What is the main difference between an EOR and a PEO?

An EOR is the legal employer through its own entity, so you can hire where you have no entity. A PEO co-employs through an entity you already hold, so you must be registered first. An EOR brings the entity, a PEO works through yours. No entity, use an EOR; existing entity, a PEO can run the admin.

Do I need my own legal entity to use an EOR?

No. The EOR provider employs your people through its own entity, so you need none. You can hire in a new country within days without incorporating. A PEO, by contrast, requires you to already have your own entity in the country.

Can a PEO help me hire in a country where I have no entity?

No. A PEO co-employs through an entity you already hold, so it cannot help where you are not registered. Either set up an entity first, which is slow, or use an EOR, which employs through its own entity from day one. For fast market entry, an EOR is the right model.

Is an EOR more expensive than a PEO?

It depends on providers and headcount, not the model. An EOR turns entity costs into a per-employee fee, usually cheaper below 10 to 15 people in a market. Above that, your own entity plus a PEO can win. Ask for the FX policy in writing either way; undisclosed FX runs about 1.5 to 3% of salary.

Who is the legal employer under each model?

Under an EOR the provider is the legal employer and carries most local obligations, while you direct the work. Under a PEO you stay the legal employer in a co-employment split. Confirm in writing which obligations sit with each party in either model.

When should I move from an EOR to my own entity?

Below roughly 10 to 15 employees in most European markets, an EOR stays simpler. Above that, the per-seat fee approaches fixed entity costs, so your own entity can be cheaper. Teamed models the crossover per country, helps set up your own entity via GEMO in 90+ countries, and can keep running it with no re-onboarding.

EOR vs PEO

EOR vs PEO, which employment model fits your expansion

The deciding question is whether you already have a legal entity in the country. A PEO co-employs your people through your own registered entity, so it needs you to be set up there first. An EOR is the legal employer through its own entity, so you can hire in a country where you have no entity at all. Use an EOR to enter a new market quickly and compliantly. Use a PEO to outsource HR and payroll admin where you are already established, usually at home.

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Own entity
A PEO needs your own in-country entity. An EOR provides its own, so you do not need one.: 57
Countries where Teamed operates its own legal entities, the EOR backbone, plus vetted partners across the wider 180+ footprint.: 4.8
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Last reviewed 18 June 2026By Tom Price-Daniel, Co-founder, Teamed

EOR vs PEO: what is the difference and which one do I need?

At a glance

EOR

EOR: hire where you have no entity

Best for: entering a new country fast, where you have no legal entity and do not want to set one up yet. The EOR becomes the legal employer through its own entity and carries the local compliance.

PEO

PEO: co-employ through your own entity

Best for: companies that already have a registered entity in the country, usually their home market, and want to outsource HR, payroll and benefits admin while keeping the employment relationship in house.

Shared by both: Payroll and tax filing run by the provider · Statutory benefits administered · HR and compliance support

Where it matters	Who leads	Why
Do you need your own legal entity	EOR	EOR needs none, it uses its own entity. A PEO requires you to be registered in the country first.
Who is the legal employer	Draw	EOR: the provider is the legal employer. PEO: you remain the employer under a co-employment split. Different, not better or worse.
Speed to hire in a new market	EOR	An EOR can onboard in days. Setting up the entity a PEO needs can take weeks or months.
Best for your established home market	PEO	Where you already have an entity and just want HR and payroll admin off your plate, a PEO is the lighter fit.
Compliance and misclassification risk	Draw	EOR shifts most local employer liability to the provider. PEO co-employment shares it. Read which obligations sit where.
Cost transparency	Draw	Depends on the provider, not the model. Ask either one for the FX policy and the all-in fee in writing.
Cross-border coverage	EOR	EOR providers reach 100+ countries through owned entities and partners. Most PEOs are single-country, usually domestic.
Path to your own entity later	EOR	A good EOR helps you graduate to your own entity when scale justifies it. A PEO already assumes you have one.

EOR on G2

Who EOR is for

Reach for an EOR when you are entering a country where you have no legal entity and want to hire quickly and compliantly, without months of incorporation. Reach for a PEO when you are already registered in the country, usually at home, and simply want to hand HR, payroll and benefits administration to a partner while you stay the legal employer.

Not the right fit if

You already have a registered entity in the country. A PEO is the lighter fit. You do not need an EOR to provide an entity you already have.
You are hiring one or two people in a brand new market. An EOR lets you hire there in days without incorporating. Teamed is one option built for the forgotten middle.
You want one platform to run all of HR, IT and payroll yourself. Neither model is a full HRIS. Look at an all-in-one platform, and connect your EOR or PEO to it.

