Comparison

PEO vs EOR: Which One Do You Actually Need?

A PEO co-employs U.S. workers alongside you in states where you already have an entity. An EOR is the sole legal employer in jurisdictions where you don't have an entity. They solve different problems.

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The core difference

A PEO shares employer responsibilities with you under a co-employment agreement. You direct the work, the PEO runs payroll under its FEIN, and both parties share specific compliance obligations. You must already be a registered employer in the state.

An EOR is the legal employer of record. The worker is on the EOR's payroll in a jurisdiction where the EOR (not you) holds the entity. EORs are how startups hire one engineer in Portugal without opening a Portuguese entity.

When each model fits

PEO: U.S. employer with 5–500 employees who wants HR, benefits, WC, and payroll bundled. State entities already established.
EOR: Hiring across states or countries where you have no entity, or testing a market before committing to incorporation.
Both: Some larger employers run a PEO for U.S. headcount and an EOR for international.

Can a PEO hire someone in a state where I have no entity?

No. A PEO requires you to be a registered employer in the worksite state. If you need to hire in a new state with no setup, you need an EOR or you need to register first.

Is an EOR more expensive than a PEO?

Usually yes per worker, because you're paying for entity infrastructure in jurisdictions where you don't have one. But total cost vs. setting up your own entity is often dramatically lower for small headcount.

Most U.S. employers shopping for "PEO vs EOR" actually want a PEO. If you're hiring internationally or testing new states, EOR is the right tool.

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