An Employer of Record becomes the sole legal employer of your team. You need no legal entity of your own.
A Professional Employer Organization shares employer duties with you. You must already have a legal entity in that country.
That’s the difference every comparison article gives you.
Here’s what none of them mention. This framing comes from United States law. Co-employment, the idea the whole PEO model rests on, is American. It does not exist as a legal category in Bangladesh, India, or Pakistan.
Vendors still sell “PEO” in those markets. What you actually receive can carry a very different liability position from the one you were sold.
This guide covers the standard comparison first. Then the part that matters if you’re hiring in South Asia.
What is the difference between an EOR and a PEO?
The Employer of Record model puts the provider on the employment contract. They register the employee, run payroll, file taxes, and carry the employer obligations. Your company holds no employment relationship with that person at law. You direct the work and manage performance.
A Professional Employer Organization enters co-employment with you. Your company stays an employer for legal purposes. The PEO takes on administrative work: payroll, benefits, HR support. Liability is shared, not transferred.
The practical difference sits in one question. Do you have a legal entity in that country?
| Employer of Record | Professional Employer Organization | |
|---|---|---|
| Needs you to have a local entity | No | Yes |
| Who is legal employer | The provider | You, jointly with the provider |
| Where employment liability sits | With the provider | Shared |
| What you get | Employment where you’re not registered | Admin support where you already operate |
| Typical use | Entering a new country | Reducing HR overhead at home |
If you have no legal entity in that country, a PEO is not available to you. It doesn’t matter what a vendor calls its service. That single fact settles most cases.
The PEO model was built for the United States
The PEO industry grew up solving American problems.
Fragmented employment law. Fifty states, each with its own wage rules, leave entitlements, and workers’ compensation system. Small employers working across state lines needed help. PEOs sold that help.
Employer-provided health insurance. In the US, health cover comes through your employer. A PEO can pool thousands of small companies into one plan and negotiate rates none of them could reach alone. This is a large part of why PEOs exist. It has no equivalent in markets with public health systems.
Workers’ compensation. State-mandated insurance with premiums that punish small headcount. Pooling helps.
A legal doctrine that allows it. US law recognises joint employer status. Courts have built tests for when two companies share employer responsibility. The Internal Revenue Service certifies PEOs. Most states license them directly.
That last point carries the weight.
Co-employment works in the United States because American law provides a framework for it. Certification, licensing, and case law all define where each party’s duties end.
Take that framework away and the model has nothing to stand on.
Why co-employment doesn’t travel to South Asia
Employment law in Bangladesh, India, and Pakistan recognises an employer. Singular.
The Bangladesh Labour Act 2006 attaches employer duties to the party in the employment relationship. India’s labour codes do the same. Pakistan’s provincial ordinances follow the same pattern.
None of them create a legal category for two organisations to jointly hold employer status the way American co-employment does. None of them certify or license organisations offering it.
That creates a gap between marketing and law.
A vendor can call a service co-employment. Whether a labour court, tax authority, or provident fund inspector treats it that way is a separate question. Statute decides that, not the contract between you and the vendor.
Two more sources of confusion are worth naming.
“Global PEO” used to mean EOR. For most of the last decade, providers used that phrase to describe what the industry now calls an Employer of Record. Much of today’s confusion traces back to that period, and older content still carries it.
Vendors use whichever word the buyer uses. An American buyer asks for a PEO because that’s the term they know. The vendor answers to the word instead of correcting it.
What a vendor means when they say PEO in South Asia
When a provider in the region calls its service a PEO, it’s usually one of three arrangements. Each carries a different liability position. The label won’t tell you which one you’re being offered.
An Employer of Record using the wrong word
The most common case, and the least worrying.
The provider becomes the sole legal employer. They hold the registrations and carry the obligations. The service is an EOR. Only the name is wrong, usually because the buyer asked for a PEO.
How to tell: ask who is named as employer on the contract. If it’s the provider’s company and yours appears nowhere, you’re buying an EOR.
