A professional employer organization (PEO) co-employs staff at a client that already has its own legal entity, sharing employment responsibilities under a services agreement while the client stays an employer of its own people [7]. An employer of record (EOR) becomes the legal employer of the worker through an entity it already operates, which is what lets it hire in a country where the client has no entity at all [10]. That difference decides whether you need a local entity, who carries employment liability, how benefits are sourced, and whether either model is available in a given market [10][11]. A US PEO can also hold voluntary IRS certification, and a certified PEO is treated as the employer for federal employment tax on wages it pays to work site employees, which an uncertified PEO is not [1][2]. If you are already a registered employer where the person will work, a PEO usually fits; if you are not, an EOR is normally the only compliant route [10].
\n","summary":"A PEO co-employs staff at a business that already has its own legal entity, while an EOR becomes the sole legal employer where the client has no entity. That difference drives entity requirements, liability, benefits sourcing, and country availability. US PEOs can hold voluntary IRS certification that shifts federal employment tax liability for work site employees, and EOR arrangements face country limits such as Germany's employee leasing rules.","publishedAt":"2026-07-21T19:57:35.653","verifiedAt":"2026-07-21T00:00:00","editorialStatus":"APPROVED","lastReviewedAt":"2026-07-21T00:00:00","nextReviewDueAt":"2026-10-21T00:00:00","templateVersion":"v2","aliases":["EOR vs PEO","PEO vs EOR: which one do I need?","Difference between an employer of record and a professional employer organization","Is an EOR the same as a PEO?","Should I use a PEO or an employer of record?","Co-employment vs employer of record","When to use an EOR instead of a PEO","EOR or PEO for international hiring","What is the difference between a CPEO and an EOR?","Global PEO vs employer of record"],"confidenceScore":90,"confidenceLabel":"High","canonicalUrl":null},"contributor":{"id":"ec39deab-44fe-48d8-9029-fefe993ab85a","slug":"answer-stack","displayName":"AnswerStack","websiteUrl":null},"contributorOrganizationProfile":{"entityId":"ec39deab-44fe-48d8-9029-fefe993ab85a","legalName":null,"description":null,"websiteUrl":null,"imageUrl":null,"slogan":null,"subtitle":null,"facts":[],"coiNote":null,"foundingDate":null,"numberOfEmployeesText":null,"contactPoint":null,"address":null,"headquartersText":null,"organizationType":null},"contributorPerson":{"slug":"answerstack-editorial-team","displayName":"AnswerStack Editorial Team"},"sections":[{"id":"2deb8c23-6439-439a-89ad-19ddfaf0dccc","sectionKey":"core_difference","sectionType":"markdown_section","heading":"What actually separates an employer of record from a PEO?","introMarkdown":"An employer of record becomes the legal employer of the worker, while a professional employer organization shares employment responsibilities with a client that is already an employer. Texas, which licenses PEOs, defines coemployment as a contractual relationship that \"involves the sharing of employment responsibilities to covered employees in accordance with a professional employer services agreement\" [7]. You keep your entity, the people stay your employees, and the PEO takes over payroll, benefits sponsorship, and an agreed portion of compliance work [14]. An EOR signs the employment contract itself through an entity it already operates in the worker's country, so you hold a services agreement with the provider rather than an employment contract with the person [10].\n\nA PEO can only share responsibilities you already carry, so you have to be a lawful employer where the work happens, with a registered entity and the payroll and tax registrations that go with it [10]. An EOR asks nothing of you locally, because the employment sits inside its entity [10]. A US company hiring its first person in Portugal has no practical PEO option, since there is no local employer to share with.\n\nUS federal tax law does not recognize co-employment at all. The IRS states that \"the Code does not define the term 'co-employer' and the concept is not recognized under federal tax law\" [1]. The idea lives in state PEO statutes and private contracts, and for tax purposes the IRS looks for the common law employer, so a client that outsources payroll to an ordinary PEO \"generally remains responsible for paying taxes and filing returns\" [1]. Voluntary certification is the only mechanism that moves that federal liability [2][3].\n\nNone of this is legal or tax advice, since classification turns on specific facts in specific jurisdictions.","introHtml":"An employer of record becomes the legal employer of the worker, while a professional employer organization shares employment responsibilities with a client that is already an employer. Texas, which licenses PEOs, defines coemployment as a contractual relationship that "involves the sharing of employment responsibilities to covered employees in accordance with a professional employer services agreement" [7]. You keep your entity, the people stay your employees, and the PEO takes over payroll, benefits sponsorship, and an agreed portion of compliance work [14]. An EOR signs the employment contract itself through an entity it already operates in the worker's country, so you hold a services agreement with the provider rather than an employment contract with the person [10].
\nA PEO can only share responsibilities you already carry, so you have to be a lawful employer where the work happens, with a registered entity and the payroll and tax registrations that go with it [10]. An EOR asks nothing of you locally, because the employment sits inside its entity [10]. A US company hiring its first person in Portugal has no practical PEO option, since there is no local employer to share with.
