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What we do – Professional Employer Organization

A Professional Employer Organization (PEO) provides Human Resources management services and administrative assistance. In short, it acts as an employee of a workforce on behalf of the company that has hired it.

The services offered by a PEO can vary, but typically include payroll, recruiting, hiring, benefits administration, and human resource solutions. Certainly significant in both the time and investment required for an organization to function successfully.

Involving a PEO is a very common option for start-ups and growing companies that require administrative support. Later, in the section What are the benefits of a global PEO? we will talk about the benefits of involving a PEO in the process.

What process does our Professional Employment Organization follow?

PEOs hire employees directly and carry out administrative work related to human resources such as payroll, benefits, and essential taxes. Meanwhile, the contracting company carries out the day-to-day with its employees.

Under this agreement, the PEO acts as the “Employer of Record” or Legal Employer, for tax and insurance purposes, all while taking care of various administrative and compliance responsibilities. However, all employees receive instructions and tasks from the client company.

In some markets, PEOs are called co-employers. Partnering with a PEO can significantly reduce costs for companies because a specialized PEO offers more efficient services than the company itself.

The tasks of the PEO will be agreed upon in a written agreement between the PEO and the company. This agreement should cover:

• Administration of payroll
• Essential taxes (Payroll taxes, for example) and tax compliance
• Administration of employee benefits (for example, health insurance, compensation, pension plans)
• Human resource management (HR)
• It is also common for PEO agreements to cover related services such as recruiting and contracting.

How is a PEO different from co-employment?

The term ‘co-employment’ is frequently used when speaking of a Professional Employment Organization. However, it is more accurate to refer to co-employment as a specific form of PEO offered in some countries. So what is co-employment?

Co-employment refers to two different companies (one of which is usually a PEO) that have the rights and obligations of an employer. One of the companies is the ‘operating employer’ and takes care of the day-to-day running of the employees.

The other company is the ‘administrative employer’ and is responsible for payroll processes, benefits administration, and related functions.

In the case of co-employment, as there are two companies with rights and obligations over an employee, a tripartite agreement is usually established in which the three parties agree on their rights and obligations.

What is the difference between a PEO and employee leasing companies?

PEOs provide administrative and compliance services to the client company and its employees. Instead, an employee leasing company provides its own employees, most often on a temporary basis, to its client (the company). Once the assigned task is completed, the employees return to the leasing company to be rented to another company when necessary.

PEOs arose from the employee leasing model, so both terms are often confused.

A similar agreement is the one with an ETT that recruits its own employees, almost always on a temporary basis. This is very common in cases of administrative or manual work, where substitutions are sometimes needed.

How does our International or Global PEO work?

Not all international or global PEOs (both terms are used) offer the same range of services. An international PEO offers more services than a domestic PEO, helping its clients with expansion. The specific services provided by the PEO are specified in the agreement between both parties.

Services offered by a PEO:

Human Resources (HR)

Global PEOs are experts on local laws and regulations. They help foreign companies to adhere to the laws. They can also provide employment contracts that adhere to local and national regulations, as well as market regulations.

Payroll Services

Global PEOs handle the payroll process in compliance with the rules of their own jurisdiction. This involves manual and automated processes that ensure that the employee receives the correct payroll or salary with their due withholdings.

Benefits Administration

A Global PEO administers all employee benefits. This includes vacations, absences, insurance, compensation, and retirement contributions. Due to economies of scale, a global PEO can provide larger savings in mandated benefits than a company on its own.

A global PEO ensures that the relevant payroll deductions and compensation are made. It also regularly checks that standards are being met and that it is aligned with the local market offer.

Taxes

PEOs calculate and pay the taxes required of the employees of the contracting company. They ensure that companies optimize their taxes by ensuring that all deductions allowed in the country where they are established are made.

Risk and compliance services

Global PEOs help minimize any risk associated with a global expansion. A Start-up or SME may not have the resources or local knowledge to know the risks associated with expanding to a certain country.

Global PEOs can provide guidance on the risks associated with different expansion business models (for example, establishing a local company versus hiring a global PEO). Worldwide PEOs are mainly familiar with the dangers related to managing workers in another jurisdiction, such as member complaints/lawsuits, workplace security requirements, and handling workers’ rewards.

