The Medical Link | Hiring In The U.S.? Understanding EOR Vs. PEO | European American Chamber of Commerce New York [EACCNY] | Your Partner for Transatlantic Business Resources

If you’re planning to hire employees in the U.S., you’ve probably come across two common options: EOR (Employer of Record) and PEO (Professional Employer Organization). On the surface, they can sound similar—but they serve very different purposes, especially for international companies entering the U.S. market.

Understanding the difference early can save you time, money, and a lot of confusion.

What Is an Employer of Record (EOR)?

An Employer of Record is a third party that legally employs workers on your behalf. This is often the fastest way for an international company to hire in the U.S. without setting up a U.S. legal entity.

With an EOR, the provider:

Becomes the legal employer of the U.S. employee
Handles payroll, tax filings, and compliance
Manages employment contracts and required benefits
Takes on much of the employment liability

You still manage the employee’s day-to-day work, but legally, they’re employed by the EOR.

When EOR makes sense:

If you’re testing the U.S. market, hiring your first U.S. employee, or don’t yet have a U.S. entity, an EOR can be a simple, low-commitment way to get started.

What Is a Professional Employer Organization (PEO)?

A PEO works differently. In this model, your company must have a U.S. legal entity. The PEO enters into a co-employment relationship with you, meaning:

You remain the legal employer
The PEO handles payroll, HR administration, benefits, and compliance support
Employees are reported under your company’s EIN
You gain access to more robust benefits and HR infrastructure

PEOs are designed for companies that are ready to build and scale a long-term U.S. workforce.

When PEO makes sense:

If you’ve established a U.S. entity and are planning to grow your team, a PEO offers better cost efficiency, more control, and stronger benefits options over time.

EOR vs. PEO: Pros & Cons for International Employers

Option	Pros	Cons
EOR (Employer of Record)	Fastest way to hire in the U.S. No need for a U.S. entity Provider handles payroll and compliance Lower upfront setup effort	Typically, higher cost per employee Less control over benefits and plan design Can be harder to scale long-term Transitioning later may require employee changes
PEO (Professional Employer Organization)	Often more cost-effective as you scale Access to stronger benefits options More control and long-term stability Well-suited for multi-state growth	Requires a U.S. entity More setup work upfront Not ideal for “testing” the market

Key Differences to Keep in Mind

The biggest difference comes down to entity ownership and long-term strategy. An EOR allows you to hire without setting up a U.S. entity, while a PEO requires one. EORs are often quicker to deploy but can become expensive as your team grows. PEOs take more effort to set up but typically offer better long-term value for growing U.S. teams.

Many international companies start with an EOR and later transition to a PEO once their U.S. presence is more established.

Final Thoughts
There’s no one-size-fits-all answer. The right choice depends on where you are in your U.S. expansion journey, how quickly you need to hire, and your long-term growth plans.

If you’re unsure which model makes sense for your business, working with a U.S.-based HR or benefits advisor can help you make the right decision—and avoid switching models too soon.

Compliments of The Medical Link – a member of the EACCNY

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