# EOR vs PEO: the difference between an employer of record and a PEO > Machine-readable page from EOR Overview (https://eoroverview.com/), an independent research platform for Employer of Record services. > Canonical page: https://eoroverview.com/glossary/eor-vs-peo/ > Methodology: how providers are researched, scored and compared is documented at https://eoroverview.com/methodology/. > Disclosure: EOR Overview is free to use. We may earn a referral fee from some providers; this never affects a rating or ranking position (https://eoroverview.com/disclosure/). An EOR becomes the legal employer of your worker, so you never need a local entity. A PEO co-employs workers alongside your own entity, which means you must already be registered in that country. That single fact decides which one applies to your situation. ## Explanation What is the difference between an EOR and a PEO? An employer of record is the sole legal employer of the worker on paper, carrying full statutory liability in the worker's country, while a professional employer organization shares that employment relationship with your own registered entity through co-employment. Everything else, pricing, geography, exit terms, follows from that distinction. What does a PEO do, and where does it work? A PEO handles payroll, benefits administration, and HR compliance for workers you already employ through your own legal entity in that country. It does not remove your obligation to be registered there. The PEO becomes a co-employer of record with your company for tax and insurance purposes, but your entity remains on the hook for the underlying employment relationship. This confines PEOs to countries where a business already has, or is willing to set up, a registered entity. A PEO cannot place a worker in a country where the client has no legal presence. Most PEO usage is domestic: a US company with a US entity using a PEO to outsource payroll and benefits for US employees, rather than a way to enter a new country. What does an EOR do, and where does it work? An EOR employs the worker directly under its own local entity, issues the local contract, runs local payroll, and carries the compliance liability for that jurisdiction. The client company directs the worker's day-to-day work but never registers a subsidiary. This is what makes an EOR usable for hiring in a country where the client has no legal footprint at all. The trade-off is explained in more depth on the EOR vs setting up an entity comparison: an EOR is faster to start than incorporating, but it is not designed for large, long-term headcount in one country, where an entity often becomes the cheaper option. EOR vs PEO side by side Factor EOR PEO Legal employer The EOR itself Shared between client entity and PEO (co-employment) Needs your local entity No Yes, required Geography Cross-border, any country the EOR operates in Domestic, only where the client already has an entity Compliance liability Carried by the EOR Shared, client entity retains significant exposure Typical buyer Company hiring in a country with no local entity Company outsourcing HR/payroll where it is already registered How it is priced Per employee per month, flat fee is common Per employee, sometimes a percentage of payroll Exit Transfer employment to client entity or another EOR, or end contract Bring employment fully back in-house, entity already exists When a PEO is the right choice A PEO fits a company that already has an entity in the country and wants to outsource the administrative weight of payroll, benefits, and HR compliance rather than the underlying legal employment. It suits businesses with a stable, growing headcount in one country where the entity cost is already sunk. Small businesses in this position tend to choose a PEO because they gain access to benefits plans and HR expertise at group rates without hiring an internal HR department. This is the domestic answer to the "peo vs eor for small businesses" question: if the business already operates through an entity in that country, a PEO is the narrower, usually cheaper tool for the job. When an EOR is the right choice An EOR is the right choice when the company has no entity in the target country and does not want to build one for the number of workers involved. This covers first hires in a new market, testing demand before committing to incorporation, and hiring a small, distributed team across several countries at once. For "eor vs peo which is better for global hiring," the answer is structural rather than a preference: a PEO cannot operate in a country where the client has no entity, so global hiring across multiple new markets is an EOR use case by default. A directory of vetted options sits on the providers page, and a shortlist by use case is on the best EOR page. Can you use both at once? Yes. It is common for a company to run a PEO in its home country, where it has an entity and a large team, while using an EOR for new countries where it has no legal presence yet. A US company might, for example, keep a large domestic team on a PEO while an EOR employs three new hires in Germany and one in Brazil, with no entity opened in either country. If a company later incorporates in a country where it was using an EOR, it can generally move those workers onto a PEO arrangement or bring them fully in-house. In practice this means terminating the EOR contract for those employees, issuing new local contracts under the newly formed entity, and carrying over tenure and accrued entitlements where the local rule requires it. In Germany, for instance, accrued notice periods and vacation balances typically need to transfer to the new contract; in Brazil, the FGTS severance fund balance and length-of-service record need to be reconciled with the new employer of record. The mechanics, paperwork, and timeline differ by country and by provider, so check the specifics with both the EOR and the receiving entity before initiating a transfer. The reverse, moving from PEO to EOR, does not happen in the same country, since a PEO only exists where an entity already does. How do EOR and PEO pricing differ? PEO pricing is usually quoted per employee per month or as a percentage of payroll, a structure that matches the administrative and benefits-brokering work involved, and it does not need to price in the legal liability of being the employer, since that stays partly with the client entity. EOR pricing bundles in-country legal employment, payroll, and compliance liability, so an EOR fee is a proxy for the risk it absorbs, not just the admin it performs. Among the 147 EOR providers listed on EOR Overview, 35 publish an entry price outright, ranging from $49.99 to $699 per employee per month with a median of $349. The other 112 quote only after a sales conversation. PEO providers are not covered in this directory, so no comparable figures are available here; check individual PEO providers directly for their pricing structure. A full breakdown of what drives EOR pricing, and what "expensive" or "cheap" actually means in this market, is on the EOR cost page. Frequently asked questions Is an EOR the same as a PEO? No. An EOR is the sole legal employer with no entity requirement for the client. A PEO co-employs alongside a client entity that must already exist in that country. Can a PEO hire someone in a country where I have no entity? No. A PEO requires the client to already be registered in that country. Hiring without an entity is what an EOR is built for. Which is cheaper, EOR or PEO? Neither is uniformly cheaper. PEO fees skip the cost of carrying full legal employment liability, but they only apply where an entity already exists. An EOR fee replaces the cost and time of incorporating, which matters more for small or short-term headcount. Do PEOs work internationally? Some providers offer both PEO and EOR services under one brand, but the PEO service itself is domestic by definition, tied to countries where the client has a registered entity. Can I switch from an EOR to a PEO later? Yes, once the company incorporates in that country. At that point workers can generally move from EOR employment to a PEO co-employment arrangement or fully in-house employment, but check the specifics with the providers involved since transfer mechanics, entitlement carryover, and timelines vary by country.