A payroll bureau
The provider calculates and processes payroll, files returns, and may handle benefits. Your company stays the employer at law and keeps all the obligations.
This is outsourced admin. It requires you to have a company.
How to tell: if your company name is on the employment contract and the registrations sit with you, the provider is running your payroll rather than employing anyone.
A manpower supply or contract labour arrangement
The provider supplies workers who do the work at your direction. In India this falls under the Contract Labour (Regulation and Abolition) Act 1970 where the thresholds are met.
This is the arrangement that most resembles co-employment in practice. It’s also the one where the liability position surprises people.
How to tell: ask which law governs the arrangement, and whether the provider is registered as a contractor under it.
Statutory liability you can’t contract away
Here the language question stops being academic.
Under India’s Contract Labour Act 1970, the company receiving the labour is the principal employer. The contractor supplying the workers is their employer.
That sounds like a clean split of responsibility. In normal circumstances it works like one.
It stops working when the contractor defaults.
If the contractor fails to pay wages, or pays short, the obligation falls to the principal employer. That’s your company. The Act places independent duties on the principal employer and creates vicarious liability for the contractor’s failures.
Here’s the critical part. These duties come from statute. No contract between you and the provider can remove them.
An indemnity clause may give you a claim against the provider afterwards. It does not stop the liability attaching to you in the first place. And it’s worth very little if the provider is the reason the money never arrived.
Think about what that means in practice.
You engage a vendor calling itself a PEO. You understand that employment risk is shared or transferred. The vendor hits trouble and misses a payroll. Your company, as principal employer, becomes liable for the unpaid wages and the duties that come with that position.
The risk you thought you had moved was never movable.
That’s the structural difference between such an arrangement and an Employer of Record. An EOR is the sole legal employer. It holds the registrations and carries the obligations in its own name. There is no principal employer relationship for liability to flow back through.
Thresholds, applicability, and the exact scope of principal employer duties vary by statute and by state. This describes the general position and is not legal advice. Take advice on your own arrangement.
EOR, PEO, and what’s actually available in South Asia
| Employer of Record | PEO as sold in the US | “PEO” as offered in South Asia | |
|---|---|---|---|
| Legal basis | Employment law of the market | Co-employment doctrine, state licensing, IRS certification | No specific legal category |
| Requires your own entity | No | Yes | Usually yes |
| Named employer on contract | The provider | Both parties | Varies. Ask |
| Where liability sits | With the provider | Shared, defined by statute | Often with you as principal employer |
| Can liability be contracted away | Not relevant, it never attaches to you | Partially, within the framework | No. Statutory duties survive contract terms |
| Health insurance pooling | Local benefits administration | Significant, a core reason PEOs exist | Limited, health systems differ |
| Best for | Hiring where you have no company | Cutting HR overhead where you already operate | Depends which arrangement it actually is |
Which model fits your South Asia plans?
Work through it in order.
Do you have a registered legal entity in the country?
If no, a PEO is not available to you. Co-employment needs you to be an employer already, and you cannot be one without a legal entity.
Anything sold to you as a PEO in that situation is one of the three arrangements above wearing the wrong label. An EOR service is what fits.
If yes, keep going.
What are you actually trying to solve?
If you want payroll and filings handled while you stay the employer, you’re looking for payroll outsourcing. That’s a real and useful service. It should be priced and described as one.
If you want to reduce employment liability, look at where liability actually sits under that specific arrangement. The label won’t tell you. The section above explains why.
If you want to hire in a second market where you have no company, that’s an EOR question again. The company you hold elsewhere doesn’t change it.
How many people, in how many markets?
One or two people in a market you’re not registered in points firmly to an EOR.
A large established team where you already operate points toward keeping the employment in-house and buying admin support.
When a PEO is genuinely the right choice
The PEO model works well in the conditions it was built for. Suggesting otherwise would be dishonest.
You’re hiring in the United States and already have a US company. The framework exists. The certification exists. The value is real.
