PEO vs EOR: which one you need to hire abroad (2026)

A PEO and an employer of record solve different problems. A PEO co-employs the staff of a company that already has its own legal entity, almost always in the US. An employer of record legally employs people in countries where the hiring company has no entity. For hiring abroad, that difference decides which one you can use.

TL;DR

• A PEO shares employer duties with a company that already employs its staff through its own entity. An employer of record is the only legal employer in a country where the hiring company has no entity.
• A PEO usually cannot employ someone in a country where your company has no entity. Products sold as a “global PEO” hire abroad through an employer of record.
• Justworks lists its PEO Basic plan at $79 per employee per month. Employer of record fees run from $199 to $699 per employee per month, before salary and employer contributions.
• Many US startups run a PEO for US staff and a separate provider for everyone abroad. Kleos employs people as employer of record in the US and abroad, so both groups can sit on one platform.

Provider prices checked October 2026.

What is the difference between an employer of record and a PEO?

A PEO co-employs the staff of a company that already has its own legal entity, usually in the US, and shares employer duties with it. An employer of record is the only legal employer of a person in a country where the hiring company has no entity. Whether you have an entity where the person works decides which one fits.

The two models are often confused because some providers sell both. Justworks, for example, runs a US PEO and lists employer of record for international hires as a separate add-on.

What is a PEO?

A professional employer organization (PEO) is a company that signs a co-employment agreement with a business and takes over payroll, employment taxes, benefits and HR compliance for that business’s employees. The business keeps directing the work. PEOs operate mainly in the US, where 187 NAPEO member PEOs serve more than 230,000 small and mid-sized businesses.

Those businesses employ more than 4.5 million people, according to the National Association of Professional Employer Organizations (NAPEO). NAPEO counts more than 500 PEOs in the US and reports that about 14% of employers with 20 to 499 employees are PEO clients.

The main reason small companies choose a PEO is benefits. A PEO groups the employees of many clients into one plan, so a 15-person startup can offer health insurance on terms usually available to much larger employers.

What is co-employment?

Co-employment is an arrangement in which a PEO and its client share employer responsibilities for the same employees, as set out in their client service agreement. The client stays the employer that directs the work; the PEO takes on the payroll, tax and benefits functions the agreement assigns to it.

The IRS certifies some PEOs as certified professional employer organizations (CPEOs). Under 26 U.S.C. § 3511, a CPEO is treated as the employer for federal employment taxes on wages it pays to worksite employees. The certification program was created by the Tax Increase Prevention Act of 2014. (As of October 2026.)

What is an employer of record?

An employer of record (EOR) is a company that legally employs a person in a country where the hiring company has no entity. It signs the local employment contract, runs payroll, withholds tax, pays social contributions and administers statutory benefits. The hiring company directs the day-to-day work and pays the employer of record a monthly fee.

An employer of record covers employment obligations; it does not remove every tax exposure. Business activity abroad can still create a permanent establishment for your company, which is worth checking with a tax adviser.

Kleos runs employer of record in 200+ countries, through its own entities in core markets and vetted local partners elsewhere, including the US. Kleos withholds and pays employment taxes and statutory contributions in each employee’s country. Kleos can also help arrange private health insurance where a company wants to offer it on top of statutory benefits.

How to choose an employer of record covers the checks to run before signing with a provider.

What is a global PEO, and can a PEO hire employees in another country?

A PEO usually cannot employ someone in a country where your company has no entity, because co-employment shares the employer role with an employer that already exists there. Providers that sell a “global PEO” or “international PEO” hire abroad through an employer of record, where the provider or its local partner becomes the only legal employer.

The pricing pages show the split. Justworks lists its US PEO per employee per month, and lists employer of record for international hires as a separate add-on at $599 per employee per month. International contractors are a third line, at $39 per paid contractor.

Whatever the product is called, three questions show what you are buying:

1. Who is the legal employer in the employee’s country: your company, the provider, or a local partner?
2. Does the provider employ through its own entity in that country, or through a partner?
3. Is the fee for the person abroad the same as for your US employees, or priced separately?

If the answer to the first question is the provider or its partner, the arrangement is an employer of record.

Kleos does not sell a PEO. Kleos is an employer of record and contractor-of-record that employs people in 200+ countries, including the US, through its own entities in core markets and vetted local partners elsewhere.

How do US startups with a PEO hire outside the US?

Most run two or three systems: a PEO for US employees, plus a separate employer of record, contractor-of-record or payment tool for people abroad. US companies Kleos spoke with in 2026 described this pattern repeatedly, along with the work of reconciling several providers every month.

Four examples from those conversations, with identifying details removed:

• A software company of more than 100 people runs its US employees through a PEO. Most of the team works from more than 20 other countries, mostly as contractors, with an employer of record for a few of them.
• A company that has used the same PEO for years tried to add its staff abroad to the PEO’s employee directory, so everyone could see company holidays in one place. The PEO required a US phone number for each person, and the plan was dropped.
• A company keeps its US team on a PEO, employs one person in Asia through a second provider because its PEO did not cover that country, and pays contractors in several other countries through a third.
• A company with employees in North America and Europe on three different providers decided to move everyone to one platform.