Find your pick in 20 seconds

If you are…	Start with	Why
Hiring in a country where you have no entity	EOR	The EOR is the legal employer through its own entity, so you can hire without incorporating.
Already registered in the country, want HR and payroll admin off your plate	PEO	Co-employment through your own entity. The lighter fit where you are already established.
Fast international expansion across several markets	EOR	One provider, many countries, no entity setup. Most PEOs are single-country.
Growing past 10 to 15 people in one country	EOR now, your own entity later	Start on an EOR, then graduate to your own entity when the per-seat fee approaches the fixed cost of incorporating.

What is the difference between an EOR and a PEO?

An Employer of Record (EOR) legally employs your people in a country through its own entity or a vetted local partner. It issues the contract, runs payroll, remits income tax and statutory contributions, and carries the obligations of the local employer while you direct the day-to-day work. The defining feature is that the EOR supplies the legal entity, so you can hire compliantly in a market before you have any presence there.

A Professional Employer Organisation (PEO) works differently. It enters a co-employment arrangement with a company that already has its own registered entity in the country. The PEO administers payroll, benefits and HR compliance under a shared-employer model, while the client company stays the legal employer and keeps direction and control of the workers. A PEO does not provide an entity. It plugs into the one you already have, which is why PEOs are most common in a company's home market.

So the choice is rarely about which model is better in the abstract. It is about one fact: do you already have a legal entity in the country. If you do, and you want HR and payroll administration off your plate, a PEO is the lighter fit. If you do not, and you want to hire there quickly and compliantly, an EOR is the model that lets you, because it brings the entity. Many companies use both over time: an EOR to enter new markets fast, a PEO at home, and eventually their own entity in the markets where they scale.

The legal entity question, the one that decides it

Everything else follows from this. A PEO co-employs through an entity you already own in the country, so you must be registered there first. An EOR brings its own entity and becomes the legal employer, so you can hire where you have no presence at all. If you have no entity and do not want to set one up yet, the PEO model is simply not available to you, and the EOR is the model designed for that situation.

Detail	EOR	PEO
Who provides the entity	The EOR. It employs your people through its own in-country entity or a vetted local partner.	You do. A PEO has no entity of its own to employ through, it co-employs through yours.
Can you use it with no local presence	Yes. That is the point of an EOR, hire compliantly before you incorporate.	No. You must already be a registered employer in the country.
Who is the legal employer	The EOR provider, on paper. You keep day-to-day direction of the work.	You remain the legal employer in a shared co-employment arrangement.

The simple test

Ask one question. In this country, do I already have a registered legal entity? If yes, a PEO can co-employ through it. If no, you need an EOR, because it brings the entity with it.

Speed and coverage when you enter a new country

An EOR can onboard a hire in a new market in days, because the entity already exists. Reaching the same point with a PEO means first setting up your own entity, which can take weeks or months and carry ongoing director, filing and bookkeeping obligations. On geography, most PEOs are single-country, usually domestic, while EOR providers reach 100+ countries. For fast international expansion that gap is decisive.

Detail	EOR	PEO
Time to first hire	Days. The EOR entity is already in place.	Weeks to months, if you still need to incorporate the entity the PEO requires.
Countries covered	EOR providers commonly reach 100+ countries through owned entities and vetted partners.	Most PEOs operate in a single country, typically the company home market.
Best entry use case	Testing a new market, hiring a first employee abroad, or staffing a project without setting up locally.	Streamlining HR and payroll where you are already established and registered.

Worked example

You want to hire one engineer in Germany and have no German entity. An EOR employs them through its own German entity within days. A PEO cannot help until you have incorporated in Germany yourself, which is the slow path you were trying to avoid.

Compliance, liability and misclassification

Both models reduce compliance load, but they split risk differently. Under an EOR, the provider is the legal employer and carries most local employer obligations, from statutory contributions to termination law. Under a PEO co-employment, those obligations are shared between you and the provider, and the exact split varies by contract and jurisdiction. With either model the deciding move is the same, read which obligations sit where before you sign, and check who handles a contested termination or a tax-authority question.

Detail	EOR	PEO
Local employer liability	Sits largely with the EOR provider as the legal employer.	Shared between you and the PEO under the co-employment split.
Misclassification exposure	Lower for the client, since the worker is properly employed through the EOR entity.	You remain a named employer, so your exposure depends on the co-employment terms.
Who handles an edge case	A good EOR gives direct access to real HR and legal experts for contested terminations and authority questions.	Depends on the PEO. Confirm the escalation path and who carries the obligation.

