Expanding your business to the United States or managing U.S.-based HR functions can feel overwhelming. Navigating payroll, benefits, and compliance with local regulations requires specialized expertise. While many businesses consider PEO (Professional Employer Organization) services as a starting point, exploring a more comprehensive solution, such as the Employer of Record (EOR) model, can be the key to unlocking efficient and compliant U.S. expansion.

At American Employer of Record, we specialize in the EOR model, offering a seamless way to hire and manage U.S. employees without setting up a local entity. Let’s explore the key differences between PEO and EOR to help you choose the best solution for your business.

What is a Professional Employer Organization (PEO)?

A PEO provides HR management through a co-employment model. This means the PEO partners with your business to share responsibilities for HR functions such as payroll, benefits, and compliance, while you remain the legal employer.

While companies with existing U.S. entities often consider this model, it does require co-employment, which may not be ideal for businesses seeking full compliance or risk management solutions.

Key PEO features

• Co-management of payroll and tax support
• Shared responsibility for compliance with U.S. employment laws
• Access to competitive employee benefits through pooled resources

What is an Employer of Record (EOR)?

An EOR is a more comprehensive solution, especially for companies expanding into the U.S. without a local entity. Unlike a PEO, an EOR becomes the legal employer of your U.S.-based staff, taking full responsibility for compliance, payroll, and benefits administration. This allows your business to focus on growth and team management without worrying about legal and regulatory complexities.

Key EOR features

• Full payroll processing and compliance management
• Seamless administration of benefits tailored to U.S. regulations
• No need for a local entity—hire quickly and compliantly
• Comprehensive onboarding and employee administration support

The differences: PEO vs EOR

Understanding the differences between PEO and EOR is crucial for selecting the right solution for your business. Here’s how they compare:

Legal employer status
With a PEO, your business remains the official employer while sharing HR responsibilities with the PEO partner. In contrast, an EOR takes on full legal responsibility as the employer on record, handling all employment obligations.

Entity requirement
PEO services require your business to already have a U.S. entity, as the co-employment model depends on this structure. On the other hand, EOR services eliminate the need for a U.S. entity, making it easier for businesses to expand into the U.S. quickly and compliantly.

Compliance responsibility
A PEO provides compliance support but does not assume full liability, as your business remains the employer. With an EOR, all compliance responsibilities—such as payroll, taxes, and benefits administration—are fully managed on your behalf.

Ideal use cases
PEOs are best suited for U.S.-based companies that want to streamline HR management and enhance employee benefits while maintaining control. EORs are ideal for international companies entering the U.S. market or hiring remote U.S. employees without establishing a local entity.

Why choose EOR over PEO?

While many businesses initially consider PEO services, the EOR model offers broader advantages. By becoming the legal employer, an EOR simplifies compliance, reduces liability, and allows businesses to expand without the complexity of setting up a U.S. entity.

Let’s build your U.S. team together

At American Employer of Record, we understand that businesses often search for PEO services when exploring HR outsourcing or U.S. expansion. Our tailored EOR solutions address the same pain points, offering payroll, benefits, and compliance management while eliminating the need for a co-employment arrangement.

Whether you’re expanding into the U.S. or looking for support with compliant hiring, our team ensures your business scales effectively without the administrative burden. Contact us today to learn how we can help streamline your U.S. operations!