PEOs or Professional Employer Organisations, are third-party companies to which businesses can outsource employee management tasks to. In other words, when you partner with a PEO, that organisation becomes the employer of record for your employees meaning they handle employee-related taxes and benefits, as well as other HR functions like payroll, human resources, employee benefits, and workers’ compensation on behalf of expanding your business from overseas. The right PEO can help your business save time and money.
What you will learn:
What is PEO?
A Professional Employer Organisation (PEO) is a business services company that provides your company with comprehensive employee management services to businesses. A PEO consulting services acts as an external functional team that helps you attract and retain quality employees and manage your employee benefits costs and minimise your exposure to employment-related risk so you can focus on growing your business.
A PEO typically has a team of HR, legal, tax, client services, and accounting professionals. Businesses partner with PEOs to cut down on the costs of administering benefits, streamline payroll processes, and successfully expand into international markets without having to create their own business.
A PEO can help businesses navigate the problems of lawfully hiring foreign workers, paying according to local rules and regulations, and properly terminating workers when necessary to minimise risk. PEOs also assist organisations in lowering their health insurance and benefits expenses. Working with a PEO is an excellent approach for small- and medium-sized businesses to provide great benefits to their workers without cluttering their HR departments or in-house HR resources.
What are their main duties?
PEO services mainly handle these areas:
|Taxation Services and Compliance||
|International Employment Service||
What is the difference between a PEO and Human Resources Outsource (HRO) and Administrative Services Outcome (ASO)?
Human resources are an important component of your company’s operations and long-term success. People working in human resources for your business are responsible for creating and modifying the culture of your organisation.
Outsourcing human resources is a good solution for your company to perform critical HR activities. Transferring responsibilities of certain HR activities to another service provider allows you to manage costs, save time, minimize paperwork, and redirect attention to money-making activities. It might be tough to know where to begin when you’re thinking about outsourcing your Human Resources (HR) department. There are a lot of solution providers out there such as PEO, an HRO, or an ASO. Would you like to know which one is best suited for you?
Professional Employer Organisation (PEO)
PEO is a company that can assist you in many areas. It becomes the employer of record, assisting you with issues such as taking on and managing employer responsibilities like payroll, tax compliance, human resources, workers’ compensation, and employee benefits among other things.
The advantages of forming a PEO alliance extend beyond the obvious ones such as shifting employer-related liabilities and responsibilities but also include an important one: freeing up time for the company and key employees to focus on core activities. Most significantly, it allows you to relax and focus on the company because you know that you’re working with a reputable firm that will take care of your most valuable asset-your staff.
The key advantages of using a PEO service include:
- Most of your payroll and tax compliances duties are delegated to someone else.
- The PEO is in charge of the workers’ compensation so you don’t have to deal with annual compensation inspections.
- You’ve access to a team of specialists and industry experts who are committed to assisting you to manage the risks and responsibilities connected with your business and staff through PEO relationships.
The main disadvantages of using a PEO service include:
- There’s less flexibility in selecting benefit providers and the benefits for your employees.
- Since PEOs collaborate with other businesses, their services will appear to be less personal and in-depth than an in-house HR department.
- There may be potential changes in the benefits and coverages for your employees in the future.
Human Resources Outsourcing (HRO)
The HRO model typically provides services to help employers manage employees’ risks and responsibilities but you still remain the legal employer, unlike the PEO services. This option is more attractive to firms who already have developed internal staff and technology to handle a majority of these tasks and responsibilities but may have a requirement outside of their internal knowledge that could be handled more effectively by an HRO provider.
An HRO company takes over your company’s HR operations and administers them using its own technology and tools because you may choose to outsource the entire HR department or particular HR activities for which you require additional manpower and knowledge.
The key advantages of using an HRO service include:
- The service provides customised services based on the demands and needs of our clients.
- The service allows you to focus on the company’s strategic initiatives rather than HR operations, which will help you with employee communications and management part.
The main disadvantages of using an HRO service include:
- Reduced availability of services.
- Loss of in-house expertise since you’ll be getting advice from an external point of view.
Administrative Service Organisation (ASO)
The significant difference between the PEO and the ASO is the co-employment relationship because unlike the PEO arrangement, the company gets to keep their own unique tax ID number hence they aren’t the employer on record and the daily operations of HR-related responsibilities will be handled by the ASOs, who will not be the sponsor nor provide workers with compensation coverage or benefits however if you wish to add these features to your agreement with the ASOs then do expect additional expenses.
Please note that ASOs will not be held responsible for the compliance, benefit, or legal issues, they’ll only supply information regarding these matters.
The key advantages of using an ASOs service include:
- The model allows you to keep your employer of record status and get the same level of service and access to a team of experts to help run your company more efficiently.
- It offers ‘’a la carte’’ services, which means that you’ll just be charged for services that your company truly requires.
- You’ll maintain operational control over your company’s HR operations and have access to HR experts specialising in a number of HR functions such as legal issues, tax filing, and compliance.