Read which obligations sit where

Neither model removes compliance, it relocates it. Map every statutory obligation to a party before you sign. The honest test of a provider is whether it shows you that map plainly rather than burying it.

Cost transparency, a provider question not a model question

Cost honesty depends on the provider you pick, not on whether the model is called EOR or PEO. The variable that most often hides is foreign exchange on salary conversions, where an undisclosed spread typically runs 1.5 to 3% of salary and does not appear as a line on the invoice. The fix is the same for either model, ask for the FX policy and the all-in fee in writing, including any deposit, setup or offboarding terms in the contract.

Detail	EOR	PEO
Headline fee	Per employee per month for an EOR. Teamed is $599 USD or £479 GBP, flat.	PEO pricing is often a percentage of payroll or a per-employee admin fee. Ask for it in writing.
FX on salary conversions	Varies by provider. Teamed absorbs FX at zero markup and shows the applied rate against mid-market on every invoice.	Varies by provider. Where you pay in your home currency only, FX may not arise.
Deposits and contract terms	An EOR commonly takes a refundable deposit of about one month of salary. Teamed does, which is standard for the model.	Check for setup, minimum-term and offboarding terms in the PEO contract.

Worked example

On a $190,000 salary, an undisclosed 2% FX spread is about $3,800 per employee per year. Across five hires that is roughly $19,000 a year you cannot see on the invoice. Teamed removes that variable by absorbing FX at zero markup and showing the rate against mid-market.

When you outgrow either model and want your own entity

Both an EOR and a PEO are stages, not destinations. As headcount grows in a country, the cumulative fee approaches the fixed cost of running your own entity, a registration, a local director where needed, bookkeeping and annual filings. A PEO already assumes you have that entity. A good EOR helps you graduate to one when the maths flips, models the crossover per country, and can keep running the employment operations afterwards so your people never re-onboard.

Detail	EOR	PEO
Crossover modelling	A good EOR flags the month your own entity becomes the better structure. Teamed does this per country.	A PEO presupposes the entity, so it is the model you move toward, not away from.
Setting up your own entity	Teamed sets up your own entity via Global Entity & Employment Operations (GEMO) in 90+ countries and can keep running it.	You already hold the entity, the PEO administers HR and payroll on top of it.
Migration without re-onboarding	EOR-to-entity migration on the same system, no gap in coverage and no re-onboarding for employees.	Not applicable, the entity is already yours.

Rough guide

Below roughly 10 to 15 full-time employees in most European markets, an EOR stays the simpler structure. Above that, the per-seat fee approaches the fixed cost of your own entity. A good EOR helps you make that move and can keep managing the entity for you.

Why the comparison matters

Behind every line item is a real person, in a real place.

The fee, the FX and the support model are not abstractions. They decide whether the person you hired in Barcelona or Rome is paid right, on time, by someone who knows their employment law. That is the comparison worth running.

What each stakeholder evaluates

Criterion	Legal	Finance	People Ops	Security
Do you have a legal entity in the country	This is the gating question. A PEO can only co-employ through an entity you already hold. If you have none, an EOR is the only model that lets you employ compliantly, because it supplies the entity. Confirm in writing which party is the legal employer and which statutory obligations sit with each.	Setting up an entity carries fixed costs, a registration, a local director where required, bookkeeping and annual filings. Below roughly 10 to 15 employees in a market, an EOR is usually cheaper than carrying those fixed costs. Above that, your own entity plus a PEO can win.	With an EOR your people are employed through the provider entity from day one, with local contracts and benefits. With a PEO they stay your employees, so you keep more of the relationship but also more of the administration.	Your own entity gives you the most control over data residency and contracts in that country. An EOR is the faster route in, and a good one helps you graduate to your own entity later without re-onboarding.
How fast you need to be live in a new market	An EOR can issue a compliant local contract and onboard within days because the entity already exists. Reaching the same point through a PEO means incorporating first, which adds weeks or months and ongoing obligations.	Speed has a cost either way. An EOR converts entity setup into a predictable per-employee fee. Incorporating to use a PEO is a larger up-front and recurring fixed cost that only pays back at scale.	For a first hire or a small team in a new country, an EOR removes the setup work entirely. A PEO suits a country where you are already established and just want admin off your plate.	Ask either provider how many countries it covers through its own entities versus vetted partners, and who carries the obligation in each. Coverage and accountability matter more than brand.
Cost transparency before you sign	Ask for the FX policy and the full fee schedule in writing for either model, including any deposit, setup, minimum-term and offboarding terms. The honest provider shows you the map of obligations and costs rather than burying it.	An undisclosed FX spread typically runs 1.5 to 3% of salary and does not appear as a line item. On a $190,000 salary that is roughly $2,850 to $5,700 per year per employee. Teamed absorbs FX at zero markup and shows the applied rate against mid-market on every invoice.	A readable invoice means no surprise reconciliation at year end, and your people see a clean record of what they were paid. Note that an EOR commonly takes a refundable deposit of about one month of salary, which is standard for the model.	A timestamped applied rate shown against a public mid-market reference is an auditable record. An undisclosed spread is not. Ask which you are getting, in either model.

