Employers of Record (EORs) and Professional Employer Organizations (PEOs) both help businesses manage employment-related responsibilities, but they can serve different purposes and operate under different models.
Employer of Record
An EOR legally employs workers on behalf of another company, taking responsibility for employment compliance and other critical employment aspects like issuing payroll, benefits eligibility and administration, tax obligations, and regulatory filings. The Master Service Agreement (MSA) between the EOR and client company should outline the key roles and responsibilities of both parties. An EOR model can apply to a client’s entire workforce or a select portion of their business.
This model allows client companies to quickly onboard employees, independent contractors, and freelancers across different regions without establishing legal entities in each location. An EOR can be the preferred approach for U.S. entities looking to expand across the U.S. or into Canada without the traditional investment required to set up a business entity in the country. The client company maintains day-to-day management of employees while the EOR handles all legal employer obligations. An EOR is a turnkey solution ideal for contingent workforces that often expand and contract due to changing business conditions.
The EOR model often provides greater flexibility as it supports rapid scaling of teams across different jurisdictions while ensuring compliance with varying state, provincial, and federal regulations. This enables client companies to focus on their core business without the administrative burden of managing employment complexities.
Professional Employer Organization
A PEO, in contrast, operates through co-employment, where the client company remains the legal employer but shares certain responsibilities with the PEO. The PEO typically manages HR functions, payroll, and compliance and often provides access to better benefit offerings through economies of scale. This model is typically more suited for traditional employment relationships rather than the flexible, project-based engagements that characterize the freelance workforce approach. PEO relationships most typically apply to all employees under the client company.
Note that some PEOs and EORs operate in a bit of a mixed area and may provide services that overlap or resemble each other. It is important to clarify the legal relationship and determine who holds the employer responsibilities for compliance, benefits, payroll, and risk management in each specific context.
The freelance economy requires agility and compliance simultaneously: a balance that EORs are particularly well-positioned to provide, especially for companies seeking to build distributed teams across North America without establishing multiple legal entities.
Let’s compare:
| EOR | PEO | |
| Scope | Most often applies to a part of the client’s total workforce | Most often applies to all of the client’s workforce |
| Key roles & responsibilities | Provides employment contracts, HR support, payroll, benefits eligibility and administration, tax obligations and regulatory filings | Client company provides contracts, often with PEO guidance |
| Ideal use case | Flexible workforces, contractors | Established domestic workforce, traditional employees |
| Legal entity requirements | No entity required by the client | Client must have a legal entity in the country of employment |
| Geographical scope | Often supports global/multi-state/provincial employment | PEO generally operates within the country where the client is already set up |
| Worker classification | Can handle both employees and contractors | Primarily focused on traditional employees |
| Business size fit | Works well for businesses of any size | Often more beneficial for small to mid-sized businesses |
| Setup speed | Generally faster implementation | Usually requires more extensive setup process |
| Primary benefit | Rapid workforce scaling without legal complexity | Economy of scale for HR services and benefits |
Which model is right for you?
An EOR model might be the right approach if you need to hire workers in a country or state where you don’t have a legal entity, want to avoid the complexities of local compliance, or need to move quickly to onboard talent internationally or across jurisdictions.
A PEO model might be the right approach if you already have a legal entity in place; want to co-manage HR functions like benefits, payroll, and compliance; and are looking for a partner to help you scale while maintaining more control over your workforce.
How AllWork can help
AllWork operates as an EOR, meaning we legally employ your flexible workforce on your behalf, so you can focus on driving results without taking on the administrative or compliance burden of being the legal employer.
Here’s what that means for you:
- Your flexible workforce legally works under AllWork’s EIN (employer identification number) in the U.S. or our BN (business number) in Canada, allowing you to engage talent in places where you don’t have an entity or want to reduce administrative overhead.
- Key responsibilities and areas of ownership between your company and AllWork are clearly outlined in the MSA (master service agreement), so there’s no ambiguity around who does what.
- AllWork determines the most compliant way to classify and pay your workforce—whether as a W-2 employee or 1099 contractor in the U.S., or the appropriate designation in Canada—so you can avoid misclassification risks.
- AllWork handles critical compliance-related tasks, including payroll processing, tax withholdings and remittance, benefits administration (where applicable), and alignment with local labor laws.
- AllWork’s platform gives you real-time visibility into your workforce’s status, payments, schedule, and performance metrics—so you stay in control without needing to manage the backend complexity.
Whether you’re scaling a retail brand, launching in a new market, or building a distributed team, AllWork enables flexible hiring with confidence and speed. Schedule a demo of the AllWork platform here!
Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. Businesses should consult legal counsel for specific questions based on your circumstances and applicable laws.
