By KTA’s Labor Law and Private Clientele Department |

Over the past few decades, globalization and technological advancements have dramatically transformed the labor market. More recently, alternative employment solutions such as Employer of Record (EOR) and Professional Employer Organization (PEO) have emerged as a significant trend, reshaping the way businesses hire and manage employees, particularly in a global context.

While some professionals in the Human Resources sector often use the terms Professional Employer Organization (PEO) and Employer of Record (EOR) interchangeably, it is crucial to note that there are significant differences between these two entities. This document aims to delineate these distinctions and offer a concise overview of their respective roles within the industry, and highlight the Israeli prospective regarding the option for these companies to sponsor B-1 Work Visa for their clients.

PEOs and EORs: Navigating HR Solutions for Global Enterprises

Professional Employer Organization (PEO) The acronym PEO in the HR context stands for Professional Employer Organization. PEOs provide a variety of outsourced HR services that primarily help companies comply with the local employment laws, particularly those relating to payroll and taxation. This relationship is considered a co-employment arrangement and is occasionally referred to as “global payroll”.

Engaging a PEO can reduce HR expenses while simultaneously enhancing the employee experience. Despite the outsourced HR function, companies retain control over key organizational decision-making processes, including the management of daily employee roles and responsibilities.

For a more comprehensive understanding of PEOs, consider reading our detailed guide on Professional Employer Organizations.

In essence, the end client “Company” is the employer of the employee to all intent and purpose, while the PEO replaces the HR unit of the company. 

Employer of Record (EOR) The Employer of Record (EOR) is a service that, while similar to a PEO, has its unique attributes. Most notably, EORs legally assume the role of employer for the talent chosen by their client. Unlike the co-employment relationship established with PEOs, the EOR assumes complete responsibility for complying with local employment laws. This covers aspects such as onboarding, payroll, benefits, and more.

The significant advantage for clients is that they do not need to invest time and resources into deciphering the often complex labor laws of various countries. As a result, EORs can offer their clients considerable savings in terms of time and money.

In essence, the EOR is the employer of the employee to all intent and purpose, supplying their employees to the end client, the “Company”

Although PEOs and EORs provide similar services, the nature of their relationships with clients and the degree of legal responsibility they assume are markedly different. Recognizing these differences is key to selecting the appropriate service for the organization’s needs.

EOR and PEO: Can Either of Them Sponsor a B-1 Expert Work Visa in Israel?

Tיק sponsor and hire foreign nationals in Israel, who would be physically working at client sites (as EOR or PEO). Typically, the responsibility of recruiting, facilitating, and looking after foreign workers in Israel falls to licensed manpower companies. These firms are officially authorized to introduce foreign workers into the country and assign them to various client locations.

Under Israeli legislation, a sponsor for the B-1 work visa can either be the employing company within the country where the employee is physically located and carrying out their duties, or it may be an international employer who dispatches their employees to Israel as part of a professional assignment. The latter should be understood as more than simply a Human Resources entity, such as an Employer of Record (EOR) or Professional Employer Organization (PEO).

POE and EOR Campaign in Israel: Powered by KTA

As a relatively new concept in the labor market, the Israeli government has not yet fully acknowledged and implemented regulations that permit HR companies, such as Employers of Record (EOR) or Professional Employer Organizations (PEO), to employ foreign nationals in Israel and assign them to client sites. Such requests, when put forth by EORs or PEOs, present challenges and necessitate thorough clarification about the employment’s nature, why the employment is arranged through an HR company as opposed to direct employment, and so forth.

The POE advantage: in the PEO option, KTA successfully managed to present a legal compliant option by which the Company (rather than the POE) will sponsor the application. Nevertheless the application for the visas and work permits may provide full disclosure of the arrangement to the Israeli authority. 

We anticipate that, in due course, the Israeli government will incorporate these options into its regulations, thereby allowing HR companies to sponsor work visas. In the interim, KTA is spearheading a campaign to establish a pilot process for all HR companies, enabling them to apply for and sponsor B-1 Expert Work Visas.

We strongly encourage EOR and PEO companies to join this initiative. If successful, it will provide these companies with the opportunity to partake in the pilot process first and harness its market potential. Should your company be interested in supporting this campaign, please do not hesitate to let us know. Your participation could play a crucial role in shaping future regulations.