How to choose between an EOR and a PEO

The path is short once you answer the entity question. These four steps take you from the country fact to the model that fits, and to a provider you can trust.

Step 1
Check the entity in each country
For every country you hire in, ask whether you already have a registered legal entity. Where you do, a PEO can co-employ through it. Where you do not, you need an EOR, because it brings the entity.
Step 2
Match the model to the goal
Use an EOR to enter a new market fast and compliantly with no local presence. Use a PEO to outsource HR and payroll administration where you are already established, usually at home.
Step 3
Pressure-test the provider
For either model, ask for the FX policy and the all-in fee in writing, who the legal employer is, which obligations sit where, and who handles a contested termination. The honest provider answers plainly.
Step 4
Plan the graduation
Decide when your own entity becomes the better structure. A good EOR models that crossover per country and can set up and run your own entity later, so your people never re-onboard.

Dyke Yaxley · UK chartered accountancy

Audit capacity doubled, with no entity setup

Audit capacity in 2024: +100%
Compliance issues across the engagement: 0
South Africa hires, both retained: 2
Entity setup required: None

Challenge

Dyke Yaxley, a UK chartered accountancy with over a century of history, was turning down audit work in 2024. Local UK talent supply for qualified auditors had not kept pace with client demand. Cross-border hiring felt too legally complex for a firm whose brand sits on compliance discipline, and setting up a foreign entity was out of the question.

Approach

Because the firm had no entity in South Africa, a PEO was never an option there. Dyke Yaxley used the EOR model instead, partnering with Teamed to hire two qualified audit professionals in South Africa. Teamed handled the South African employment-law side end to end, a compliant contract, local payroll, statutory tax obligations and onboarding, through its own entity. No incorporation, no local counsel on retainer, no permanent-establishment exposure.

Result

Both hires exceeded expectations on technical work, client satisfaction and cultural fit. Audit capacity doubled in 2024. Zero compliance issues across the engagement. The firm went from declining new audit work to confidently taking on additional clients. This is the EOR model doing what a PEO could not, hiring in a country where the client had no entity.

Read the full case study →

Interactive tool

Model the cost of EOR versus your own entity

EOR or your own entity plus a PEO, the answer turns on headcount per country. The crossover calculator shows the month your own entity becomes the cheaper structure, so you know when to graduate off the EOR.

Open the crossover calculator

Decision checklist

Choose an EOR if you have no legal entity in the country and want to hire there quickly and compliantly. The EOR supplies the entity and becomes the legal employer.
Choose a PEO if you already have a registered entity in the country, usually your home market, and want to outsource HR, payroll and benefits administration while staying the legal employer.
Choose an EOR for fast international expansion across several markets. Most PEOs are single-country, while EOR providers reach 100+ countries.
Whichever model you pick, ask for the FX policy and the all-in fee in writing, confirm who the legal employer is and which obligations sit where, and check who handles a contested termination.
If you want an EOR built for fast-growing international companies, Teamed shows FX at zero markup on every invoice, gives real HR and legal experts on every plan, and helps you graduate to your own entity when the time comes.

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Honest take

When a PEO is the better choice

Choose a PEO if you already have a registered legal entity in the country and simply want HR, payroll and benefits administration handled. You do not need an EOR to supply an entity you already hold.
Choose a PEO if your hiring is concentrated in your home market, where co-employment through your own entity is the lighter, often cheaper structure.
Choose a PEO if you want to keep the employment relationship in house, staying the legal employer while a partner runs the admin underneath you.

