As Canadian businesses look for ways to streamline HR, reduce administrative workload, and stay compliant, two terms often appear in the search for outsourcing support: PEO and EOR. While both provide HR-related services, they function very differently. Understanding these differences can help you choose the option that best supports your growth, hiring strategy, and legal responsibilities.
This employer-focused guide explains both models in plain language, outlines what is and isn’t allowed in Canada, and helps you determine which approach is right for your business.
What Is a PEO?
A Professional Employer Organization (PEO) is an outsourced HR provider that typically manages payroll, benefits, workers’ compensation, and HR administration through a co-employment model. In the United States, both the PEO and the client share employer responsibilities, and the PEO becomes the employer of record for tax purposes while the client directs day-to-day operations.
Co-employment, however, is not legally recognized in Canada. This means the American-style PEO model does not exist here. Canadian PEOs can offer HR outsourcing support but cannot legally act as the employer of record for your staff.
A Canadian PEO-style service can assist with payroll processing, benefits administration, HR support, onboarding documentation, and compliance guidance. These services provide administrative relief, but the client always remains the official employer.
What Is an EOR (Employer of Record)?
An Employer of Record (EOR) is a service provider that becomes the legal employer of a worker on your behalf. This model is fully recognized and permitted in Canada.
An EOR handles payroll, taxes, deductions, compliance with labour laws, employment contracts, statutory obligations, and risk management related to employment. You still direct the employee’s work, schedule, and performance, while the EOR manages the administrative and legal aspects of employment.
Businesses use EORs to hire quickly, expand into new provinces, reduce compliance risk, or employ workers without setting up a local entity.
PEO vs. EOR in Canada: What’s the Difference?
A PEO in Canada offers HR support only, while an EOR legally employs workers on your behalf. A PEO cannot become the employer of record, whereas an EOR assumes full employer liability, handles compliance, and manages all legal obligations tied to employment.
PEO-style services are suited for HR administration, while EOR services are suited for companies wanting fast, low-risk hiring across multiple regions.
When a PEO-Style HR Partner Makes Sense
A PEO-style solution is useful if you want help with HR tasks but prefer to remain the employer. It can be beneficial for businesses with stable teams that need support with payroll, benefits, and compliance. You maintain full employer responsibility while outsourcing administrative workload.
When an EOR Is the Better Solution
An EOR is ideal when you want someone else to take on the legal employer role. It is especially valuable if you need to hire quickly, reduce employment risk, support remote teams, or expand into new markets without establishing a corporation. International companies hiring Canadian talent often use an EOR for streamlined onboarding and compliance protection.
Which Option Is Best for Your Business?
Choose a PEO-style HR outsourcing partner if you want to keep full employer control, need administrative HR support, and already have internal oversight for compliance.
Choose an EOR if you want a legally recognized employer to manage compliance, reduce liability, support rapid hiring, or help you expand into new provinces or markets.
The U.S. co-employment model does not apply in Canada. Businesses searching for a PEO in Canada are often looking for either HR outsourcing support or full employer-of-record services. Understanding which model you need is essential for choosing the right HR solution.
If you’re unsure which model is the best fit for your business, our team is here to help. Connect with us for a consultation and we’ll walk you through your options, recommend the right approach, and guide you through the next steps with clarity and confidence.