\nUS federal tax law does not recognize co-employment at all. The IRS states that "the Code does not define the term 'co-employer' and the concept is not recognized under federal tax law" [1]. The idea lives in state PEO statutes and private contracts, and for tax purposes the IRS looks for the common law employer, so a client that outsources payroll to an ordinary PEO "generally remains responsible for paying taxes and filing returns" [1]. Voluntary certification is the only mechanism that moves that federal liability [2][3].
\nNone of this is legal or tax advice, since classification turns on specific facts in specific jurisdictions.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":10},{"id":"3fedad9a-e693-49de-ad71-e0270d5e9127","sectionKey":"comparison_table","sectionType":"table_section","heading":"How do the two models compare side by side?","introMarkdown":"Six dimensions decide the answer for most buyers, and the first two usually settle it.","introHtml":"Six dimensions decide the answer for most buyers, and the first two usually settle it.
\n","outroMarkdown":"Published rates apply to the named vendors on the verification date and sit on top of salary and statutory employer contributions.","outroHtml":"Published rates apply to the named vendors on the verification date and sit on top of salary and statutory employer contributions.
\n","contentJson":{"rows":[{"cells":["Legal employer","The EOR's local entity signs the employment contract [10]","You remain an employer of your staff and the PEO co-employs under a services agreement [7][10]"]},{"cells":["Entity requirement","None in the hiring country, since you use the EOR's entity [10]","You must already be registered as an employer where the work happens [10]"]},{"cells":["Employment liability","Sits with the EOR's entity, shaped by your indemnities [10]","Shared by contract; an uncertified PEO leaves the client liable for federal employment tax, while a CPEO is solely liable for work site employees [1][3]"]},{"cells":["Benefits sourcing","Statutory local benefits plus whatever plans the provider offers there [10]","May sponsor a single welfare benefit plan across many clients [8]"]},{"cells":["Geographic scope","Places where you have no presence, subject to local restrictions [11]","Only where you are registered, and in the US it rests on state licensing [7][9]"]},{"cells":["Typical cost model","Flat fee per employee per month; published examples $599 and $699 [12][13]","Per employee per month or a percentage of payroll; published entry points $99 and $125 [12][13]"]}],"columns":["Dimension","Employer of record (EOR)","PEO, including an IRS-certified CPEO"]},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":20},{"id":"b493e4d1-ce2d-4c38-905a-2c508665db5c","sectionKey":"dimensions_in_practice","sectionType":"markdown_section","heading":"What does each difference mean in practice?","introMarkdown":"### Who signs the employment contract\n\nThe EOR's local entity is the named employer on the contract, the payslip, and the statutory filings [10]. Under a PEO your entity stays on the employment relationship and the PEO joins it by contract, which is why the services agreement has to spell out which responsibilities each party holds [7].\n\n### Whether you need a local entity\n\nA PEO requires you to be registered where the work happens, so a business using a PEO in three US states is registered in three US states [10]. An EOR removes that requirement and keeps your registration footprint at home [10]. Answer this before anything else, because it usually eliminates one model outright.\n\n### Who carries employment liability\n\nEmployment liability under an EOR sits with its entity, moderated by the indemnities in your services agreement [10]. Under a PEO the liability is shared, and not symmetrically across categories. Federal employment tax is the clearest case, because an ordinary PEO leaves the client responsible for the tax and the returns [1], while a certified PEO is solely liable for the taxes on wages it pays to work site employees [2][3].\n\n### How benefits are sourced\n\nA PEO can sponsor a single welfare benefit plan that eligible employees of many client companies join, which is the basis of the pooled purchasing argument [8]. NAPEO, a PEO trade association, reports roughly 500 PEOs in the United States employing about 4.5 million people, so pools can be large; read that as industry research rather than neutral data [14]. An EOR provides the statutory local package plus whatever supplementary plans it has arranged in that country, and quality varies by market.\n\n### Where each model is available\n\nEOR availability depends on local employment law, and several countries restrict it. Germany treats the arrangement as employee leasing, which requires a license from the German Labour Agency and caps a single assignment at 18 months [11]. PEO availability depends on your own registration plus, in the United States, state licensing; Texas requires a license for a provider with even one covered employee in the state [7].\n\n### How the pricing works\n\nEOR pricing is normally a flat monthly fee per employee on top of salary and statutory employer costs. Deel publishes EOR pricing starting at $599 per employee per month and Remote publishes $699 [12][13]. US PEO pricing from those same vendors starts at $125 and $99, because your entity is still doing part of the work [12][13]. Traditional PEOs often quote a percentage of gross payroll instead, which changes how cost scales as salaries rise.","introHtml":"The EOR's local entity is the named employer on the contract, the payslip, and the statutory filings [10]. Under a PEO your entity stays on the employment relationship and the PEO joins it by contract, which is why the services agreement has to spell out which responsibilities each party holds [7].
\nA PEO requires you to be registered where the work happens, so a business using a PEO in three US states is registered in three US states [10]. An EOR removes that requirement and keeps your registration footprint at home [10]. Answer this before anything else, because it usually eliminates one model outright.
\nEmployment liability under an EOR sits with its entity, moderated by the indemnities in your services agreement [10]. Under a PEO the liability is shared, and not symmetrically across categories. Federal employment tax is the clearest case, because an ordinary PEO leaves the client responsible for the tax and the returns [1], while a certified PEO is solely liable for the taxes on wages it pays to work site employees [2][3].
