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. | Co-employment where employer responsibilities are shared (IRS, NAPEO). |
| The client directs daily work, but the EOR carries all legal employment liability. | Requires the client to have a local legal entity and remain jointly responsible (K&L Gates). |
Nordic context: Co-employment is not recognised in Denmark, Sweden, Norway or Finland. The PEO model does not apply here — only fully responsible EOR structures are compliant.
Use Case Scenarios
| EOR is ideal for | PEO is ideal for (outside Nordics) |
|---|---|
| Hiring internationally without a local entity | Domestic setups where co-employment exists (e.g. United States) |
| Short-term or project-based onboarding | Companies outsourcing HR for an existing entity |
| Managing payroll, tax and contributions locally | Teams seeking pooled benefits |
Setup and Implementation
| EOR | PEO |
|---|---|
| No local entity required | Client must already have a local entity |
| Fast onboarding (days) | More complex setup |
| No employee minimums | Typically minimum headcount |
Flexibility and Control
| EOR | PEO |
|---|---|
| Must follow local labour standards | Greater control over HR policies |
| Provider takes full compliance responsibility | Client shares liability |
| Easy to exit or switch | Usually longer commitments |
Final Thoughts
For placements in the Nordics, EOR is the only compliant option when no local entity exists. PEO structures are not recognised in Denmark, Sweden, Norway or Finland.
Contact Northern Partners for guidance on the right workforce model for your situation.
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.