Additional services offered by us

The global services of a PEO are not all the same. We know that the wide range of services by a global PEO is by a range of other services that help facilitate international expansions.

At PEO Middle East we go beyond basic services and provide a range of partner services for overseas expansion. These facilities may diverge between diverse countries and their valid laws.

Such services include the following:

Global Mobility This means supporting companies in the transfer or secondment of staff (head office staff) in visa applications and other immigration matters.

Legality and compliance

Sometimes specialized legal services are required to support international expansion, such as tripartite agreements or contracts with local agents. PEO Middle East can help you with this.

Global Entity Settings

In some cases, you may seek to establish a local legal entity (such as a subsidiary of your multinational corporation). PEO Middle East can help you do this.

Annual/quarterly tax returns

You may be subject to a number of non-payroll taxes in your country of expansion. This may include corporate income tax, turnover tax, or digital transaction taxes. We can help you by ensuring full reporting compliance with these tax obligations.

Training, incorporation, and relocation services

We provide training to support your workforce in the target country of expansion.

Selection and background check

Through our recruitment services, we use traditional advertising as well as our global network of business contacts to identify a selection of potential employees for final approval.

General human resource management services, including employee performance management.

Advice on market research and market entry

We can ensure your international expansion is based on up-to-date local market and compliance information.

Many of these solutions involve the use of the latest technological innovations, which may be appropriate for a client company within its country of expansion. At PEO Middle East, we customize our offerings to meet the needs of your business.

What are the benefits of using a global PEO?

Global PEOs are staffed by specialists with expertise in human resources, tax, legal, and payroll functions. Having a commercial agreement with a global PEO allows a company to expand faster, more affordably, and with less risk than other alternatives.

Some of the most important benefits of using a global PEO are outlined below:

Reduced costs

Using a PEO allows you to eliminate costly and time-consuming setup processes. The biggest cost savings come from not having to establish a separate legal entity. Other important savings can be achieved by: Streamlined payroll and compliance processes, which are already optimized for local conditions.

An efficient onboarding process for new staff.

Access to profitable deals for employee benefits (such as private providers of health insurance and workers’ compensation).

Avoid compliance penalties and enforcement actions as a result of a poor understanding of the local environment.

Small businesses that work together with PEOs have an employee turnover rate that is 10% to 14% lower than businesses that operate on their own. These businesses are also growing 7% to 9% faster than their counterparts.

Faster entry into the market

Your company does not have to wait for the bureaucratic processes necessary to establish an entity so you can enter the market and take advantage of the opportunities it offers earlier. Most of the time you can be up and running with employees in just days.

Time is also saved due to the support a PEO provides in recruiting staff, HR compliance, and legal compliance.

Payroll in compliance

One of the most important benefits of using an experienced PEO is being able to outsource the complex task of regulatory compliance to a local expert.

Foreign companies may be hesitant to get involved with government agencies. A worldwide PEO can help leader customer businesses through the procedure of hiring international workers in a compliant manner. They also help companies compensate their employees in accordance with local laws and regulations and terminate the employment relationship if necessary.

Additionally, international PEOs ensure that companies withhold the correct amount of tax from an employee’s compensation; and that employees receive their legal benefits, in accordance with local laws.

Simplified deregistration and cancellation procedures

The laws relating to the liquidation of a company are complex and can result in a lengthy and costly exit from a foreign market. Failure to properly liquidate a foreign business can result in continued accumulation of tax liabilities, even for a non-operating business. In addition, significant penalties may apply to the company and any of its directors. This could lead to a situation where future participation in that market becomes much more challenging.

With a global PEO, the key objectives of international expansion can be achieved with less effort, time, and cost.

Try a new market without taking as many risks

To grow internationally, many companies will choose to try a new market. By engaging the services of a global PEO, foreign companies can mitigate the cost of building a new branch or subsidiary.

Partnering with a local expert helps reduce risk and provides peace of mind. Rules connected to employment, taxes, and worker benefits are continually varying. A specialized PEO stays up to date with these changes, which means you can be sure your business is running compliantly.

Specialized PEOs have local in-house experts who carefully investigate and monitor any changes in the market. This ensures that your clients are always compliant, even in the midst of legislative changes.

