The Confusion Between PEO and EOR
If you've been researching how to hire employees in India without setting up a local entity, you've almost certainly encountered both "PEO" (Professional Employer Organisation) and "EOR" (Employer of Record). Many providers use these terms interchangeably — but they describe meaningfully different service models.
Understanding the distinction matters because it affects your legal exposure, the level of control you retain, and the compliance obligations you take on.
What is an EOR (Employer of Record)?
An Employer of Record is a company that becomes the sole legal employer of your workers in India. The EOR:
- Signs the employment contract directly with the employee
- Is registered as the employer with all statutory authorities (EPF, ESI, PT)
- Runs payroll and makes all statutory deductions
- Bears full legal liability as the employer
- Operates under its own entity — you have no Indian legal presence
You retain control over the employee's work, deliverables, and day-to-day management — but the EOR is the employer of record in every legal sense.
What is an International PEO?
A Professional Employer Organisation (PEO) traditionally operates under a co-employment model. In a PEO arrangement:
- Both the PEO and the client company are considered employers
- The PEO handles HR administration, payroll, and benefits
- The client company retains significant employer responsibilities
- The client may need its own local entity in some jurisdictions
In the international context, "International PEO" is often used as a marketing term for what is functionally an EOR service — particularly in India, where the co-employment model is less common.
Key Differences at a Glance
| Factor | EOR | Traditional PEO |
|---|---|---|
| Legal Employer | EOR only | PEO + client (co-employment) |
| Client Entity Required | No | Sometimes yes |
| Employer Liability | Fully on EOR | Shared between PEO and client |
| Payroll | Run by EOR | Run by PEO |
| HR Admin | Handled by EOR | Handled by PEO |
| Benefits | EOR's benefit plans | PEO's pooled benefit plans |
| PE Risk | Very low | Moderate (if client has local presence) |
| Best For | No local entity, full outsourcing | Companies with some local presence |
In India: The Practical Reality
India does not have a formal legal framework for co-employment in the Western PEO sense. As a result, most "International PEO" services in India are functionally EOR services — the provider becomes the sole legal employer and manages all compliance obligations.
When evaluating providers in India, ask these questions:
- Are you the registered employer with EPF, ESI, and the Shops Act?
- Do I need my own Indian entity to use your service?
- Who bears liability in the event of a labour dispute?
- Is the employment contract between the employee and you or me?
Which Model is Right for You?
Choose an EOR if:
- You have no Indian entity and don't plan to set one up soon
- You want zero employer liability in India
- You need to hire quickly with minimal setup
- You want a single point of accountability for all India employment matters
Consider a PEO if:
- You already have an Indian entity but want to outsource HR and payroll
- You want to retain some employer responsibilities while outsourcing administration
- You need access to pooled benefits plans for cost efficiency
LawSync: EOR and International PEO Services
LawSync offers both EOR and International PEO services in India, tailored to your specific situation. Whether you need a full EOR solution with zero Indian footprint or a PEO arrangement to complement your existing entity, our team will design the right structure for you.
Book a free consultation to discuss which model fits your India expansion plans.