By: Joseph O’Shea

When it comes to managing a growing workforce, there are a lot of different solutions available. Two of the most common options – and often the most valuable – are Professional Employer Organization (PEO) and Employer of Record (EOR) solutions.

These two talent solutions are often confused because they both involve third-party organizations helping companies handle various HR functions, like payroll and benefits. At Broadleaf, we often hear from organizations that are unsure whether a PEO or an EOR is the right fit for their workforce strategy. While both models handle HR administration, the key difference lies in who carries the legal and compliance responsibility for your employees. PEOs serve as co-employers while EORs become legal employers.

If you’re not familiar with these talent solutions, or are trying to decide between the two, keep reading to learn more about the key features of both so you can determine which one best fits your needs.

PEO vs. EOR

Before we get into which solution might be best for you, let’s get a better idea of what PEOs and EORs are individually.

What is a PEO?

A PEO is a third-party organization that acts as a co-employer of your company’s workforce. This includes all employees – whether they’re full-time, part-time, or contingent. Companies often turn to PEOs when they’re growing domestically and need HR support without building a full internal team.

By acting as a co-employer, PEO providers absorb some of the more time-consuming HR work that ties up your internal resources. Some of the tasks PEOs often handle include:

• Payroll
• Tax Filing
• Benefits Management
• Workers’ Compensation & Unemployment Claims

The point of a PEO is to relieve your internal team so they can focus on more critical work. Providers offer administrative support for your existing workforce, but do not help with sourcing talent, hiring, or managing employees and their work.

Because a PEO only acts as a co-employer, your company will retain some of the risk and liability for your workers.

What is an EOR?

An EOR is a third-party organization that acts as a legal employer of workers on behalf of your company. A provider will manage the administrative and HR tasks associated with the workers it employs for you – which are most often contingent or temporary. EORs are especially valuable for organizations expanding into new states or countries where they don’t have a legal entity, or when they want to compliantly engage contingent or project-based workers.

EORs handle some of the same tasks that PEOs do, including payroll, benefits, and tax filing. But they also help you with other responsibilities like:

• Pre-Hire Checks
• New Hire Paperwork
• Onboarding
• Training
• Ongoing Worker Care
• Legal Compliance
• Termination

The biggest benefit of an EOR – and what sets it apart from a PEO – is that your provider will take full legal responsibility for the employees it has on its payroll. That means your provider will be responsible for complying with local labor laws, worker classification, proper tax withholdings, and more. This makes an EOR model ideal for organizations building a broader contingent workforce strategy, offering compliance coverage and flexibility that traditional HR structures can’t provide.

So, in addition to relieving your internal teams of time-intensive administrative work like a PEO, an EOR provider will also significantly lower your risk of costly mistakes like worker misclassification, labor law violations, and co-employment issues.

Learn More With Our Full Guide to EORs

Which Solution is Right for Me?

Now that you have a better idea of what each solution is, you need to determine your own needs and challenges. This will help you figure out whether an EOR or a PEO is right for you.

Both solutions offer relief for overworked HR teams, but do you need more than that?

If you are just looking for a co-employer who will help you free up your internal resources, a PEO may work best for you. Just keep in mind that you will share legal responsibility with your provider and can be held liable for errors with tax withholdings, worker classification, and labor law compliance.

But if you’re looking for more than just administrative help and want to lower your risk of non-compliance, an EOR is your best solution. Your provider will not only supplement your internal HR team, but also absorb legal risks that often lead to significant fines. If you choose to use an EOR, just be aware you’re giving up some control over your personnel functions.

Regardless of whether you choose to use an EOR or a PEO, the key to success is finding the right provider. Before you sign a contract, you’ll want to thoroughly assess all your options and properly vet potential providers.

You should ask providers about:

• Overall Cost: Is the solution within your budget?
• Contract Specifics: How long will you be under contract, and is everything you need included?
• Flexibility: Can your provider adapt and scale if your needs change?
• Security & Privacy: What protocols are in place to protect the information of your business and its employees?

The right provider will have a proven track record of offering time and cost savings to its clients. You can check online for reviews and case studies, or ask your potential provider for references or testimonials.

Looking for the Right EOR Provider?

Choosing between a PEO and an EOR comes down to your organization’s structure, workforce mix, and risk tolerance. Understanding these models—and how they align with your broader workforce strategy—helps you make informed decisions as your organization grows.

At Broadleaf, we work with organizations of all sizes to navigate these complexities and design workforce solutions that fit their goals. If you’re ready to explore how an EOR model can support your workforce strategy, get in touch with our team of experts to see what we can do for you.