Health insurance pooling matters to your economics. A small US employer joining a PEO plan can reach rates far beyond what its own headcount would command. This is often the single biggest financial argument for a PEO, and it’s a strong one.
You want to keep the employment relationship. Some companies want their own name on the contract for cultural or commercial reasons. A PEO lets you keep that while handing off the admin. An EOR does not.
Workers’ compensation costs are a problem. Pooling helps here the same way it does with health cover.
None of these apply to hiring in Bangladesh, India, or Pakistan without a legal entity. That isn’t a criticism of the model. It’s a question of which problem you’re solving.
Questions to ask a vendor calling itself a PEO
Five questions that establish what you’re actually buying. Ask them before you discuss price.
1. Whose name appears as employer on the contract? Provider only means EOR. Both parties, or yours alone, means something else.
2. Which law governs this arrangement? A provider who can name the act and explain how it applies knows what it’s selling. Vagueness here is itself the answer.
3. Who holds the registrations with tax and social security authorities? Registrations follow the legal employer. This tells you who that is, whatever the terminology.
4. If you fail to pay wages, who is liable? The important one. A provider who answers with the statutory position, rather than pointing at an indemnity clause, is worth continuing with.
5. Do we need our own legal entity for this to work? If the answer is yes, you’re not buying an EOR. Whether what you are buying suits you is a separate matter. At least you’ll know.
Frequently asked questions
Can I use a PEO if I don’t have a company in the country?
No. Co-employment needs you to be an employer, which needs a legal entity there. If a vendor offers you a PEO in a market where you have no legal entity, ask whose name goes on the employment contract. The answer usually reveals an Employer of Record described with the wrong word.
Is a global PEO the same as an EOR?
In most cases, yes. “Global PEO” was the industry’s term for Employer of Record services for much of the last decade. Providers using the phrase today are almost always describing an EOR. Confirm it by asking who is named as employer on the contract.
Does co-employment exist in Bangladesh, India, or Pakistan?
Not as a legal category comparable to the US framework. Employment law in each country attaches employer duties to one party in the relationship. None of them certify or license co-employment arrangements. Vendors may use the term commercially, but the legal treatment follows statute, not the label.
Who is the legal employer under each model?
Under an EOR, the provider, exclusively. Under a US PEO, both your company and the provider, with duties split by statute. Under a South Asian arrangement called a PEO, it depends which of the three structures you’re actually buying.
Is a PEO cheaper than an EOR?
Comparing them on price usually means comparing different things. A PEO fee excludes the cost of the legal entity you must already have. That means incorporation plus ongoing accounting, audit, and filing costs. Once you include those, the comparison shifts a lot. Meteors pricing is $99 per employee per month.
Can I switch from a PEO arrangement to an EOR?
Yes. Employees move to the provider’s company through a structured handover. It covers contract novation, re-registration with authorities, benefits continuity, and preserved length of service. Companies commonly do this once they realise the liability position isn’t what they assumed.
What happens to liability if my provider fails to pay wages?
Under an EOR, the provider is the legal employer and the obligation is theirs. Under a contract labour arrangement in India, the principal employer is your company. You carry the obligation to pay when the contractor defaults, and that duty comes from statute rather than agreement.
Which model works better for hiring one or two people?
An EOR, in almost every case. Setting up a legal entity to make a PEO possible costs $5,000 to $10,000 and takes several months. That’s hard to justify for a small team. EOR Bangladesh or Employer of Record India puts someone on payroll in days without any of it.
Choosing between the two
For most companies looking at South Asia, the decision settles at the first question. No legal entity means no PEO, whatever a vendor calls its service.
If you do have a legal entity and someone offers you co-employment, the label matters less than three things. Whose name is on the contract. Which law governs the arrangement. Where liability lands when something goes wrong.
Those three answers tell you what you’re buying. The terminology doesn’t.
Meteors is the legal employer for teams across Bangladesh, India, and Pakistan. That means no principal employer relationship and no shared liability to unpick. Get in touch with the market and roles you’re considering.