\nA PEO can sponsor a single welfare benefit plan that eligible employees of many client companies join, which is the basis of the pooled purchasing argument [8]. NAPEO, a PEO trade association, reports roughly 500 PEOs in the United States employing about 4.5 million people, so pools can be large; read that as industry research rather than neutral data [14]. An EOR provides the statutory local package plus whatever supplementary plans it has arranged in that country, and quality varies by market.
\nEOR availability depends on local employment law, and several countries restrict it. Germany treats the arrangement as employee leasing, which requires a license from the German Labour Agency and caps a single assignment at 18 months [11]. PEO availability depends on your own registration plus, in the United States, state licensing; Texas requires a license for a provider with even one covered employee in the state [7].
\nEOR pricing is normally a flat monthly fee per employee on top of salary and statutory employer costs. Deel publishes EOR pricing starting at $599 per employee per month and Remote publishes $699 [12][13]. US PEO pricing from those same vendors starts at $125 and $99, because your entity is still doing part of the work [12][13]. Traditional PEOs often quote a percentage of gross payroll instead, which changes how cost scales as salaries rise.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":30},{"id":"68ea5896-fca7-4680-8561-71017faed09e","sectionKey":"cpeo_and_state_rules","sectionType":"markdown_section","heading":"What does IRS certification change for a US PEO?","introMarkdown":"### What certification does\n\nSection 3511 of the Internal Revenue Code provides that a certified professional employer organization \"shall be treated as the employer (and no other person shall be treated as the employer) of any work site employee\" [2]. The IRS puts the practical version to customers directly: for work site employees, \"the CPEO is solely liable for paying the customer's employment taxes\" [3]. Certification is voluntary, so a PEO without it leaves the client responsible for the tax and the filings [1].\n\n### Where the relief stops\n\nRelief covers work site employees, and only the wages the CPEO actually pays. For covered employees who are not work site employees, \"a CPEO and its customer may both be liable with regard to remuneration the CPEO pays to non-worksite employees\" [3]. Work site status turns on an 85 percent threshold measured at the customer's location, and the CPEO has to notify the customer when employees stop meeting it [4].\n\n### How to verify a CPEO\n\nThe IRS publishes lists of currently certified, suspended, and revoked CPEOs, refreshed by the fifteenth day of the first month of each quarter [6]. Check the exact legal entity name and EIN on your contract against that list, since a group can hold certification for one subsidiary and not another. CPEOs also file Form 8973 to report when a customer contract starts and ends [3].\n\n### What certification requires of the PEO\n\nA CPEO posts a surety bond for federal employment taxes worth at least the greater of 5 percent of its prior year section 3511 liability, capped at $1 million, or $50,000, and it files quarterly CPA attestations covering tax deposits and working capital [5].\n\n### The state layer\n\nState rules run in parallel with the federal program and do not track it. Texas licenses PEOs under Labor Code Chapter 91 and requires a license for a provider with even one covered employee in the state [7]. For state unemployment tax there, a licensed PEO \"shall be the employer of the workers it provides to a client,\" and an unlicensed provider shifts that determination to the client [9]. Workers compensation is separate again, since in Texas either party may carry it and the services agreement has to name which one does [8]. Confirm the equivalent rules in every state where you have staff; this is general information rather than legal or tax advice.","introHtml":"Section 3511 of the Internal Revenue Code provides that a certified professional employer organization "shall be treated as the employer (and no other person shall be treated as the employer) of any work site employee" [2]. The IRS puts the practical version to customers directly: for work site employees, "the CPEO is solely liable for paying the customer's employment taxes" [3]. Certification is voluntary, so a PEO without it leaves the client responsible for the tax and the filings [1].
\nRelief covers work site employees, and only the wages the CPEO actually pays. For covered employees who are not work site employees, "a CPEO and its customer may both be liable with regard to remuneration the CPEO pays to non-worksite employees" [3]. Work site status turns on an 85 percent threshold measured at the customer's location, and the CPEO has to notify the customer when employees stop meeting it [4].
\nThe IRS publishes lists of currently certified, suspended, and revoked CPEOs, refreshed by the fifteenth day of the first month of each quarter [6]. Check the exact legal entity name and EIN on your contract against that list, since a group can hold certification for one subsidiary and not another. CPEOs also file Form 8973 to report when a customer contract starts and ends [3].
\nA CPEO posts a surety bond for federal employment taxes worth at least the greater of 5 percent of its prior year section 3511 liability, capped at $1 million, or $50,000, and it files quarterly CPA attestations covering tax deposits and working capital [5].
