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How Can a PEO or EOR Support Your Business Growth Needs?

This Article Is Authored By MSI Global Talent Solutions


One way companies are building resiliency in this highly volatile market is by increasing their growth opportunities both locally and globally. Utilizing a PEO or EOR can solve HR challenges when determining which markets to enter. But deciding which one can best solve HR talent strategy requirements depends on understanding the differences between a PEO and an EOR.


What is a PEO?

A PEO (Professional Employer Organization) is a third-party Human Resources company. It becomes your co-employer for your employees in jurisdictions where you choose to do business and provides comprehensive HR support on your behalf. As co-employers, you hold all related liabilities and responsibilities. The value of a PEO is it is a fully outsourced HR organization that has its own experts at affordable pricing.

When you co-partner with a PEO you remain obligated to jurisdictional requirements and will have to register your business in every state or country you have employees.


What is an EOR?

An EOR is an Employer of Record organization that becomes a full legal employer of the worker. The EOR will be registered in each jurisdiction they employ workers. Because the EOR is the legal employer, it holds all liabilities and responsibilities of the workers. An EOR is used when a small to a mid-size company does not wish to add additional headcount (employees) to their staff, and/or is in a fast growth mode. The EOR has the liability and maintains full accountability of the workers they employ.

The chart below provides an overview of the benefits of using a PEO or EOR and the reasons behind using them.



OPTION

PEO (Professional Employment Organization)

EOR (Employer of Record)

HR Technical Experience

Highly trained experts

Highly trained experts

Relationship to Employer

Co-employer

Full legal employer

Relationship to Employee

The PEO manages HR-related operations. Employees see PEO’s name on payroll stub and other HR documents. Company continues normal operations, employee functions, and responsibilities.

The EOR manages all employee facing matters. Holds all liabilities and responsibilities of the workers.

Risk Management

Company owns all risks and liabilitites. PEO will help manage risks, including facility security and workplace safety.

Covers all areas of risk. They are fully accountable and liable to your employees.

Company Growth Goals

Longer term, intended for use in hiring employees as opposed to independent contractors.

Companies looking to add employees as an "expense" rather than headcount, or who are in rapid growth. Hires contingent workers.

Health Insurance

You have to opt in to pay coverage under their plan. PEOs can obtain best market rate for benefit plans, including health insurance, workers' compensation and other types of business

Your employees are covered under the EOR's insurance. You do not pay out-of-pocket insurance premiums. Can save money on insurance premiums, but fewer plans to choose from

Tax

Uses own EIN (Employer identification number). Files taxes in those jurisdictions in which they support you. Can provide a lower state unemployment tax rate to help lower your tax burden.

Uses own EIN. Responsible for their own tax obligations in all jurisdictions

HR Management

CHOICE BASED ON COMPANY NEED

- Payroll Set Up and Processing, compliance and record maintenance

- Benefits Administration including medical, or educational assistance

- Worker's Comp Administration

- Taxation and Compliance

- Talent Acquisition

- Termination Services

- Training and Development

- Risk Management in partnership with the co-partner company

- Compliance Assistance with labor law and employee requirements

MAY TAKE ON FEWER TASKS Payroll Set Up and Processing

- Benefits Administration

- Worker's Comp

- Unemployment

- Taxation and Compliance

- Talent Acquisition for temps or contractors

- Training and Development

- Risk Management as its own entity

Best Used For

Outsourcing payroll and some HR functions.

Typically not used for companies with fewer than 10 employees.

Expanding into other states or countries.

Will work with small companies.

IMPORTANT NOTE: only an EOR can register your business in new locations. This is a huge timesaver.

Costs

High set up costs

Potential Higher Long-term costs

High set up costs

Likely Lower long-term costs

The Future of Work

Understanding the importance of your worker's need for resiliency will help solidify your business resiliency. Introducing an internal mobility program into your HR strategy allows your talent to seek new opportunities and gain valuable experiences while remaining ‘at home, keeping the Great Resignation at bay. Utilizing a strong technology-enabled platform will strengthen your ability to benefit from workforce retention at the value/cost ratio you want to achieve.

OUR EXPERTISE:

MSI’s agile workforce optimization experts can help design and implement a technology-enabled internal talent mobility program to optimize your mission-critical workforce and develop long-range strategies for success. setup


For more information, please contact MSI – at info@msigts.com


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