The main disadvantages of using an ASOs service include:
- It doesn’t offer group health insurance or workers’ compensation coverage.
- It doesn’t take any responsibility for the risks that may occur.
- The service may be more expensive if you’ve the option to add on features like employee benefits and insurance.
What is the cost and benefit analysis of PEO (for employers)?
Typically, PEO services charge their clients using two traditional pricing methods:
- Flat/Employee-Based Fee: If your employees’ salaries are at least partially based on variables like commission, PEO will compute the fees for their services based on the number of your workers to provide a more consistent calculation of their services so the PEO’s administrative costs are calculated as a fixed cost per employee.
- Payroll Percentage Based Fee: PEO services will be calculated based on the percentage of your monthly payroll if your business’ payroll remains consistent from month to month so PEO’s administrative costs are figured as a percentage of your employees’ gross pay
The main benefits of PEO services include:
- Make sure business is in compliance with labour law and tax requirements: Many rules and regulations govern HR activities and the employment process, which is frequently modified, thus it may be difficult for new and growing businesses to know what to do. PEO services keep up with the latest legislation that the employer may not be aware of and guarantee that the firm is in compliance with HR standards and regulations in accordance with local requirements.
- Save time by eliminating HR and administrative duties: PEO services can save companies time and help them focus on the important stuff, such as company growth, revenue-making possibilities, and business operations.
- Improve the HR experience by providing a smoother user journey: HR PEO services provider not only helps employers with HR responsibilities and demands, but also allows them to set up in a new market or overseas country in a few days. Entering a foreign market may be hazardous for various reasons, such as time, local legislation, language difficulties, and personnel or resources. PEO services may help companies test out specific markets without establishing a firm, allowing them to hire workers and begin operations much faster.
- Give your employees the opportunity to work in other countries: PEO services can assist the employer in establishing a business in another country whether or not they’ve a presence there. They can provide employers with a wider range of scope on applicants and recruit and onboard the finest talent available anywhere, both locally and internationally, which will enable them to be more globally competitive.
Who needs a PEO?
- Employers in need of specialised HR workers — If your company or organisation has employees outside the human resources sector working on HR and compliance issues rather than the responsibilities you hired them for, consider hiring a PEO.
- Small and medium-sized enterprises (SMEs) that desire to be more competitive — Many small businesses collaborate with PEOs in order to expand their benefits packages, such as healthcare and retirement plans, giving them a competitive advantage over bigger competitors. Small businesses can join a PEO and gain access to retirement plans, insurance, and other perks that can help them compete against larger corporations.
How to choose a PEO Provider?
A PEO provider is important for your organisation therefore it’s first important to figure out your needs so that you know exactly what qualities and services you require. What are the major issues your business is facing right now? Do you expect any changes in your company that may have an impact on the services you require? You should carefully figure out your needs so that you know exactly what qualities and services you require before you look into multiple companies to see which one best fits your company’s needs.
There are five steps you may take to ensure you choose the best PEO service company for your needs.
- Determine your human resources requirements: Make a list of all of the HR activities that you want to outsource to a PEO firm.
- Examine all of your options: Look at the various PEO service providers and evaluate their qualities, services, and tools.
- Take into account your field: Some industries have tight HR regulations, which is why some businesses prefer to work with a PEO that specialises in their sector.
- Narrow down your top PEOs: Create a list of the top providers you’re considering. Inquire about what each firm has to offer by contacting them and asking about features, pricing, contracts, and customer service.
- Choose your PEO provider: After comparing your top possibilities, select the PEO firm that best compliments your company’s requirements.
How can Fastlane help?
You can trust that FastLane will help you get a foothold in the global market since we’re experienced in providing a wide range of corporate and HR PEO services for businesses. While you focus on your business goals, we’ll make sure that the expansion process is carried out smoothly without any legal obstacles in your way and businesses can also take advantage of a comprehensive and adaptable benefits package, streamlined payroll process, access to a dedicated HR team and compliance with the local employment laws and regulations.
PEOs can help you to expand your business internationally, especially in new countries where you don’t have any connection in one, without breaking the bank or going through any legal hassles. PEO services include human resources and payroll administration as well as legal employment assistance.
It’s important to understand the fine print of the PEO service you will ultimately go with and determine where their responsibilities begin and end before signing up. You might find yourself using numerous PEOs to cover various services and jurisdictions, which costs both a considerable amount of time and money.
Fortunately, you will not face the above issue with Fastlane since we’re are able to provide PEOs services in a lot of countries as our broad extent of connections in a wide range of countries can utilize all of your staff – wherever they are. We provide a worldwide EOR solution that incorporates all PEO advantages and drawbacks and will be responsible for the legal employer responsibilities, employment contracts, various contractual obligations, and other PEO perks. You can trust us with this service as we have been handling it since 2013, the period we first founded our company, so why not give us a call and chat with us regarding any PEO inquiries you may have.