\nState rules run in parallel with the federal program and do not track it. Texas licenses PEOs under Labor Code Chapter 91 and requires a license for a provider with even one covered employee in the state [7]. For state unemployment tax there, a licensed PEO "shall be the employer of the workers it provides to a client," and an unlicensed provider shifts that determination to the client [9]. Workers compensation is separate again, since in Texas either party may carry it and the services agreement has to name which one does [8]. Confirm the equivalent rules in every state where you have staff; this is general information rather than legal or tax advice.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":40},{"id":"26700858-95d8-4fe5-a5f7-2ec1120795e9","sectionKey":"which_one_do_you_need","sectionType":"markdown_section","heading":"Which one do you need?","introMarkdown":"### You already have an entity where the person will work\n\nA PEO is normally the better fit, because it works wherever you are already a lawful employer and published PEO rates run several hundred dollars per employee per month below EOR rates [12][13]. In the United States, filter to IRS-certified PEOs if federal employment tax exposure matters to your finance team [3][6]. Exit is simple, since you are already the employer, so leaving means moving payroll and benefits elsewhere without touching anyone's employment contract.\n\n### You have no entity in that country\n\nAn EOR is normally the only compliant route, because there is no local employer for a PEO to share responsibilities with [10]. Check that the provider holds its own entity there rather than subcontracting to a partner, and read the termination clause first, since statutory notice and severance get passed through to you.\n\n### You are hiring across several countries at once\n\nAn EOR handles that spread far better than opening entities in parallel, and it keeps your registration footprint in one place while you learn which markets deserve a permanent presence [10]. Plan the exit anyway, because moving employees onto your own entity later is a transfer of employment that some countries treat as a business transfer carrying protected terms.\n\n### Benefits pricing is your main reason for outsourcing\n\nA US PEO fits better than an EOR, because a PEO can sponsor a single welfare benefit plan covering eligible employees across many clients [8]. Ask for the plan documents and the renewal history rather than accepting the pooled purchasing argument on its own.\n\n### You have five or more people in one country\n\nPrice your own entity against the fees. At $599 to $699 per employee per month, ten people in one country costs roughly $72,000 to $84,000 a year in provider fees alone [12][13], which sits inside the range where an entity plus local payroll starts to compete. Incorporation and accounting costs vary by country, so run both numbers.","introHtml":"A PEO is normally the better fit, because it works wherever you are already a lawful employer and published PEO rates run several hundred dollars per employee per month below EOR rates [12][13]. In the United States, filter to IRS-certified PEOs if federal employment tax exposure matters to your finance team [3][6]. Exit is simple, since you are already the employer, so leaving means moving payroll and benefits elsewhere without touching anyone's employment contract.
\nAn EOR is normally the only compliant route, because there is no local employer for a PEO to share responsibilities with [10]. Check that the provider holds its own entity there rather than subcontracting to a partner, and read the termination clause first, since statutory notice and severance get passed through to you.
\nAn EOR handles that spread far better than opening entities in parallel, and it keeps your registration footprint in one place while you learn which markets deserve a permanent presence [10]. Plan the exit anyway, because moving employees onto your own entity later is a transfer of employment that some countries treat as a business transfer carrying protected terms.
\nA US PEO fits better than an EOR, because a PEO can sponsor a single welfare benefit plan covering eligible employees across many clients [8]. Ask for the plan documents and the renewal history rather than accepting the pooled purchasing argument on its own.
\nPrice your own entity against the fees. At $599 to $699 per employee per month, ten people in one country costs roughly $72,000 to $84,000 a year in provider fees alone [12][13], which sits inside the range where an entity plus local payroll starts to compete. Incorporation and accounting costs vary by country, so run both numbers.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":50},{"id":"6b69de7f-47eb-41e7-86fc-b50fe760d8a1","sectionKey":"contributor_perspective","sectionType":"markdown_section","heading":"How this answer was researched","introMarkdown":"This record was built from primary legal and tax sources rather than vendor marketing, because the two categories are described inconsistently across the industry and the same provider often sells both. The statutory material comes from the Internal Revenue Code and its regulations, from IRS pages written for CPEOs and their customers, and from Texas Department of Licensing and Regulation material on state PEO licensing. Pricing figures come from vendors' own pricing pages on the date shown and appear only as examples of how each model is priced. Figures from NAPEO are labeled as trade association research, since that organization represents PEOs. Nothing here is legal or tax advice, and country rules change often. If you work in this field and can correct a detail, add a jurisdiction, or supply a documented counterexample, the editorial team wants to hear it and will credit the contribution.","introHtml":"This record was built from primary legal and tax sources rather than vendor marketing, because the two categories are described inconsistently across the industry and the same provider often sells both. The statutory material comes from the Internal Revenue Code and its regulations, from IRS pages written for CPEOs and their customers, and from Texas Department of Licensing and Regulation material on state PEO licensing. Pricing figures come from vendors' own pricing pages on the date shown and appear only as examples of how each model is priced. Figures from NAPEO are labeled as trade association research, since that organization represents PEOs. Nothing here is legal or tax advice, and country rules change often. If you work in this field and can correct a detail, add a jurisdiction, or supply a documented counterexample, the editorial team wants to hear it and will credit the contribution.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":"This answer was written and reviewed by the AnswerStack Editorial Team, which has no commercial stake in the products, companies, or methods discussed. Every claim is cited inline and verified on the dates shown.","noteHtml":"This answer was written and reviewed by the AnswerStack Editorial Team, which has no commercial stake in the products, companies, or methods discussed. Every claim is cited inline and verified on the dates shown.
