By Anton van Heerden, Managing Director at DNA EOR

Let’s clear something up.

In the global employment world, people often use the terms “PEO” and “EOR” as if they’re interchangeable. They’re not.

Sure, both models help companies manage international employees. Both help you stay compliant. And both let you get to market faster than setting up your own entity. But the truth is, PEOs and EORs are built for two very different business scenarios – and if you’re expanding into South Africa, picking the right one is more important than you might think.

If you’re unsure which model suits your company- or if someone on your team just asked, “Can’t we just use a PEO for that?” – this article is for you.

Let’s unpack the core differences and use the South African lens to help make sense of it all.

What Is a PEO?

A Professional Employer Organisation (PEO) is a co-employment model. You stay the legal employer of record, but the PEO takes on a portion of HR functions like payroll processing, benefits administration, and tax reporting.

The catch? To work with a PEO, you must already have a registered legal entity in that country. So, if you’re looking to use a PEO in South Africa, your business needs to be properly incorporated, with a South African bank account, a registered office, and compliance with the Companies and Intellectual Property Commission (CIPC) and SARS (South African Revenue Service).

Think of a PEO as an extension of your HR department – but you remain on the hook for employment contracts, terminations, and compliance with South African labour law.

What Is an EOR?

An Employer of Record (EOR) is a legal employment partner. In this model, the EOR becomes the official legal employer of your team members in South Africa – even though they work for you in every practical sense.

The EOR handles everything: employment contracts, monthly payroll, PAYE deductions, UIF contributions, tax reporting, statutory benefits, and terminations. You maintain day-to-day control over your employees’ work, goals, and performance – but the EOR carries the legal and compliance responsibility of being the employer.

This model is designed for companies that do not have a South African legal entity and want to hire quickly, compliantly, and without long-term infrastructure commitments.

Where Things Often Get Confused

It’s easy to see where the confusion comes from.

Both EORs and PEOs:

• Offer payroll and benefits administration
• Help companies stay compliant with local employment laws
• Provide faster market entry compared to setting up your own entity

But here’s the fundamental difference:

• A PEO shares employer responsibilities with you – but you must have a legal entity.
• An EOR is the employer – so you don’t need a local entity at all.

What This Means in South Africa

Let’s say you’re based in the UK or the US and want to hire a product designer in Johannesburg. If you have no South African entity, a PEO is not an option.

South African employment law is strict about worker classification. If you issue contracts or make tax submissions without being properly registered locally, you’re potentially in breach of the law. That’s where an EOR, like DNA EOR, comes in.

We employ the designer (employee) legally on your behalf, ensuring all statutory benefits, deductions, and compliance boxes are ticked. You focus on growing your product; we make sure everything is above board on the employment front.

And if you ever decide to open an entity later, we can help you transition that hire smoothly.

When Should You Use a PEO?

• You’ve already set up a South African entity
• You have in-house legal and HR teams that understand local labour law
• You’re hiring several people and want help with operational HR but retain legal control

When Should You Use an EOR?

• You don’t have a South African entity
• You want to test the market before investing in infrastructure
• You’re hiring one or two key team members and want to get started quickly
• You want to ensure local labour law compliance from day one without the overhead

South African Labour Law Isn’t Forgiving

One of the reasons choosing the right model matters here is that South African labour protections are strong. The Basic Conditions of Employment Act (BCEA) and Labour Relations Act (LRA) govern everything from minimum notice periods to termination processes and severance pay.

If you incorrectly classify a worker as an “independent contractor” or use a PEO without having a legal entity, you’re exposed to fines, audits, or legal claims at the Commission for Conciliation, Mediation and Arbitration (CCMA).

And while a PEO might help with HR admin, it won’t shield you from those liabilities. An EOR will – because we carry the legal responsibility.

But Can’t I Just Use a PEO Internationally?

PEOs are more common in the United States, where the IRS even offers a certified PEO (CPEO) programme. Outside the U.S., EORs are far more practical and widely used. Most international companies rely on EORs when entering a new country for the first time.

In fact, in many cases, global employment platforms that say they’re “PEO providers” are actually operating as EORs in regions where the client doesn’t have a legal entity. If your provider says they can onboard staff for you in a country where you aren’t registered – they’re acting as an EOR.

How DNA EOR Fits Into This

At DNA EOR, we provide true EOR services in South Africa. We are the legal employer of your hires. We’ve built our processes around South African labour law, and our contracts, payroll systems, and compliance checklists are all locally grounded.

We also offer PEO services to companies that already have a registered entity in South Africa but want support with HR and payroll admin – without handing over legal control.

It’s all about picking the right model for where you are now, and where you’re going.

Last words

Both PEOs and EORs have a place in the global employment toolkit – but they’re not interchangeable. If you’re expanding into South Africa, understanding the difference can be the key to staying compliant and competitive.

If you’re just getting started, an EOR is likely the best fit. It gets you into the market faster, keeps you compliant, and gives you flexibility to scale. If you already have an entity and are ready to grow a large in-country team, a PEO could support you as your HR partner.

Either way, get local advice. The last thing you want is to build a global team on the wrong foundation.

Let’s make sure your next hire in South Africa is the right one – for the long term.