What PEO?

How Does A PEO Work?

Here's one thing to note about the international PEO industry: It’s important to clarify that a PEO is not a temp agency. While both can help with hiring and recruiting, a temp agency generally sends you short-term employees to fill a temporary need (hence the name).

With a PEO service, you’re handing over many, if not all, of your personnel needs. This service can handle administrative tasks as varied as:

• Payroll solutions (such as setting up a payroll management system)
• Hiring (and possibly other HR responsibilities)
• Recruiting
• Benefits administration
• Compliance
• Administration of employee-related funds (like unemployment and worker’s compensation)

In many ways, the service provider becomes your business partner. This is why they’re considered co-employers. However, unlike other business partners, a PEO will only be involved in personnel issues. This means they won’t be involved in shaping your business.

If you are seeking a more hands-on partner in global employment, an Employer of Record like Playroll may be the better choice.  

‍

Employer of Record (EOR) vs PEO 

As we discussed above, a Professional Employer Organization operates as an external party that is hired to help with a company’s HR management. On the other hand, an EOR’s duties and control can extend beyond HR. 

A PEO acts as a facilitator of your company’s HR decisions. In contrast, an EOR acts as the sole legal employer of overseas staff and handles payroll and taxes in addition to HR tasks. As such, an EOR takes on all employer-related risks and compliance. 

Head over to Playroll’s website for a full breakdown of the difference between EORs and PEOs.  

‍

The Benefits Of Using A PEO

So, why must a business become a Professional Employer Organization client? Depending on the size of your company, there are a few different reasons why this partnership may benefit your business.

Small or medium-sized companies

A small or medium-sized business can benefit from working with an international employer organization because it may not have the full resources to handle its HR operations. As the company expands, it may make more sense to outsource HR needs rather than build a department from scratch. 

This arrangement can free your primary staff from any HR duties, in addition to providing the following:

• Better employee benefits: Because employer organizations work with numerous businesses, they often have access to better employee benefit plans that may be less expensive for your business to implement. This makes hiring a service provider a win-win for you and your employees. This also boosts employee retention and reduces employee turnover.
• Larger hiring pool: Again, because these organizations work with numerous companies, they’ll often have access to a much larger and more diverse hiring pool than you might otherwise have on your own. This can be a significant advantage in helping you find the best candidates to fill your positions. They'll also know which hiring practices are better, whether employee leasing or inclusive hiring.
• Expertise: Even if you were to start your own HR department, you’d likely lack immediate expertise regarding payroll, compliance, onboarding, and other personnel issues. Your first hire would likely need to be an HR expert. Professional Employer Organizations specialize in human resources so that they can quickly provide the experts and expertise you need.

While these benefits can be useful for businesses of any size, it’s worth noting that many service providers will not work with businesses that have fewer than ten employees. If you’re still at this stage, you may want to wait until your business grows before looking into an employer organization partner.

‍

Multinational companies

Employer organizations aren’t just for small and mid-size businesses. While large companies are very likely to have their own HR departments, it doesn’t mean they can’t also benefit from human resource outsourcing.

A larger client company may find that an employer company can offer them invaluable benefits, especially if they plan to expand internationally. 

These benefits can include:

Payroll Administration : Staying on top of your payroll needs can be difficult when your company spans numerous countries and handles large numbers of employees. Nothing can start eroding your employee morale faster than repeated payroll errors. Hiring a co-employer who specializes in payroll can be hugely beneficial to both you and your team.

Compliance: When it comes to laws governing employees and tax filing, things can get complicated—even on the domestic front. 

As your business expands internationally, you’ll have to start dealing with multiple countries and their respective laws and ensure that you operate compliantly. 

Working with international experts like Playroll’s compliance management team can help you meet your requirements and breathe a bit easier.

Trackable data: Working with an employer organization's specialists can also make tracking your HR narratives easier. Taking care of this in-house (especially across multiple countries ) can be difficult and lead to disorganized data.