\n","sortOrder":60},{"id":"15438f8b-2c9f-43cb-9031-206f9b73b2e9","sectionKey":"trade_offs","sectionType":"markdown_section","heading":"What should you watch for in either model?","introMarkdown":"### EOR arrangements are restricted in some countries\n\nGermany classifies the EOR model as employee leasing, so the provider must hold a license from the German Labour Agency, and without it \"an employment relationship between the EOR's customer and the employee arises automatically by operation of law\" [11]. Assignments are capped at 18 months and both parties face fines of up to 30,000 euros per violation [11].\n\n### Certification status is not a given\n\nA PEO without IRS certification leaves you responsible for federal employment tax on your own employees, whatever the services agreement says [1]. Providers sometimes describe themselves as certified when only one affiliated entity holds the certificate, so check the exact name and EIN against the IRS public listing [6].\n\n### State accounts behave differently than buyers expect\n\nWhether the PEO or the client is the employer for state unemployment tax is set by state law rather than your contract, and in Texas it flips to the client if the provider is unlicensed [9]. Workers compensation is separate again, and in Texas the services agreement has to name the party maintaining coverage [8].\n\n### The category labels are unreliable\n\nDeel and Remote both sell EOR and PEO products from the same platform [12][13], and \"global PEO\" often describes what is legally an EOR. Ask which entity signs the employment agreement instead of sorting providers by the label on a pricing page.","introHtml":"Germany classifies the EOR model as employee leasing, so the provider must hold a license from the German Labour Agency, and without it "an employment relationship between the EOR's customer and the employee arises automatically by operation of law" [11]. Assignments are capped at 18 months and both parties face fines of up to 30,000 euros per violation [11].
\nA PEO without IRS certification leaves you responsible for federal employment tax on your own employees, whatever the services agreement says [1]. Providers sometimes describe themselves as certified when only one affiliated entity holds the certificate, so check the exact name and EIN against the IRS public listing [6].
\nWhether the PEO or the client is the employer for state unemployment tax is set by state law rather than your contract, and in Texas it flips to the client if the provider is unlicensed [9]. Workers compensation is separate again, and in Texas the services agreement has to name the party maintaining coverage [8].
\nDeel and Remote both sell EOR and PEO products from the same platform [12][13], and "global PEO" often describes what is legally an EOR. Ask which entity signs the employment agreement instead of sorting providers by the label on a pricing page.
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":70},{"id":"56f57a2e-95d9-4b0b-bf7c-43b642a30a43","sectionKey":"what_they_are_not","sectionType":"markdown_section","heading":"What an EOR and a PEO are not","introMarkdown":"### Neither one is a staffing agency\n\nA staffing agency sources candidates and supplies them for its own account, while both an EOR and a PEO start after you have already chosen the person.\n\n### An EOR is not a contractor arrangement\n\nAn EOR puts the worker on an employment contract with statutory entitlements attached, while a contractor stays self-employed. Several providers sell a separate agent of record or contractor of record service for that case.\n\n### A PEO is not a way to stop being an employer\n\nCo-employment shares defined responsibilities without removing you from the employment relationship, and with an uncertified PEO the client stays responsible for its own employment taxes and returns [1].\n\n### \"Global PEO\" is not a third model\n\nThe phrase is marketing shorthand. In almost every case the structure underneath is an EOR, because genuine co-employment requires you to already be an employer in that country [10].\n\n### Neither model settles worker classification\n\nPutting a genuine contractor through an EOR converts that person into an employee, which changes the underlying facts. Routing a misclassified worker through a PEO changes much less, because you remain an employer either way [1].","introHtml":"A staffing agency sources candidates and supplies them for its own account, while both an EOR and a PEO start after you have already chosen the person.
\nAn EOR puts the worker on an employment contract with statutory entitlements attached, while a contractor stays self-employed. Several providers sell a separate agent of record or contractor of record service for that case.
\nCo-employment shares defined responsibilities without removing you from the employment relationship, and with an uncertified PEO the client stays responsible for its own employment taxes and returns [1].
\nThe phrase is marketing shorthand. In almost every case the structure underneath is an EOR, because genuine co-employment requires you to already be an employer in that country [10].
\nPutting a genuine contractor through an EOR converts that person into an employee, which changes the underlying facts. Routing a misclassified worker through a PEO changes much less, because you remain an employer either way [1].
