If you’ve started looking into HR solutions for international hiring, you’ve probably encountered two acronyms: EOR and PEO. They’re often used in the same breath. Some providers market themselves as doing both. A few use the terms interchangeably. And yet they describe meaningfully different arrangements — one of which doesn’t really apply to UK employment at all.
Here’s the clearest version of the distinction, and the answer to which one you actually need.
What a PEO does
PEO stands for Professional Employer Organisation. The defining feature of a PEO arrangement is co-employment: both the PEO and the client business are considered employers of the same workers simultaneously, each with different responsibilities.
In practice, the client business manages the employee day-to-day — work direction, performance, hiring and firing decisions. The PEO handles the administrative end: payroll processing, benefits administration, tax filings, HR compliance. Both parties share the employer relationship under one legal framework.
Co-employment has genuine advantages in the right context. US-based PEOs can give small employers access to benefits packages — particularly health insurance — that they couldn’t negotiate alone. That’s a real and useful thing.
The US is where the PEO model originated, and it’s where it still makes the most sense. NAPEO estimates that PEOs employ around four million workers in the US through this structure.
Recommended Employer of Record
Why PEOs don’t translate to the UK
UK employment law doesn’t recognise co-employment. There is one employer, and that employer carries all the obligations that come with the role.
Some providers attempt a PEO-style arrangement in the UK anyway. But if you look closely at what they’re actually offering — payroll outsourcing, HR support, benefits administration — it amounts to outsourced HR services. It’s not co-employment in the legal sense, because UK law has nowhere to put that concept.
If a provider tells you they offer “PEO services in the UK,” ask them one direct question: who is the named legal employer on the employment contract? The answer tells you what you’re actually buying. If it’s the provider’s own UK entity, that’s an EOR, regardless of the label on the tin.
What an EOR does differently
In an employer of record arrangement, there is one employer: the EOR. Its UK-registered entity employs the worker under a UK employment contract. You, the client, have a separate commercial agreement with the EOR that governs what you can ask the worker to do and what the EOR is responsible for managing.
It’s a cleaner legal structure. It works because it doesn’t require UK law to accommodate a concept it doesn’t have. The EOR is simply the employer. You’re simply the client. The worker has one employer. The contract is governed by one set of rules.
That clarity is worth something. Triangular employment arrangements can get messy — but the EOR model, done properly, at least has a well-understood legal shape.
A direct comparison
| EOR | PEO | |
|---|---|---|
| Legal employer | The EOR’s entity | Shared (co-employment) |
| Does the client need its own legal entity? | No | Usually yes |
| Works in the UK? | Yes | Not in a strict legal sense |
| Who manages the employee day-to-day? | You | You |
| Best suited for | Hiring where you have no local entity | US businesses outsourcing HR domestically |
The one situation where a PEO is relevant to UK businesses
If your company has employees in the United States — which a growing number of UK-founded businesses do — a US PEO becomes a useful thing to know about. It can give your American team access to competitive health and benefits packages that you’d struggle to source as a small foreign employer entering the US market.
But that’s a separate question from hiring in the UK, or expanding internationally from the UK. Those are EOR conversations.
The terminology
The phrase “global PEO” appears a lot in marketing copy. What it usually means in practice is EOR services delivered across multiple countries — the provider holds entities in each country and serves as the local legal employer in each. That’s EOR. The “PEO” label persists partly because it’s more familiar to US buyers, and partly because some providers don’t seem especially concerned about the distinction.
Don’t let the language confuse the decision. Ask who the legal employer is. That’s the question that matters.
Which one do you need?
For the vast majority of UK businesses reading this — and for overseas businesses wanting to hire UK staff — the answer is an EOR.
You want to hire someone in a country where you don’t have a legal entity. The EOR holds that entity, employs the worker, manages the compliance, and invoices you monthly. That’s the model. PEO is a different arrangement built for a different legal context, and it doesn’t transfer cleanly to the UK.
The one exception: if you’re a UK business with US employees and you’re looking to improve their benefits package or consolidate HR admin there, talk to a US PEO. It’s worth it. Just don’t confuse that conversation with the one about international expansion.
