Professional employer organization: Advantages and disadvantages

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A professional employer organization or PEO is an agency that can take care of the aspects related to your HR department. In this way you can see simplified many aspects of it, saving time and costs. The benefits not only stay there but you will find many others.

In this article, we will show you what you need to know about these organizations and their benefits. In addition, you will know certain disadvantages or limitations of your hiring, as well as when you may need their services. Let us see:

  1. What is a PEO?
  2. What services do these professionals offer?
  3. Are there any advantages and disadvantages?
  4. When is the best time to hire a PEO?
  5. What types of companies use them?
  6. How can we help you get the best PEO?

1. What is a PEO?

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PEO stands for professional employer organization, which commonly works offering human resources solutions, thanks to their experience. In addition, they can take care of tasks that can be time-consuming and tedious. These professionals offer their services to both large and small companies.

Thanks to the services of these professionals, some operations can be optimized within your company. In this way, the administrative burdens of the HR department of your company are alleviated. In addition, they are capable of carrying out personnel recruitment tasks in all areas of your company.

When your business employs one of these organizations, you establish a joint working relationship with them. Therefore, you are authorizing the PEO provider to handle various employee-related duties and responsibilities. However, your company will still have daily control over staff members and their performance in the company. In addition, the professional employer organization will be the employer of record for tax and insurance purposes.

2. What services do these professionals offer?

A professional employer organization can offer a wide variety of services for many types of business. Below is a list of human resource services provided by most of these organizations.

2.1 HR management

This service allows your company to solve the need for an HR team. This way, you will have the benefit of a larger employee base with low-cost benefits. Plus, it helps you address your changing needs when your business is expanding. Otherwise, thanks to the human resources services of a PEO, your company will work more efficiently. Hence, your company will be able to follow the path of growth and development while the PEO is in charge of HR.

2.2 Legal compliance

Working in conjunction with a PEO allows your business to comply with the laws and regulations in the UAE or any nation. This is one of the most beneficial solutions for hiring these experts due to their expertise in the subject matter. In this way, you will be sure that your company will not have problems with labor and employment laws.

These professionals have the necessary knowledge to deal with: state, federal, and industry-specific laws. In addition, you will find that this service is very useful due to the constant change of all these laws and regulations. In this way, you will not have to deal with sanctions, fines, worker turnover, as well as loss of the reputation of the company.

2.3 Payroll

This process allows your company to execute one-time payments for each payroll period for your staff. This is of great help, especially when your company has employees abroad. In addition, a PEO has specialized software to calculate the number of hours worked and the payment of each worker. After this, they make the corresponding payments for each employee. Therefore, having this service can help you simplify this challenging procedure, especially with a new business.

2.4 Employee compensation

Another service offered by a PEO is maintaining employee compensation coverage. In this way, you will have a more pleasant work environment, by providing more adequate compensation policies for your workers. Among these are:

  • Management of injury claims.
  • Return to work programs.
  • Security.
  • Training procedures, among others.

So when you apply all the right solutions, you will optimize workplace safety for your employees. Plus, the PEO offers better rates while lowering your business insurance costs. This way you will also get access to a lower mod rate.

As well, most of these organizations offer safety training for employers and employees. Therefore, this service will allow you to have a healthy workplace with healthier staff members.

2.5 Retirement packages

Another service of a professional employer organization is that they offer retirement plans. In this way, your company can continue to comply with the corresponding local regulations with these plans. Employees will be able to easily access and manage their retirement plans, thanks to the fact that they will be hosted on online platforms.

2.6 Training and development

These professionals also offer training services for all the staff in your business. In addition, most of them guide their workers in aspects of health, harassment, diversity, and safety. They do this with both their in-house employees and remote workers. In this way, they will be able to develop the skills that will help them improve in their specific areas of work. For example, they may offer courses on leadership, communication, management, or teamwork.

2.7 Immigration services

Professional employers can help you comply with the immigration laws of the region where you will settle. In this way, you can move your workforce anywhere in no time.

2.8 Relocation services

Within the services of the PEO, there is the relocation of employees to or from the Middle East. Thus, your employees will not have problems making these transitions that can be a bit laborious. In this way, you will have the experience of the experts who deal with visas, permits, and other related matters.

2.9 Search and recruitment of employees

One of the jobs you can entrust to a professional employer organization is the search and recruitment of personnel. Thus, you will be able to select the best candidates to work in your company and have an effective workforce. This recruitment can be done with both remote workers and those who will work in person.

