Expanding your business or managing a workforce overseas often involves critical decisions about how to legally employ people and handle human resource (HR) functions. Two common solutions in HR outsourcing are Employer of Record (EOR) and Professional Employer Organization (PEO). Understanding what these models are, their differences, and deciding factors can help you choose the perfect fit for your organizational needs.

What is an Employer of Record (EOR)?

An EOR is a third-party organization that becomes the legal employer for employees hired on your behalf in a particular country, such as the Philippines. The EOR handles all employment responsibilities, including recruitment, compliance with local labor laws, payroll processing, tax withholding, benefits administration, and HR documentation. Through EOR services, businesses can lawfully hire full-time employees without having to establish their local entity, enabling smooth market entry and workforce management.

What is a Professional Employer Organization (PEO)?

A PEO is also a third-party that partners with your business to manage HR administrative tasks like payroll, benefits, and compliance. However, unlike an EOR, a PEO acts as a co-employer—your business retains legal employment responsibility and control over hiring, supervision, and workforce management decisions. PEOs are well-suited for handling payroll processing, benefits administration, and regulatory compliance support while allowing the client to stay directly involved in HR operations.

Key Differences Between EOR and PEO

Business Need or Aspect	EOR	PEO
Legal entity requirement	No need for you to have a local legal entity in the jurisdiction – the EOR uses its entity.	You generally must have a legal entity (or register one) in the jurisdiction where you hire.
Legal Employer Status	The EOR is the legal employer of record; your business retains management of the day-to-day but not the employer legal liability.	Co-employment: your business remains legal employer (or co-employer) and shares liability with the PEO.
Risk and Compliance Burden	EOR assumes full or near-full employer liability (taxes, local labor law compliance, filings) for the employees in that jurisdiction.	PEO shares employer-related risks; the client company still retains responsibility for many compliance obligations.
Scope of Services	Primarily used for global hiring / cross-border employment; very helpful when you don’t have entity presence.	Better suited when you already operate in the country/region and want to outsource HR admin functions (payroll, benefits, etc.).
Flexibility and Speed	High speed to hire remotely in multiple regions; less infrastructure required.	Might require entity set-up, local registration, or minimum employee counts; somewhat less agility in new geographies.
Best for	Quickly onboarding international employees, trial markets, remote global talent.	Long-term domestic workforce where you have or will build infrastructure; benefit administration etc.
Cost Considerations	May be cost-efficient especially when you avoid entity establishment costs; but service fees apply.	Potentially lower cost in mature domestic markets with many employees; but you still carry legal exposure.

Deciding Factors on Choosing EOR or PEO

Geographic Location: If you are hiring outside your home country, especially where you do not have a legal entity, an EOR is ideal to ensure compliance and legal employment. If you operate domestically or have established local presence, a PEO may be suitable to streamline HR operations.

Control vs Delegation: Choose a PEO if you want to maintain control over hiring and workforce management but seek support for administration and compliance. If you’d prefer to delegate full employment responsibility and reduce legal risk abroad, EOR is the better choice.

Legal and Compliance Risk: EOR assumes full legal responsibility for compliance and employee liabilities in foreign jurisdictions, reducing your financial and regulatory exposure. PEO shares these risks, as the client remains the legal employer.

Scalability and Speed: For quick market entry and flexible workforce scaling internationally, EOR services allow rapid hiring without entity setup. PEO tends to suit ongoing HR management domestically.

Criteria When to Use EOR or PEO

Use an EOR when:

• Entering the Philippine market without establishing a local entity
• Hiring remote full-time employees abroad on a long-term basis
• Managing employment compliance where local labor laws are complex
• Running project-based or seasonal workforces internationally

Use a PEO when:

• You have existing local operations and want to outsource HR admin
• Managing a multi-state workforce domestically with complex compliance
• Your internal HR team needs assistance with payroll, benefits, or tax filing
• Supporting regulated industries requiring HR expertise and risk management

This clear distinction and understanding of EOR vs PEO empower companies to choose smartly based on their geographic, operational, and risk requirements. Partnering with Global ZenTech ensures whichever path you choose, you have a trusted expert to guide you through employment solutions in the Philippines.

Get Started with EOR or PEO with Global ZenTech Today

We offer comprehensive EOR services tailored for businesses expanding in the Philippines, providing a one-stop solution that covers recruitment, payroll, compliance with Philippine labor laws, employee onboarding, and performance management. Our expertise ensures your business remains compliant, minimizes risks, and enjoys streamlined HR operations allowing you to focus on core activities.