In the last few years, more companies have expanded their workforces globally than ever before. Businesses realized the talent pool is no longer limited to their city limits (or even their country’s borders, for that matter) and skilled workers everywhere are getting a shot at working for top employers—no matter where they live.
Related: Hired survey data reveals 99% of respondents prefer a hybrid or remote working environment. Translation: if your role is in-office only, you’re missing out on loads of talent.
But with this new world of opportunity comes a new set of challenges. If you’ve considered hiring across borders, you’ve probably encountered the alphabet soup of global employment terminology. PEO, EOR, GEO, GPEO, AOR—what does it all mean?
If you’re confused by these terms, we’ve got you covered. Read on to find out what some of these common acronyms related to remote work really mean.
For the purposes of our definitions, a “customer” is a business seeking help with hiring workers in multiple jurisdictions, and a “Team Member” is a worker in one jurisdiction who wants to provide services to the “customer” located in a different jurisdiction (this could be an employee, a contractor, or a consultant).
What is a Professional Employer Organization (PEO)?
PEO is a legal term describing an organization that co-employs its customer’s employees.
PEOs help manage administrative challenges that come along with employing in multiple states. They usually provide access to other services (like retirement accounts, enhanced health insurance, and other benefits at competitive rates).
The most important factor of the PEO construct is both the PEO and the customer (company) employ the team members. This means a customer (company) must be established in every jurisdiction where it’s using a PEO and the customer (company) is still the legal employer of the Team Member (employee, contractor, or consultant) held accountable for compliance.
What is an Employer of Record (EOR)?
Unlike PEO, EOR (employer of record) is a descriptive term, not a legal term. It describes a business that formally employs Team Members (employees, contractors, or consultants) while the Team Members provide services to a customer (company).
An EOR can be a PEO, but it doesn’t have to be. An EOR may also be:
- an employment agency (a company that provides temporary workers),
- an umbrella agency (a company that manages contractor tax withholdings and payments),
- a consultancy (a company whose employees provide services to another company),
- Or any number of other organizations.
What is a Global Employer Organization (GEO) or Global PEO (GPEO)?
Similar to EOR, global employer organization (GEO) and global PEO (GPEO) are descriptive terms rather than legal terms. They are used to describe an EOR that employs Team Members outside of where the customer (company) is incorporated.
Unlike a PEO, which is the co-employer of Team Members (employees), GEOs are the employer of Team Members. For this reason, the customer (company) doesn’t share any liability.
What is an Agent of Record (AOR)?
Agent of record (AOR) is a legal term to describe an individual (or a company) that has authorization to act on behalf of another. In the world of distributed work, AORs are typically used to manage contractor relationships. For example, they’ll forward invoices and handle payments between a business and contractor.
Understanding the Best Global Hiring Option for You
When it comes to deciding which option for globally distributed teams works best for your business, it ultimately comes down to your current HR needs. If you want to outsource your HR function but still maintain some control, a PEO might be the best fit. If you want to completely outsource HR, an EOR may be the way to go.
The other option is to use a global employment platform. Like an EOR, a platform like Oyster facilitates cross-border employment on behalf of your company, but with the added benefit of being fully automated, self-serve, and free to start.
At the end of the day, it’s up to you to determine the best cross-border employment option for your team. But know that when it comes to hiring globally, you’ve got choices!
This article was contributed by Hired’s partner Oyster, an end-to-end distributed Human Resources platform. They enable employers to hire, compensate, and care for talented colleagues around the world. Hear more about the impact of remote hiring in this blog recapping a conversation with Hired CEO Josh Brenner and Oyster CEO Tony Jamous.
Disclaimer: This blog and all information in it is provided for general informational purposes only. It does not, and is not intended to, constitute legal or tax advice. You should consult with a qualified legal or tax professional for advice regarding any legal or tax matter and prior to acting (or refraining from acting) on the basis of any information provided on this website.
Source: Employer - hired.com
