When a business wants to stop spending its own time on payroll and people administration, four options usually come up. They overlap, but they are not the same. This is general information, not legal advice, so check the details with your own advisers.
Payroll service
A payroll provider calculates pay, handles deductions and payroll taxes, and produces pay slips and reports. You stay the employer and handle everything else in HR yourself. It is the narrowest option and often the simplest to run.
PEO (professional employer organization)
A PEO shares employer responsibilities with you through a co-employment arrangement. It typically bundles payroll, benefits administration and some compliance support. In return you give up some control over how those functions are run.
EOR (employer of record)
An employer of record becomes the legal employer of the people who work for you, handling the employment contract, payroll and related administration, while you direct the day-to-day work. It is often used to hire people without setting up your own employment arrangements for them.
Outsourced HR and operational support
An outside team does the day-to-day HR and payroll preparation work in your own systems: recruiting support, onboarding, records, time and attendance, payroll inputs. Your business remains the employer, and you keep your own benefits and payroll providers.
How to choose
- If you only need the pay run and taxes handled, a payroll service may be enough.
- If you want benefits and compliance bundled and are comfortable with co-employment, look at a PEO.
- If you want to hire people without handling the employment side yourself, look at an employer of record.
- If you want to keep your own systems and providers and just need the work done, look at outsourced operational support.
Questions to ask any provider
- Who is the legal employer, and who carries which responsibilities?
- Which systems will the work run in, and who owns the data?
- What happens if the person doing the work leaves?
- How are confidentiality and access handled?