Key takeaways
- EORs and PEOs both help with global hiring. But they solve the problem in different ways. The real difference comes down to legal responsibility. With an EOR, the risk sits with them. With a PEO, it’s shared with your business.
- EORs suit UK startups and SMEs seeking fast, compliant international hiring without setting up local entities, while PEOs work best for larger organisations with existing entities and in-house compliance capability.
- Your decision should be based on cost, speed, and risk. EORs keep pricing predictable and give you flexibility. PEO costs move with payroll and often need a longer-term setup to make sense.
Building a team overseas used to sound scary - and expensive. Not anymore!
UK startups and SMEs are now hiring across borders to access the right skills, keep costs under control, and scale faster without waiting years to grow.
But global hiring comes with strings attached.
- Employment law
- Payroll compliance
- Tax obligations
- Local labour rules
And they’re different in every country. That extra layer of complexity is what catches many teams out.
To manage this complexity, many businesses turn to outsourcing HR services through either an Employer of Record (EOR) or a Professional Employer Organisation (PEO).
The global Enterprise Employer of Record (EOR) solutions market is worth approximately US $8.0 billion (approx. £6.2–£6.4 billion) in 2025 and may grow to around US $25 billion (approx. £19.5–£20.0 billion) by 2033, driven by rising demand for compliant global hiring, payroll and workforce management.
While these terms are often used interchangeably, the difference between an EOR and a PEO is significant, and choosing the wrong model can lead to higher costs, compliance risks, or operational friction.
This guide explains Employer of Record vs PEO for your UK business. We cover how each model works, the pros and cons, cost differences, and the challenges businesses should consider before deciding which route to take.
What is an Employer of Record (EOR)?
An Employer of Record is a third-party organisation that legally employs workers on your behalf in another country. The EOR becomes the official employer in the eyes of local authorities, while you continue to manage the employee’s day-to-day responsibilities, performance, and workload.
This model is particularly popular with UK businesses that want to hire internationally without setting up a local legal entity. The EOR already has an established presence in the country, allowing you to hire quickly while remaining compliant with local laws.
In practice, an EOR manages:
- Employment contracts
- Payroll and tax filings
- Statutory (mandatory) employee benefits
- Local labour law compliance
For businesses exploring global expansion for the first time, an EOR removes much of the legal and administrative risk.
Check out our guide to “What is a UK Employer of Record” for deeper insights.
What is a PEO?
A Professional Employer Organisation (PEO) operates under a co-employment model.
Unlike an EOR, a PEO does not become the sole legal employer. Instead, your business and the PEO share employer responsibilities.
To use a PEO, you must already have a registered legal entity in the country where your employees are based. The PEO then supports you with payroll, HR administration, benefits, and some compliance functions.
PEOs are commonly used by established companies that want to outsource HR tasks while maintaining a direct legal relationship with their employees.
Key differences between EOR and PEO
Both models support global hiring. But the difference is crucial.
With EOR versus PEO, it comes down to who carries the responsibility, the risk, and the legal accountability when things go wrong.
With an Employer of Record, the provider is the legal employer. This means they take responsibility for employment law compliance, contracts, and statutory obligations. For UK businesses hiring abroad, this significantly reduces exposure to local legal risks.
With a PEO, your business remains the legal employer. The PEO assists with HR and payroll, but compliance responsibility is shared. This offers more control but also more risk.
Here’s a detailed comparison table for an in-depth look into the key differences.
Curious to know how EOR compares to offshoring and outsourcing models? Read Black Piano’s ultimate comparison guide.
Pros and cons of Employer of Record (EOR) services
1. Advantages of using an EOR
- Faster international hiring - An Employer of Record already has legal entities in place, which allows businesses to hire overseas employees in days rather than months. This speed is especially valuable for UK startups and SMEs competing for global talent and needing to move quickly.
- Built-in local compliance expertise - Employment laws vary widely by country, and even small mistakes can lead to fines or legal issues. An EOR ensures employment contracts, payroll, taxes, and statutory benefits fully comply with local regulations.
- Reduced administrative workload - EORs manage payroll processing, tax filings, statutory reporting, and HR documentation. This removes a significant operational burden and allows internal teams to focus on growth rather than compliance.
Related read – How to hire remote employees: Tips for success
2. Disadvantages of using an EOR
- Reduced control over employment decisions - Because the EOR is the legal employer, certain actions, such as contract changes, disciplinary processes, or terminations, must be handled through the provider rather than directly by your business.
