionsBusiness has some controlEOR has all control
Risk and liabilityBusiness shares risk and liabilityEOR bears all risk and liability
CostTypically lowerTypically higher

When to Use a PEO

Here are some reasons why you might want to use a PEO, Professional Employer Services:

  • You’re a small business with grow objectives and don’t have the resources to handle HR in-house.
  • You have high turnover and need help with compliance.
  • You’re in a regulated industry and need help staying compliant.
  • You want comprehensive HR services beyond employment administration, such as ongoing HR support, employee development, and performance management.
  • You prefer to outsource the entire HR function, including payroll, benefits administration, and compliance.
  • You want to share employer responsibilities and liabilities with the PEO.
  • You are looking for a long-term strategic HR partnership.
  • You are willing to have less direct control over HR processes and policies.

When to Use an EOR

Here are some reasons why you might want to use an EOR, Employer of Record:

  • You’re a large business with complex HR needs.
  • You need to outsource all of your HR responsibilities.
  • You want to avoid any risk or liability.
  • You want to quickly establish a presence in a new country without the need for legal entity registration.
  • You primarily need assistance with legal and administrative aspects of employing talent, such as payroll, taxes, and compliance.
  • You want flexibility in managing HR processes while retaining more control over policies and procedures.
  • You are looking for a shorter-term solution for employing workers in a specific country.
  • You are willing to take on more employer responsibilities and liabilities compared to a PEO.

Case Study – International PEO Services – Exfreight Zeta Inc.

Here are some reasons why you might want to use an EOR:

  • You’re a large business with complex HR needs.
  • You need to outsource all of your HR responsibilities.
  • You want to avoid any risk or liability.

Challenge: Exfreight sought a new provider for International PEO services in Latin America, that matched their business model and offered personalized support.

Solution: Ongresso was chosen as the provider due to our alignment with Exfreight’s needs and exceptional client support. Ongresso informed the different alternatives for the business, based on its growth objective. The advantages of PEO, the benefits of EOR and also its risks and complications were evaluated in a timely manner.

Result: In the end, the business decided that the best strategy to grow in Latin America was through PEO, in this way, Exfreight experienced high satisfaction with the sales process and timely support. Ongresso’s fair treatment, transparent cost structure, and accurate information led to increased client satisfaction and a continued partnership.

You can rad the full case study here.

Conclusion: Choosing the Right PEO or EOR

The best way to choose between a PEO and an EOR is to talk to a few different providers and get quotes. It is important to understand the specific services that each provider offers and to choose the one that best meets the needs of your business.

Additional Considerations for US Business Expanding to Latin America

If you’re a US business expanding to Latin America, there are a few additional considerations you should keep in mind when choosing a PEO or EOR.

  • Language: Make sure the PEO or EOR you choose has experience working with businesses in Latin America. This will ensure that they can communicate effectively with your employees and understand the local culture.
  • Legal: Make sure the PEO or EOR you choose is familiar with the employment laws in the countries where you plan to hire employees. This will help you avoid any legal issues down the road.
  • Cost: The cost of using a PEO or EOR will vary depending on the size of your business, the number of employees you hire, and the services you need. Make sure you get quotes from multiple providers before making a decision.

We invite you to read this full article with deeper information.

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