\n","outroMarkdown":null,"outroHtml":null,"contentJson":{},"configJson":{},"noteMarkdown":null,"noteHtml":null,"sortOrder":80}],"citations":[{"title":"Third party payer arrangements: Professional Employer Organizations","url":"https://www.irs.gov/government-entities/third-party-payer-arrangements-professional-employer-organizations","excerpt":"The Code does not define the term 'co-employer' and the concept is not recognized under federal tax law.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"Co-employment is not recognized under federal tax law; the common law employer generally remains responsible for employment taxes and returns when payroll is outsourced to an uncertified PEO; section 3511 treatment of a CPEO.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"26 U.S.C. 3511: Certified professional employer organizations","url":"https://www.law.cornell.edu/uscode/text/26/3511","excerpt":"a certified professional employer organization shall be treated as the employer (and no other person shall be treated as the employer) of any work site employee","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"A CPEO is treated as the employer, and no other person is treated as the employer, of a work site employee; the section does not apply to related-party customers.","domain":"law.cornell.edu","publisherName":"Legal Information Institute, Cornell Law School"},{"title":"CPEO customers: what you need to know","url":"https://www.irs.gov/tax-professionals/cpeo-customers-what-you-need-to-know","excerpt":"A CPEO and its customer may both be liable with regard to remuneration the CPEO pays to non-worksite employees.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"Sole CPEO liability for work site employees, shared liability for non-worksite employees, and Form 8973 contract reporting.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"26 CFR 31.3511-1: Certified professional employer organization","url":"https://www.law.cornell.edu/cfr/text/26/31.3511-1","excerpt":"the 85 percent threshold described in 301.7705-1(b)(17)","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"The 85 percent work site threshold, joint employer treatment for covered employees who are not work site employees, and the notification duty when employees stop meeting the threshold.","domain":"law.cornell.edu","publisherName":"Legal Information Institute, Cornell Law School"},{"title":"Requirements for maintaining certification as a CPEO","url":"https://www.irs.gov/tax-professionals/requirements-for-maintaining-certification-as-a-cpeo","excerpt":"at least equal to the greater of 5 percent of the CPEO's liability under section 3511 of the Code during the preceding calendar year (up to $1 million) or $50,000","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"Surety bond formula and caps, annual audited financial statements, quarterly assertions with CPA attestation, and positive working capital verification.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"CPEO public listings","url":"https://www.irs.gov/tax-professionals/cpeo-public-listings","excerpt":"This list will be updated to reflect newly certified CPEOs by the 15th day of the first month of every calendar quarter.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"The IRS publishes active, suspended, and revoked CPEO lists so customers can verify certification status.","domain":"irs.gov","publisherName":"Internal Revenue Service"},{"title":"Professional employer organizations: general information","url":"https://www.tdlr.texas.gov/peo/general-information.htm","excerpt":"A coemployment relationship is a contractual relationship between a PEO and a client company, entity, or business (client) that involves the sharing of employment responsibilities to covered employees in accordance with a professional employer services agreement.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"Definition of coemployment in Texas, the licensing trigger at a single covered employee, and the full versus limited license split at 50 employees.","domain":"tdlr.texas.gov","publisherName":"Texas Department of Licensing and Regulation"},{"title":"Professional employer organizations: employer and employee benefits","url":"https://www.tdlr.texas.gov/peo/employer-employee-benefits.htm","excerpt":"A PEO may sponsor a single welfare benefit plan under which eligible covered employees of one or more clients may elect to participate.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"Workers compensation is optional in Texas and the services agreement must name the party that maintains it; a PEO may sponsor a single welfare benefit plan across multiple clients.","domain":"tdlr.texas.gov","publisherName":"Texas Department of Licensing and Regulation"},{"title":"40 Tex. Admin. Code 815.133: Professional employer organizations and temporary help firms","url":"https://www.law.cornell.edu/regulations/texas/40-Tex-Admin-Code-SS-815-133","excerpt":"A professional employer organization licensed by the Texas Department of Licensing and Regulation under Texas Labor Code Chapter 91 shall be the employer of the workers it provides to a client.","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"For Texas unemployment tax, a licensed PEO is the employer of the workers it supplies, and an unlicensed provider shifts that determination to the client.","domain":"law.cornell.edu","publisherName":"Legal Information Institute, Cornell Law School"},{"title":"PEO vs. EOR: key differences explained for employers","url":"https://www.uschamber.com/co/run/human-resources/peo-vs-eor","excerpt":"An EOR is the legal employer for staff and contractors hired through the service, whereas a PEO co-employs your workforce.","quoteText":null,"sourceRole":"INDEPENDENT","verifiedAt":"2026-07-21T00:00:00","supportsText":"Neutral definitions of the two models: the EOR as legal employer, the PEO as co-employer, and