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A PEO co-employs your existing workforce while you remain the employer of record for most legal purposes; an EOR becomes the sole legal employer of the workers, hiring them on its own entity so a company can employ people where it has no legal presence.
A professional employer organization enters a co-employment relationship. You keep your own legal entity, your own employer identification number in most arrangements, and full control over hiring, firing, pay decisions, and day-to-day direction. The PEO shares specified employer responsibilities, typically payroll processing and tax filing, benefits sponsorship, workers' compensation coverage, and HR compliance support, and it usually requires that the whole employee population or a whole worksite be included.
An employer of record does not share the relationship; it holds it. Workers are legally employed by the EOR's entity, appear on the EOR's payroll and benefit plans, and are assigned to perform services for the client. This is the standard structure for employing someone in a state or country where the client has no registered entity, or for engaging a small number of workers without setting up local payroll registration, unemployment accounts, and benefit plans.
Choosing between them turns on the problem you are solving. If you have an established workforce and want to consolidate HR infrastructure, share risk, and access larger-group benefit pricing, a PEO fits. If you need to place a handful of workers in jurisdictions where you are not registered, or hire quickly ahead of entity setup, an EOR fits. The practical cautions are the same for both: understand which party controls the benefit plan, who bears co-employment or misclassification liability under the IRS worker classification rules, and what happens to employees when the arrangement ends.
A PEO shares the employment relationship with you, while an employer of record holds it outright. With a PEO you keep your entity and control over hiring, pay, and direction; with an EOR the workers are legally employed by the provider and assigned to perform services for you.
An employer of record. It already has the registrations, unemployment accounts, and benefit plans in that jurisdiction, so a small number of workers can be hired quickly without standing up local infrastructure. A PEO is the better fit for consolidating HR across an established workforce.
Who controls the benefit plan, which party carries co-employment and misclassification risk, whether the whole workforce or worksite must be included, and what happens to the employees if the relationship ends. Exit terms matter as much as pricing in both models.