The difference between an EOR and a PEO comes down to one structural fact: who the legal employer is. An employer of record (EOR) becomes the sole legal employer of your hire, typically in a country where you have no entity of your own. A professional employer organization (PEO) co-employs people your own company already legally employs through its own entity, almost always in the United States. Everything else that separates the two products, including pricing, tax treatment and compliance risk, follows from that split. This page sets out the mechanics; the cost page on this site shows what each model is actually priced at across verified vendors.
The entity question decides which one you need
A PEO cannot help you hire in a country where you have no legal entity, because co-employment requires an existing employer to share duties with: you keep the employment relationship and the PEO layers payroll, benefits and compliance administration on top. An EOR solves the opposite problem: it, or a local entity it owns or partners with, holds the employment contract itself, so you can employ someone in a country where you have no presence at all. The practical test is simple. If your company is registered where the hire lives and works, a PEO is an option. If it is not, only an EOR, a contractor arrangement or opening your own entity will get the person legally paid.
Who files the taxes and carries the liability
Under a PEO arrangement the vendor files payroll taxes under its own employer identification number and sponsors workers' compensation and health plans, but the client remains an employer alongside it and keeps meaningful compliance exposure. The IRS runs a voluntary certification program for PEOs, created by the Tax Increase Prevention Act of 2014 under Internal Revenue Code section 7705, which examines a PEO's financial responsibility and tax compliance before granting CPEO status. With an EOR there is no sharing: the EOR is the legal employer in the hire's country, carries the local employment law obligations, and invoices you the salary plus its fee. You direct the work; it answers to the labour authorities.
How the two are priced
PEOs charge either a percentage of total payroll, commonly quoted between 2% and 15%, or a flat fee per employee per month, and the fee usually bundles workers' compensation and unemployment insurance administration. EORs almost universally price a flat monthly fee per employee, on top of which you fund the full local cost of employment: salary, employer social contributions and statutory benefits in the hire's country. That makes EOR quotes easier to compare but also easier to misread, because the advertised fee is a fraction of the true monthly cost of the hire. The verified pricing table on this site shows what each vendor actually advertises for both products where they sell both.
When each one fits, and when neither does
A PEO fits a US company that wants better benefits pricing and less HR administration for its existing domestic workforce. An EOR fits a company hiring a small number of people in countries where it has no entity: market tests, relocating key staff, or building a distributed team gradually. Neither fits well at scale in one location; once headcount in a single country grows, the per-employee fees pass what running your own entity and payroll would cost, and several vendors sell exactly that transition. Nothing on this page is legal or tax advice; the service agreement and the local law of the hire's country control in every case.
Questions people ask about difference between eor and peo
Can a PEO employ someone for me in another country?
No. A PEO co-employs staff your own entity employs, which requires you to have an entity in that country. For a country where you have none, the equivalent product is an EOR, which becomes the sole legal employer.
Is an EOR more expensive than a PEO?
The fee structures differ more than the totals. PEOs charge a percentage of payroll or a per-employee fee against staff you already pay locally; EOR fees are flat per employee but sit on top of the full foreign cost of employment, including employer social contributions in the hire's country.
Do any vendors sell both EOR and PEO?
Yes, several large platforms sell both products at different prices, which is one reason the terms get blurred in marketing. The pricing table on this site labels which product each verified price belongs to.
Does using either one remove my compliance obligations?
It moves them rather than removes them. Under co-employment you remain an employer with real obligations; under an EOR the vendor carries the legal employer duties, but worker classification and the day-to-day reality of the role still matter, and local law controls.