the registration requirement that follows from each.","domain":"uschamber.com","publisherName":"CO by U.S. Chamber of Commerce"},{"title":"Employers of record (EORs) in Germany: what you need to know","url":"https://www.orrick.com/en/Insights/2023/11/Employers-of-Record-EORs-in-Germany-What-You-Need-to-Know","excerpt":"If the EOR does not have the required license, an employment relationship between the EOR's customer and the employee arises automatically by operation of law, whether desired or not.","quoteText":null,"sourceRole":"INDEPENDENT","verifiedAt":"2026-07-21T00:00:00","supportsText":"German law treats the EOR model as employee leasing, requires a license from the German Labour Agency, caps assignments at 18 months, and creates an automatic employment relationship with the customer where the license is missing.","domain":"orrick.com","publisherName":"Orrick, Herrington & Sutcliffe LLP"},{"title":"Deel Pricing","url":"https://www.deel.com/pricing/","excerpt":"Starting at $599 per EOR employee per month; Starting at $125 per US PEO employee per month","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"Published list pricing for EOR and US PEO from a vendor that sells both models.","domain":"deel.com","publisherName":"Deel"},{"title":"Pricing and plans","url":"https://remote.com/pricing","excerpt":"$699 per employee/month (EOR); From $99 per employee/month (PEO)","quoteText":null,"sourceRole":"PRIMARY","verifiedAt":"2026-07-21T00:00:00","supportsText":"Published list pricing for EOR and PEO from a second vendor that sells both models.","domain":"remote.com","publisherName":"Remote"},{"title":"PEO industry overview","url":"https://napeo.org/intro-to-peos/industry-overview/","excerpt":"There are 500 PEOs in the U.S. ... employing 4.5 million people","quoteText":null,"sourceRole":"SUPPORTING","verifiedAt":"2026-07-21T00:00:00","supportsText":"Trade association figures for the size of the US PEO industry, used only to describe scale. NAPEO represents PEOs, so this is industry research rather than a neutral source.","domain":"napeo.org","publisherName":"National Association of Professional Employer Organizations (NAPEO)"}],"revisions":[],"relatedAnswers":[{"id":"c9458b53-b52d-4d78-bfb0-9642fb81596a","slug":"should-i-hire-someone-as-a-contractor-or-as","question":"Should I hire someone as a contractor or as an employee through an EOR?","publishedAt":"2026-07-21T20:04:33.818","confidenceScore":86,"confidenceLabel":"High","industry":{"id":"e1a1da3c-52a8-4e99-88ad-d08ef17d7c3f","slug":"hr-technology","label":"HR Technology","description":"ATS, HRIS, payroll, and workforce management"},"topic":{"slug":"global-distributed-workforce","label":"Global & Distributed Workforce","description":"Employer of Record (EOR), Contractor Management, Contractor of Record, Freelancer Management, Global Employment Platforms, Relocation Management","schemaKind":null},"contributor":{"id":"ec39deab-44fe-48d8-9029-fefe993ab85a","slug":"answer-stack","displayName":"AnswerStack","websiteUrl":null},"snippet":"Classification is a legal conclusion drawn from how the work is actually performed, so this turns on control, exclusivity, permanence, and integration rather than preference. Covers the IRS behavioral, financial, and relationship factors, state ABC tests, UK off-payroll rules, the EU platform work directive, the cost of getting it wrong under Internal Revenue Code section 3509, and the triggers for converting a contractor to employment.","url":"/q/should-i-hire-someone-as-a-contractor-or-as"},{"id":"a220094f-7f58-4a32-bd75-90a8f49c44ae","slug":"whats-the-best-eor-global-employment-platform-deel-vs","question":"What's the best EOR / global employment platform (Deel vs Rippling vs Remote)?","publishedAt":"2026-07-21T19:57:38.241","confidenceScore":80,"confidenceLabel":"Medium","industry":{"id":"e1a1da3c-52a8-4e99-88ad-d08ef17d7c3f","slug":"hr-technology","label":"HR Technology","description":"ATS, HRIS, payroll, and workforce management"},"topic":{"slug":"global-distributed-workforce","label":"Global & Distributed Workforce","description":"Employer of Record (EOR), Contractor Management, Contractor of Record, Freelancer Management, Global Employment Platforms, Relocation Management","schemaKind":null},"contributor":{"id":"ec39deab-44fe-48d8-9029-fefe993ab85a","slug":"answer-stack","displayName":"AnswerStack","websiteUrl":null},"snippet":"Fit beats ranking here. Deel leads on breadth of owned-entity coverage and contractor tooling, Rippling suits teams consolidating HR, payroll, and device management on one record, and Remote suits buyers who want a single owned-entity chain with no standing deposit. Oyster, Pebl, Multiplier, Papaya Global, and G-P win in narrower situations. Published list prices run roughly $400 to $770 per employee per month, and every coverage count is vendor-stated.","url":"/q/whats-the-best-eor-global-employment-platform-deel-vs"},{"id":"db9cec91-4d50-412b-bd9f-bbe8ed58885a","slug":"how-much-does-an-employer-of-record-cost-per","question":"How much does an employer of record cost per employee?","publishedAt":"2026-07-21T19:57:33.078","confidenceScore":86,"confidenceLabel":"High","industry":{"id":"e1a1da3c-52a8-4e99-88ad-d08ef17d7c3f","slug":"hr-technology","label":"HR Technology","description":"ATS, HRIS, payroll, and workforce management"},"topic":{"slug":"global-distributed-workforce","label":"Global & Distributed Workforce","description":"Employer of Record (EOR), Contractor Management, Contractor of Record, Freelancer Management, Global Employment Platforms, Relocation Management","schemaKind":null},"contributor":{"id":"ec39deab-44fe-48d8-9029-fefe993ab85a","slug":"answer-stack","displayName":"AnswerStack","websiteUrl":null},"snippet":"Published EOR platform fees sit between USD 199 and USD 699 per employee per month, but the fee is a small slice of the bill. Gross salary plus statutory