PEO vs. EOR vs. GEO vs. AOR: Definitions & Differences

What’s the difference between a PEO and an EOR? What do GEO and AOR stand for? Read this guide to find out the best option for you.

Stefana Zaric
Written by Stefana Zaric
March 7, 2022
Contents
Need help onboarding international talent?
Try Deel

Global expansion and hiring are top priorities for many businesses, but they are not simple processes. Fortunately, you don’t have to go alone. PEOs, EORs, GEOs, and AORs are all types of organizations that offer services to help you hire around the world in different capacities.

If these terms sound confusing–or familiar, but you don’t quite understand all the differences–you found the right guide. Below, we’ll define and compare each of these terms to help you know which global hiring service is right for you.

PEO vs. EOR vs. GEO vs. AOR: Key differences

PEOs, EORs, GEOs, and AORs are all hiring solutions to help companies hire talent, some around the globe. Each operates differently and suits a unique set of hiring and business needs.

  • PEOs help companies hire employees by taking over payroll and HR functions (but not legal employment status)
  • EORs help companies hire internationally: they legally employ employees, comply with international labor laws, and manage global payroll
  • GEOs are another term for EOR (people also sometimes use the term international PEO)
  • AORs are for businesses help companies want to hire independent contractors instead of employees

What is a professional employer organization (PEO)?

A professional employer organization (PEO) is an organization that provides HR services, typically for mid-sized and small businesses that want to hire full-time employees.

When a company and a PEO sign a contract, called a client service agreement (CSA), they enter a co-employment arrangement. That means the PEO shares all legal responsibility with the client company.

PEO services assist with the whole hiring process: employee contracts, onboarding, employee benefits, payroll management, and payroll taxes. The client company remains in charge of the employees’ work schedule, scope of work, daily responsibilities, and recruitment.

When to use a PEO?

PEOs offer more comprehensive HR services than other third-party employment organizations–except they do not take full legal responsibility for employees and therefore do not unlock international hiring. Think of a PEO as an outsourced HR department. 

PEOs are most suitable for small and mid-sized companies that do not have the bandwidth to handle HR independently. If you want to grow a team without learning how to manage payroll services, employee benefits, and payroll, a PEO may be your best solution.

Hire employees abroad, without setting up an entity

Get access to the world's best talent. Hire full-time employees in 150 countries without having to set up a legal entity in a new country.

Learn more

What is an employer of record (EOR)?

An employer of record (EOR) is a company that hires employees from other states or countries on your behalf without you having to set up a legal entity in that location.

Unlike a PEO, the EOR assumes complete responsibility for your remote full-time employees and is liable in case of a law breach. They employ on your behalf, so you still get to manage the employees’ day-to-day activities, schedule, and workload.

EOR services include HR functions, payroll processing, employee benefits administration, employee timesheet processing, tax filing, employee onboarding, employment contract creation and termination, and more.

The EOR’s job is also to ensure full compliance with local employment laws wherever you hire, and provide the mandatory employee benefits to your global workforce. Unlike staffing agencies, EORs don’t manage your recruitment process–you’re the one who needs to find the right candidates for your team.

What is a global employment organization (GEO)?

Global employment organization is basically a synonym for EOR: it’s a company that acts as the legal employer for your international employees. Just like with an EOR, you don’t need to go through the process of business registration in a foreign country.

Your remote workers have a legal employment relationship with the GEO, while you remain in charge of day-to-day management. When hiring through a GEO, you have access to legal experts familiar with local labor laws and regulatory compliance in the countries where you want to hire employees, so you don’t risk legal and financial penalties.

Note that, practically, GEO isn’t a legal term–we just use it for global employers of record, which help client companies hire global team members. 

When to use an EOR or GEO?

EOR and GEO companies help you expand your business faster and skip the costly process of opening a subsidiary in every country where you want to hire local talent.

An employer of record is a suitable choice if you want to outsource your global payroll processing, hiring, and risk management. That frees up your HR managers’ schedules so they can focus on strengthening your company culture overseas.

Sometimes, opening a local legal entity is a logical choice, like if you only plan to expand to one country and conduct in-person business there. But, entering several new markets would mean extensive research on each of the country’s regulations. In this case, hiring through an EOR (or GEO) can save you substantial business resources by ensuring you avoid any legal risks regarding employment requirements in foreign countries.

 

What is an agency of record (AOR)?

An agency of record (AOR) is a hiring service provider similar to an EOR, but instead of full-time employees, it helps you hire independent contractors. The acronym AOR sometimes also stands for an Agent of Record, as both individuals and business entities can act as middlemen between client companies and contractors.

The AOR’s job includes sending invoices and handling payments between the contractor and their client(s). In this case, there’s no employment relationship between contractors and companies. The contractor still doesn’t have the right to employee benefits such as health insurance or paid time off.

The AOR also needs to ensure that this business arrangement meets employee classification conditions and that the workers are indeed contractors according to local laws, so the client company avoids potential misclassification penalties.

When to use an AOR?

Small businesses or startups during initial stages of development often find hiring independent contractors more affordable than full-time employees. They don’t have the time to train and onboard full-time employees, so hiring experienced professionals who have their own tools is their go-to solution.

If you don’t have the time to manage your contractor or need an additional layer of protection regarding independent contractor misclassification or intellectual property, AOR services may be a suitable option. Working with an AOR is the preferred choice for many independent contractors who want to focus on their core activities instead of invoices, taxes, etc.

Some companies, like Deel, offer EOR services as well as the ability to hire international independent contractors.

Hire in 150+ countries with Deel, hassle-free

Building an international team can be time-consuming, especially when compliance is involved. But don’t let the complexities of local labor laws, taxes, and mandatory employee benefits stop you from diving into the global talent pool and finding ideal candidates for your vacancies.

Deel lets you hire anyone, anywhere in the world, within minutes, whether you wish to hire full-time employees or independent contractors. Plus, you can rest assured legal experts vet your contracts to be completely compliant, so your new hires are set up to work correctly in no time. You can manage and pay your global workforce effortlessly, in a few clicks, in a single, user-friendly platform.

Want to learn how it all works? Book a demo today to find out.

This post is provided for informational purposes and should not be considered legal advice. Talk to a legal professional such as an employment lawyer for more info.

Deel makes growing remote and international teams effortless. Ready to get started?

+

Countries

+

Customers

+

Legal experts

+

Currencies