When comparing workforce solutions, two models often come up: Employer of Record (EOR) and Professional Employer Organization (PEO). At first glance they may look similar – but in practice, they are very different. Understanding these differences is especially important if you are hiring or placing consultants in the Nordics.
Legal Structure: Who Is the Employer?
| EOR – Employer of Record | PEO – Professional Employer Organization |
|---|---|
| The EOR is the sole legal employer of the consultant and assumes responsibility for payroll, tax, and compliance. | A PEO is based on co-employment – where the PEO and the client company share employer responsibilities (IRS, NAPEO). |
| The client (Agency or Business) directs the day-to-day work, but the EOR carries all employment-related liability. | Co-employment requires the client company to have a local legal entity and remain jointly responsible (K&L Gates). |
Key Nordic context: Co-employment is not recognised in Denmark, Sweden, Norway or Finland. That means the PEO model does not apply under local labour law – only EOR structures are compliant.
Use Case Scenarios
| EOR is ideal for: | PEO is ideal for (outside Nordics): |
|---|---|
| Hiring internationally without establishing a local entity | Domestic setups in countries where co-employment is legally recognised (e.g. the US) |
| Onboarding consultants for short-term or project-based roles | Companies that already have a local entity and want to outsource HR functions |
| Ensuring tax, payroll, and social contributions are handled locally and compliantly | Established teams seeking group benefits through pooled services |
Setup and Implementation
| EOR | PEO |
|---|---|
| Quick and simple – no need for the Agency/Business to register a local entity | Requires the Agency/Business to already have a local legal entity |
| Onboarding possible within days | More complex contracts and longer setup |
| No employee minimums | Often has minimum team sizes (e.g. 5+) |
Flexibility and Control
| EOR | PEO |
|---|---|
| Limited ability to customise contracts – must follow local labour standards | Greater flexibility to design benefits and HR policies |
| The provider (EOR) takes full responsibility for compliance and payroll | The client company remains co-employer and carries shared liability |
| Easier to exit or switch providers | Typically involves a longer-term partnership |
Final Thoughts
If your priority is hiring consultants in the Nordics quickly, compliantly, and without setting up a local entity, an EOR is the only compliant option.
A PEO may be relevant in countries where co-employment is recognised (such as the US), but in Denmark, Sweden, Norway and Finland, the model simply does not exist under labour law.
Still unsure? Contact Northern Partners for guidance on compliant EOR solutions across the Nordics.
Disclaimer
This article is provided for general informational and marketing purposes only. It does not constitute legal, tax, or accounting advice, and should not be relied upon as such. Regulations in Denmark, Sweden, Norway and Finland are subject to change, and the correct setup depends on individual circumstances. We always recommend seeking professional advice from a qualified accountant, tax advisor, or legal expert before making any decisions.