employer contributions, which run from under 8 percent of pay in the United States to about 45 percent in France, dominate the total. This answer breaks the invoice into seven layers, compares published vendor rates, and works the math for three countries.","url":"/q/how-much-does-an-employer-of-record-cost-per"},{"id":"2876574d-d23c-45e7-b7cb-70ad23361043","slug":"what-is-an-employer-of-record-eor","question":"What is an employer of record (EOR) and how does it actually work?","publishedAt":"2026-07-21T19:57:30.067","confidenceScore":88,"confidenceLabel":"High","industry":{"id":"e1a1da3c-52a8-4e99-88ad-d08ef17d7c3f","slug":"hr-technology","label":"HR Technology","description":"ATS, HRIS, payroll, and workforce management"},"topic":{"slug":"global-distributed-workforce","label":"Global & Distributed Workforce","description":"Employer of Record (EOR), Contractor Management, Contractor of Record, Freelancer Management, Global Employment Platforms, Relocation Management","schemaKind":null},"contributor":{"id":"ec39deab-44fe-48d8-9029-fefe993ab85a","slug":"answer-stack","displayName":"AnswerStack","websiteUrl":null},"snippet":"An EOR hires your worker through its own registered entity in their country, signs a locally compliant employment contract, runs payroll, and remits local income tax and social contributions, while you set the pay and direct the work. This answer walks the mechanics, the invoice math, the split of responsibility across client, EOR, and worker, the owned-entity versus partner-entity distinction, and the four exposures it does not absorb.","url":"/q/what-is-an-employer-of-record-eor"}],"contributorStats":{"verifiedAnswers":224,"openDisputes":0},"schemaJson":{"@context":"https://schema.org","@type":"Question","name":"What's the difference between an EOR and a PEO, and which one do I need?","text":"What's the difference between an EOR and a PEO, and which one do I need?","url":"https://www.answerstack.io/q/whats-the-difference-between-an-eor-and-a-peo","answerCount":1,"datePublished":"2026-07-21T19:57:35.653","author":{"@type":"Person","name":"AnswerStack Editorial Team","worksFor":{"@type":"Organization","name":"AnswerStack"},"url":"https://www.answerstack.io/contributors/answer-stack"},"about":[{"@type":"Thing","name":"Global & Distributed Workforce"},{"@type":"Thing","name":"HR Technology"}],"acceptedAnswer":{"@type":"Answer","text":"A professional employer organization (PEO) co-employs staff at a client that already has its own legal entity, sharing employment responsibilities under a services agreement while the client stays an employer of its own people [7]. An employer of record (EOR) becomes the legal employer of the worker through an entity it already operates, which is what lets it hire in a country where the client has no entity at all [10]. That difference decides whether you need a local entity, who carries employment liability, how benefits are sourced, and whether either model is available in a given market [10][11]. A US PEO can also hold voluntary IRS certification, and a certified PEO is treated as the employer for federal employment tax on wages it pays to work site employees, which an uncertified PEO is not [1][2]. If you are already a registered employer where the person will work, a PEO usually fits; if you are not, an EOR is normally the only compliant route [10].","url":"https://www.answerstack.io/q/whats-the-difference-between-an-eor-and-a-peo","upvoteCount":0,"datePublished":"2026-07-21T19:57:35.653","dateModified":"2026-07-21T00:00:00","author":{"@type":"Person","name":"AnswerStack Editorial Team","worksFor":{"@type":"Organization","name":"AnswerStack"},"url":"https://www.answerstack.io/contributors/answer-stack"},"citation":[{"@type":"CreativeWork","name":"Third party payer arrangements: Professional Employer Organizations","url":"https://www.irs.gov/government-entities/third-party-payer-arrangements-professional-employer-organizations"},{"@type":"CreativeWork","name":"26 U.S.C. 3511: Certified professional employer organizations","url":"https://www.law.cornell.edu/uscode/text/26/3511"},{"@type":"CreativeWork","name":"CPEO customers: what you need to know","url":"https://www.irs.gov/tax-professionals/cpeo-customers-what-you-need-to-know"},{"@type":"CreativeWork","name":"26 CFR 31.3511-1: Certified professional employer organization","url":"https://www.law.cornell.edu/cfr/text/26/31.3511-1"},{"@type":"CreativeWork","name":"Requirements for maintaining certification as a CPEO","url":"https://www.irs.gov/tax-professionals/requirements-for-maintaining-certification-as-a-cpeo"},{"@type":"CreativeWork","name":"CPEO public listings","url":"https://www.irs.gov/tax-professionals/cpeo-public-listings"},{"@type":"CreativeWork","name":"Professional employer organizations: general information","url":"https://www.tdlr.texas.gov/peo/general-information.htm"},{"@type":"CreativeWork","name":"Professional employer organizations: employer and employee benefits","url":"https://www.tdlr.texas.gov/peo/employer-employee-benefits.htm"},{"@type":"CreativeWork","name":"40 Tex. Admin. Code 815.133: Professional employer organizations and temporary help firms","url":"https://www.law.cornell.edu/regulations/texas/40-Tex-Admin-Code-SS-815-133"},{"@type":"CreativeWork","name":"PEO vs. EOR: key differences explained for employers","url":"https://www.uschamber.com/co/run/human-resources/peo-vs-eor"},{"@type":"CreativeWork","name":"Employers of record (EORs) in Germany: what you need to know","url":"https://www.orrick.com/en/Insights/2023/11/Employers-of-Record-EORs-in-Germany-What-You-Need-to-Know"},{"@type":"CreativeWork","name":"Deel Pricing","url":"https://www.deel.com/pricing/"},{"@type":"CreativeWork","name":"Pricing and plans","url":"https://remote.com/pricing"},{"@type":"CreativeWork","name":"PEO industry overview","url":"https://napeo.org/intro-to-peos/industry-overview/"}]}}}