- Restrictions on duration or scale - Some countries place limits on how long or how extensively EOR models can be used, which may affect long-term hiring and workforce planning.
This is what makes hiring remotely in India so attractive for UK businesses. There’s no hard limit on how long you can use an EOR. Or how extensively. As long as the setup is compliant and structured properly, it works. And it keeps working as you grow. Check out why Black Piano vouches for hiring in India – Why India.
Pros and cons of a PEO
1. Advantages of a PEO
- Access to enhanced employee benefits - By pooling employees across multiple clients, PEOs can offer improved benefits such as insurance, pensions, and other employee perks that may be difficult to secure independently. This helps improve employee retention.
- Streamlined HR and payroll administration - For companies with an existing local entity, PEOs handle payroll processing, HR administration, and compliance support, reducing internal workload while allowing the business to retain employer control.
Related read – What is payroll outsourcing?
2. Disadvantages of a PEO
- Local legal entity required - A PEO can only be used if your business has a registered legal entity in the country. For UK companies entering new markets, this means additional setup time, upfront costs, and ongoing regulatory obligations.
- Shared compliance and legal liability - Unlike an EOR, a PEO does not fully absorb employment risk. Compliance responsibility is shared, which means your business remains exposed to local employment law, tax, and regulatory issues.
- System integration and communication challenges - PEO platforms may not integrate seamlessly with existing payroll, HR, or finance systems. Managing communication across multiple regions and providers can also slow decision-making.
- Reduced flexibility when scaling or exiting markets - Because a PEO arrangement is tied to your local entity, scaling down or exiting a country can be complex and costly compared to the flexibility offered by an EOR model.
EOR vs PEO cost comparison
1. A look at EOR costs
EOR pricing is usually simple and predictable.
Most providers charge a fixed monthly fee per employee, not a percentage of payroll. That varies depending on the country, role complexity, and what’s included.
If you are hiring remotely in India through an established EOR, the cost could be around £550 per employee per month. Learn about Black Piano’s transparent pricing on the website.
These fees generally cover:
- Payroll processing
- Local tax filings
- Statutory benefits administration
- Employment law compliance
- Ongoing HR support
What you pay comes down to where you’re hiring, the role, and how much support you need. The upside is the pricing stays fixed, which makes budgeting for international growth far less of a guessing game.
2. A look at PEO costs
PEOs typically charge a percentage of total payroll, rather than a flat fee. That typically sits somewhere between 2% and 12% of gross payroll, depending on the setup.
While this can appear cost-effective initially, costs increase as salaries rise or headcount grows.
PEO fees are usually calculated on gross payroll. That includes wages and salaries, overtime, bonuses, commissions, and even paid time off.
It can work well for larger, stable teams. But for fast-growing businesses, costs can rise quickly and become harder to predict.
Why UK businesses choose Black Piano
Black Piano was built for UK businesses that want to hire globally, without the usual complexity.
You don’t need a local entity. You don’t need to wrestle with payroll, tax, benefits, or compliance. We handle it all, end to end.
Pricing stays clear. Predictable. No hidden legal fees. No surprise admin costs. Whether you’re hiring one person or building a full offshore team, you scale at your own pace.
Learn more about Black Piano's Employer of Record services.
Challenges of EOR vs PEO
Neither model is without challenges.
EOR users may face -
- Reduced control
- Cultural differences
- Increased costs if additional services are required
On the other hand, PEO users may have to -
- Manage shared compliance responsibility
- Face system integration issues
- Deal with scalability concerns
For PEO, the requirement for a local entity remains the biggest barrier for growing businesses.
Which is better for you: EOR or PEO?
The answer depends on your business model, risk tolerance, and growth plans.
- If you want to hire globally quickly and compliantly, an EOR is usually the better option.
- If you already operate internationally and want HR support while retaining legal control, a PEO may be suitable.
UK startups and SMEs typically favour EORs for flexibility and speed.
Larger organisations with established entities may benefit more from PEO arrangements.
Final thoughts
The EOR vs PEO decision is not about following trends or copying what a competitor or some other company is doing. It must be a thoughtful and strategic decision.
Both models can work. It just depends on the situation.
The smart move is to look beyond short-term cost. Think long-term ROI, legal complexity, and how much control you want day to day.
Get that balance right, and the model you choose will support growth, protect the business, and give employees a better experience too.
If you are looking for a simple, compliant, and cost-effective way to hire internationally, Black Piano’s Employer of Record solution is a strong place to start.
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