An EOR is the right model for entering new markets where you have no entity. A PEO is the right model for outsourcing admin where you are already established. They solve different problems, so the honest answer is to match the model to your situation rather than to favour one for its own sake.

Questions to ask any EOR before you sign

1What deposit or pre-funding do you require, and which setup, offboarding, minimum-term, termination or admin fees are in the contract? Read it line by line before you sign.
2In this country, do I already have a registered legal entity, or do I need the provider to supply one?
3Who is the legal employer on paper, the provider or me, and which statutory obligations sit with each of us?
4How quickly can the first hire start, and does that timeline assume an entity already exists?
5Will you show me the FX rate on every salary conversion, in writing, against the mid-market reference?
6What is the all-in monthly cost per employee, including any deposit, setup or offboarding terms in the contract?
7If I outgrow this model, will you tell me, and can you help me set up and run my own entity?
8How many countries can you cover through your own entities versus vetted local partners?

Frequently asked questions

What is the main difference between an EOR and a PEO?
An EOR is the legal employer of your workers through its own in-country entity, so you can hire in a country where you have no entity at all. A PEO co-employs your workers through an entity you already own in the country, so you must already be registered there. In short, an EOR brings the entity, a PEO works through yours. That single fact decides which model you need: no entity, use an EOR; existing entity, a PEO can administer HR and payroll on top of it.
Do I need my own legal entity to use an EOR?
No. That is the defining feature of the EOR model. The provider employs your people through its own legal entity, issues compliant local contracts, runs payroll, and remits statutory contributions, while you direct the work. You can hire in a new country within days without incorporating. A PEO is the opposite, it requires you to have your own entity in the country before it can co-employ through it.
Can a PEO help me hire in a country where I have no entity?
No. A PEO operates as a co-employer through an entity you already hold, so it cannot help you hire in a country where you are not registered. If you have no entity there, your options are to set one up first, which takes weeks or months, or to use an EOR, which employs your people through its own entity from day one. For entering a new market quickly, an EOR is the model designed for the job.
Is an EOR more expensive than a PEO?
It depends on the providers and your headcount, not on the model name. An EOR converts the cost of an entity into a predictable per-employee fee, which is usually cheaper than carrying entity costs below roughly 10 to 15 employees in a market. Above that, your own entity plus a PEO can become cheaper. The variable that most often hides in either model is foreign exchange on salary conversions, where an undisclosed spread typically runs 1.5 to 3% of salary. Ask either provider for the FX policy and the all-in fee in writing before you compare. Teamed, as an EOR, absorbs FX at zero markup and shows the applied rate against the mid-market reference on every invoice.
Who is the legal employer under each model?
Under an EOR, the provider is the legal employer on paper and carries most of the local employer obligations, while you keep day-to-day direction of the work. Under a PEO, you remain the legal employer in a shared co-employment arrangement, and the obligations are split between you and the PEO according to the contract and the jurisdiction. With either model, confirm in writing exactly which statutory obligations sit with each party, and who handles a contested termination or a tax-authority question.
When should I move from an EOR to my own entity?
As a rough guide, an EOR stays the simpler structure below roughly 10 to 15 full-time employees in most European markets. Above that, the cumulative per-seat fee approaches the fixed cost of a registered entity, a local director where needed, bookkeeping and annual filings, at which point your own entity, often with a PEO to administer it, can be cheaper. A good EOR models this crossover explicitly per country, helps you set up your own entity via Global Entity & Employment Operations (GEMO) in 90+ countries, and can keep running the employment operations on the same system so your people never re-onboard.

Common questions

EOR vs PEO, which one do I need to hire abroad?
It comes down to one question, do you already have a legal entity in the country. If you do not, you need an EOR, because it employs your people through its own entity and lets you hire compliantly in days without incorporating. If you do, and you just want HR and payroll administration handled, a PEO can co-employ through your existing entity, which is the lighter fit. An EOR is the model for entering new markets fast, especially across several countries, since most PEOs are single-country. A PEO is the model for streamlining admin where you are already established, usually at home. Many companies use both: an EOR to enter new markets, a PEO at home, and their own entity in the markets where they scale.
Which employment model lets me hire in a new country without setting up an entity?
An Employer of Record. The EOR employs your workers through its own legal entity in the country, so you can hire there compliantly without incorporating, often within days. A PEO cannot do this, because it co-employs through an entity you must already own. So for hiring in a country where you have no presence, the EOR is the only model that works without first setting up an entity. A good EOR will also help you graduate to your own entity later, once your headcount in that market justifies the fixed cost.

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