To achieve and sustain growth, companies must remain lean and efficient (For further information in how, please visit our previous blog 5 tips for entrepreneurs to stay lean and flexible. Oftentimes, this entails minimizing the costs associated with hiring and the administration of the staff. To address these issues, companies could utilize the services of professional employer organisations (“PEO”) to handle their business operations. In this article, we will discuss what a PEO is, and how a Professional Employer Organization model can help your business.
What you will learn from this article:
1. What is a PEO?
A Professional Employer Organization is an entity that provides employee management services to companies. A PEO essentially serves as an outsourced functional team supported by an external professional HR solution provider under a specific service agreement. Such services can include all aspects of employee administration, payroll processing, work permit, worker compensation insurance, benefits management and recruitment.
2. How do PEO’s work?
A Professional Employer Organization will contract out staff to clients to perform designated tasks and are often recruited under the client’s instructions. The client and Professional Employer Organization essentially enter into a service contract whereby the Professional Employer Organization will assume responsibilities for the client’s HR-related employer responsibilities whereas the client will continue to control their operations and employee functions.
As a result of the service contract, a Professional Employer Organization will assume greater employer responsibilities than what is typically achieved through general HR outsourcing. For instance, the staff contracted out by a Hong Kong PEO can ensure that a client is compliant with all Hong Kong employer obligations as dictated by Hong Kong Company Law. Furthermore, they can provide monthly services such as salary and tax calculations, payroll calculation and management in addition to handling aspects regarding leave entitlement.
3. What are the benefits of using a PEO?
A Professional Employer Organization can help companies regardless of whether they are undergoing expansion into a new market, or are trying to provide their staff with competitive benefits and flexibility without having to build a full HR infrastructure.
In addition, these are the typical reasons for why a company will engage a PEO are as follows:
- Support company’s operations in a new market within a few days
- Hire local and overseas employees quickly with minimal obstruction
- Reduce time spent processing HR and administrative tasks
- Become compliant with the various employer and compliance obligations
- Provide clients access to cost-effective, comprehensive benefits
- Enjoy the HR infrastructure established by the external professional HR solution provider
The benefits are most evident during a global business expansion into a new country or when pursuing the rapid staff hiring within a short timeframe. As PEO’s can assist in all aspects related to HR, they can help formulate procedures and strategies for an effective and quick setup process and can utilize staff already contracted by the PEO. For example, the contracted staff of a Hong Kong PEO will be knowledgeable on local regulations, they can also advise clients on their employer obligations and will minimize potential risks associated with non-compliance.
FastLane is a professional firm that offers a wide range of corporate and HR outsourcing services for your business. We can provide our experience and expertise to ensure that businesses do not need to dedicate excessive resources to handle their administrative and HR tasks. We make administration easy to manage which allows our clients to focus on their key revenue driving activities.
After understanding the basics of a Professional Employer Organization, feel free to learn more about the Hong Kong MPF, one of the HR related tasks of PEO services.