Each extra provider adds a contract, an invoice format and a monthly reconciliation. Kleos keeps employees and contractors on one platform: employer of record in the US and abroad, and contractor-of-record at $50 each time you pay a contractor. EOR services for US startups converting contractors covers moving a contractor into employment on the same platform.

Do you need an employer of record or a PEO?

Use a PEO when your employees work in a country where your company already has an entity, usually the US. Use an employer of record when someone works as an employee in a country where you have no entity. Use a contractor-of-record when the person works independently under a services agreement.

The choice between employer of record and contractor-of-record depends on how the work is done, whatever the agreement is called. Global contractor management software covers how classification is tested.

What should a tech startup look for when choosing a PEO?

A tech startup choosing a PEO should check six things: the benefits plans it can offer engineers, how the fee is charged, whether it covers every US state where you employ people, its certification, what happens when you hire outside the US, and what leaving the PEO involves.

1. Benefits. Health, dental and vision plans, 401(k) administration and how premiums are billed. Premiums are usually charged on top of the PEO fee.
2. Fee structure. A flat fee per employee per month is easier to forecast than a percentage of payroll, which grows with every raise.
3. State coverage. Remote teams spread across states quickly. Check that the PEO handles state unemployment insurance and tax registration in each one.
4. Certification. Ask whether the PEO is an IRS-certified PEO, and check that the legal entity on your contract matches the certified entity. The IRS publishes the list of certified PEOs.
5. Hiring abroad. Ask whether the PEO employs people abroad through its own employer of record, through a partner, or not at all, and what that costs per person.
6. Exit terms. Contract length, early-exit charges, and how benefits, payroll records and employee data move if you leave.

The fifth question is the one most startup PEO guides skip, and the one that decides how many providers you run a year later. Where a PEO does not cover a country, a startup can keep the PEO for its US team and use Kleos as employer of record for people abroad, with contractors on the same platform.

How much does a PEO cost compared with an employer of record?

PEO fees are charged per employee per month or as a percentage of payroll, on top of salary, taxes and benefit premiums. Justworks lists PEO Basic at $79 per employee per month. Employer of record fees run from $199 to $699 per employee per month; Kleos starts from $200, depending on country.

Published list prices, checked October 2026. Benefit premiums, salary and employer contributions are not included.

The fee is rarely the largest cost. Employer contributions vary far more by country: at the senior engineer averages in Kleos’s 2026 salary data, they add about 26% of salary in Spain, 14% in the UK and nothing in Armenia. Senior software engineer salary by country, 2026 shows both for 15 countries.

Which employer of record providers don't require a large upfront deposit?

Kleos does not ask for a large upfront deposit: it pays the employee first and invoices the company afterwards, with 15 days to settle. Remote takes no standard deposit but can ask for a refundable reserve in some cases. Deel holds a refundable deposit of 1 to 1.5 months of monthly charges per hire, and Multiplier, Oyster and RemoFirst take refundable deposits.

A deposit of a month or more per employee ties up cash at exactly the moment a startup is growing its team. EOR services for US startups converting contractors compares deposits and payroll funding across six providers in more detail.

Frequently asked questions

What is the difference between a PEO and an EOR?

A PEO co-employs staff with a company that already has its own entity, usually in the US, and shares employer duties under a client service agreement. An employer of record is the only legal employer of a person in a country where the hiring company has no entity. A PEO needs your entity in the country; an employer of record does not.

Can a PEO hire employees in another country?

Usually not. Co-employment shares the employer role with your own entity, so a PEO cannot employ someone in a country where you have none. PEO providers that offer hiring abroad do it through an employer of record: Justworks, for example, lists international employer of record as a separate add-on at $599 per employee per month.

What is a global PEO?

“Global PEO” and “international PEO” are marketing names for hiring people abroad without your own entity. In practice the provider, or its local partner, becomes the legal employer, which makes the arrangement an employer of record. Ask who the legal employer is in each country before signing.

Is a PEO cheaper than an employer of record?

Per employee, usually yes: Justworks lists PEO Basic at $79 per employee per month, while employer of record fees run from $199 to $699. The two are not interchangeable, though. A PEO only works where your company already has an entity, so for hires abroad without one, an employer of record is the option available.

Can an employer of record hire employees in the US?

Yes. An employer of record can employ people in the US for companies that have no US entity, such as a European or Israeli company hiring its first US employee. Kleos employs people as employer of record in the US as well as abroad, from $200 a month per employee depending on country.

What is co-employment?

Co-employment is an arrangement in which a PEO and its client share employer responsibilities for the same employees, as set out in their client service agreement. The client directs the work; the PEO runs payroll, employment taxes and benefits. Under 26 U.S.C. § 3511, an IRS-certified PEO is treated as the employer for federal employment taxes on wages it pays.

Does Kleos offer a PEO?

No. Kleos is an employer of record and contractor-of-record. It employs people in the US and in 200+ countries abroad, from $200 a month per employee depending on country, and pays contractors for $50 each time you pay them. Companies that need a US PEO for pooled benefits can run Kleos alongside it for everyone else.

List where each person on your team works and whether you have an entity there, then match each row to a PEO, an employer of record or a contractor-of-record.

Last updated: October 2026.