Outsourcing to HR and international experts ensures you’ll receive accurate data to track your operations efficiently.

Worker flexibility: Partnering with a co-employer can also allow you to expand multi-nationally. This would mean that if you have employees who want to go overseas, they no longer have to choose between their jobs and dream locations, resulting in improved employee satisfaction and retention. 

Insurance: A partnership could result in increased access to resources such as health and  workers compensation insurance

‍

Potential Drawbacks

While there are many benefits to working with a co-employer, there are some potential downsides also to consider. If the employer organization you partner with is reliable, many of these downsides shouldn’t be of significant concern. However, you should be aware of potential risks to ensure the best partnership possible.

• Control : It’s essential to understand that you’ll have to give up some control when working with a co-employer. As such, ensure that you secure a partner that is trustworthy and aligned with your business’s goals as they will be in charge of a large part of your personnel. 
• Devalued HR: If you already have an HR department, they may view outsourcing HR services as diminishing their responsibilities. To prevent this, you’ll want to talk to your HR team about how an employer organization can benefit the overall business.  In doing so, the in-house HR team will see how they will also benefit from a service provider. 
• Security: Before choosing a PEO, you’ll want to vet its systems properly to ensure you are not opening yourself up to a potential security breach. Verifying that your co-employer uses top-of-the-line tech and has proper cybersecurity should be a critical step in your vetting process.
• Disconnect: While an employer organization will serve as a co-employer, they’re not equal partners. This means they may not be as invested in your company as you may be. This is why choosing a partner you feel comfortable with and can trust is crucial. Otherwise, you may find yourself and your co-employer at a crossroads.
• Cost: Outsourcing HR services can be expensive. However, partnering with a Professional Employer Organization can save you money in the long run and can be a worthwhile investment. 

Understanding the pricing structures of potential service providers before committing is important. Most Professional Employer Organizations will charge your company using a percentage of your payroll; pricing structures are largely dependent on the specific organization. 

‍

How To Choose The Right Professional Employer Organization

Bringing any type of partner into your business is an important decision. By taking the following steps before hiring your co-employer, you can better ensure you find the right partner  and make the best possible decision for your business:

Review their technology: Although this was already mentioned as a security concern, a thorough review of your potential partner’s technology is valuable for more than just security. You want to ensure that you understand how the service works and that you can easily integrate it into your systems. It’s always a good idea to try a demo if one is available.

Consider their reputation: You want your partner to make your life easier, not harder. By leaning on their expertise, your personnel needs should not only be met but exceeded. 

This is only possible if the employer organization that you hire are experts in the field. Do thorough research on the reputation of an organization that you are interested in to ensure that they are the most suitable candidate.

Consider your business: Most PEOs offer the same types of services, but that doesn’t mean there aren’t specialities. For instance, some providers may be better suited for small businesses, while others may work well with multinationals. 

Investigate the organization you’re considering to see whether it aligns with your particular business needs.

Ensure their support: When choosing to outsource any part of your business, you want to ensure your partner is responsive and available. Research how your potential co-employer handles customer support to ensure you’ll get the level of service you need and expect.

‍

‍

Offload Your HR Needs To Playroll

Playroll is a global Employer Of Record with a footprint in 180+ countries, that also offers PEO services to U.S. companies. Offload your payroll, HR, compliance, and benefits needs to Playroll, so you can focus on your business. Get in touch with one of our experts to find out how we can help grow your business in the U.S. and beyond.

‍

‍

FAQs About Professional Employer Organizations 

What is a PEO? 

A PEO (Professional Employer Organization) serves as a co-employer, handling your HR needs in a way that can benefit you and your employees. 

What does PEO stand for? 

A PEO stands for Professional Employer Organization. 

How does a Professional Employer Organization work? 

When a company partners with an employer organization, it effectively outsources its HR duties. This means service providers facilitate and handle administrative tasks such as hiring, recruiting, and compliance.