2.10 Health insurance services

In some cases, you will find a PEO that offers affordable health insurance packages for your business.

3. Are there any advantages and disadvantages?

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As in any business and outsourcing of certain services, hiring a PEO has pros and cons. You will then be able to see both the potential advantages and the disadvantages that you will find in your business when choosing this service.

3.1 Advantages of having a professional employer organization

Some of the benefits you will get are:

3.1.1 Reduction of expenses in HR

This is one of the benefits that may seem simple in a certain way but it is what many companies are looking for. This is a consequence of the fact that the fee you pay a PEO agency covers all the necessary HR services within a company. This way, the expansion of your company is profitable both locally and internationally.

3. 1.2 Reliable management of payroll and taxes

As you saw earlier, the professional employer organization can handle your payroll and taxes if you choose. This will give you the confidence that both the wages of your employee and your taxes will be well paid. These services also include the social security of your company’s contributions to the relevant authorities.

3.1.3 Balance of benefits for employees

Professional employers also see to it that their workers obtain the legal benefits of their jurisdiction. These may include medical care, and pension plans, among other benefits of the law. Therefore, you can take care of complement these benefits, offering them your own.

3.1.4 Legal advice and risk reduction

When you have the services of these professionals in your company, they can advise you on the establishment of compatible contracts. This is because a local PEO may not establish these types of contracts for their employees. For example, types of paid vacations, salary payments, and avoiding the risk of permanent establishment.

3.1.5 In charge of your work needs abroad

This type of organization will reduce the bureaucratic burden of your company, thanks to its extensive functions. Therefore, you can take care of the integral development of your business at the same time that a PEO solves the basic aspects of employment. So you can focus on expanding your business into new markets and engaging your new employees.

3.2 Disadvantages of hiring a professional employer organization

Rather than talking about disadvantages, each of these aspects could be seen as limitations in terms of services. Therefore, it is good that you know each one of them before requesting these services. You can see them below:

3.2.1 Legal liability

One of the limitations is that this organization does not take legal responsibility for its employees. Therefore, you may need to set up a local entity, which can be a lot of paperwork for your business. However, global employers may use your name when establishing their legal entity. This can be done wherever your employee is located but not all of these organizations offer this service.

3.2.2 May not be recognized

Of course, this only applies to certain countries, such as France, where it is not allowed, as well as Germany. However, in the UAE and other Middle Eastern countries, you can count on this service.

3.2.3 Compatible employment contracts

In most cases, employer organizations do not establish compatible employment contracts for your company. In these cases, they will only provide a legal advice service. However, many PEOs can cover employment contracts, you just need to find someone to do it.

3.2.4 Additional contractual responsibilities

Professional employer organizations may not verify these obligations. These obligations are related to intellectual property rights, data protection, health, and safety.

4. When is the best time to hire a PEO?

One of the main things you need to determine is whether you want to hand over control of a portion of the business. To answer this concern, you must analyze each of these aspects:

  • Your company is in the process of expanding or planning to do so in the short term.
  • If the mentioned benefits cover the current needs of your business.
  • Does the organization understand the core values of your company?
  • Will there be a genuine interest in the well-being of your workers?
  • You have to know if they will provide a dedicated contact for your employees.
  • Will they make unbiased recommendations, knowing that they could be held legally responsible for their advice?
  • Also, will they help with training, career development, and performance management?

5. What types of companies use them?

The list below does not necessarily represent the only companies but the most common. In addition, small and medium-sized organizations commonly benefit from this service but large organizations can also benefit. Thus, the most common companies that use these services are:

  • Real estate.
  • Health services.
  • Information and technology.
  • Engineering.
  • Stockbrokers and dealers.
  • Legal services.
  • Management consulting.
  • Accounting.
  • Manufacturing.
  • Insurance services.

6. How can we help you get the best PEO?

These organizations are in charge of the aspects related to the human resources of your company. In addition, this will bring substantial benefits to your business, such as saving time, effort, and money. The important thing is that you evaluate what these organizations offer to see if you will really get these benefits.

Here at PEO Middle East, we provide you with the best service you can get in this region. Not only that but we have the best employer of record to serve your hiring needs. Also, you can hire contractors with us in no time.

Do you have any questions about the work of a PEO? You can contact us through the telephone number +971 43 316 688 to assist you and clarify any questions. In addition, you have at your disposal the email [email protected] to write any inquiries you want to communicate.

You also have the opportunity to work with our team of professionals, just send your resume to [email protected]. You can also do this on thetalentpoint.com where you will see hundreds of job opportunities available. Register now!

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