A global PEO will help a foreign company expand its business abroad quickly and efficiently. When human resources and administrative tasks are outsourced to a PEO, the company can focus on more important business goals. The funds saved by hiring a PEO can be used to further expand a business.

What limitations exist in hiring a global PEO?

While there are no downsides to using a global PEO, there are some circumstances where it may not be the best option. Hiring a global PEO is preferable when you need quick and cost-effective entry into a new market while growing your international business or testing the market.

As your business grows, it may make sense to transition from a global PEO to a local entity in your country of expansion. It may be better to transition to a local entity in the following cases:

• You have enough employees in the destination country to justify having your own payroll processing and human resources functions. In these cases, you can still choose to outsource some administrative functions, in order to achieve significant cost savings.
• The size of your presence in the destination country would mean that there are marketing benefits to having a brand presence in that country.
• You would benefit from being able to transact with other local companies, fully regulated by local law.

This provides access to subsidies and rebates that require a locally incorporated country.

Who should use a global PEO?

Companies that want to expand abroad should consider a global PEO. They will be provided assistance with human resources, employment fulfillment, payroll, and tax functions. Start-ups, small, medium, and big companies have successfully used PEOs.

Global PEOs do not just offer faster, more cost-effective HR functions. They also provide ideal legal and statutory expertise for compliance requirements. This is opposed to start-ups and small businesses, which typically do not have such capabilities of their own.

Large corporations can also benefit from a global PEO. This is especially true in situations where the company is expanding its business to multiple countries.

No matter how well-funded an organization is, the costs of establishing a compliant payroll and human resources infrastructure abroad can be too high. International PEOs alleviate the necessity for such spending.

In addition to cost savings, international expansion can be achieved more quickly and efficiently.

Companies use a PEO regardless of their sector or industry. These industries may include the following:

• Accounting
• Real estate
• Manufacturing
• Health services
• Computer Services
• Insurance
• Electrical
• Legal
• Values
• Wholesaler, retailer
• Technology

Costs of the services of a global PEO

The costs of a PEO vary depending on the type of services required.

The site of the industry will also be a decisive influence. Most PEOs charge the client company a flat annual fee for each employee. Some also charge a fraction of the worker’s income.

This proportion may be advanced depending on the terms of the contract. For example, the client may want to provide an additional contribution to the benefits and salaries of existing employees. The more responsibilities essential, the advanced the rate.

Some PEOs also base their fees on factors such as the company’s risk level, credit rating, and benefit history. Due to these factors, rates may be higher.

Companies should research and select the PEO that offers the best value for money. A PEO must offer high-quality, cost-effective services that are relevant to a company’s needs.

Do you want to know more about a global PEO?

Given the number of PEOs today, choosing the right one for your business can be overwhelming. When you partner with PEO Middle East, your company can access emerging international markets; without the need to establish a local or subsidiary entity. And by accelerating your compatible access to new markets in days, not months, your company can save thousands of dollars in expansion costs.

Contact PEO Middle East and find out how our global PEO can accelerate your compatible expansion.

Additional Important Considerations

To better understand the role of PEOs in business, it is important to know the following:

• Most PEOs will not partner with a company with fewer than 10 employees. The best number of employees is from 16 to 80.
• PEOs typically price services based on a percentage of the company’s total payroll or the number of employees.
• A contract with a PEO means giving them some or all of the administrative responsibilities.
• The length and structure of the contract vary by PEO. The cancellation of a contract may involve the payment of a fee.
• The facilities offered by PEOs diverge and not all Professional Employment Organizations offer all services to all businesses.
• PEOs are not temporary employment agencies.

Organization of professional employers versus temporary agency

Some confuse PEOs with temporary employment or “temporary” agencies. The two are very different, although some of the services offered appear to be similar. Temporary employment agencies recruit employees and assign them to companies on a short-term basis to help with special projects or overloads or as needed. PEOs are co-employers, as noted above, and take on a number of administrative functions for clients.

How does partnering with a PEO work?

A PEO works by sharing job responsibilities. Both parties sign a contract called a customer service agreement (CSA). The PEO is the administrative employer, while your company is the workplace employer.

While you are still making hiring and firing decisions, the PEO assumes the role of legal and fiscal employer. They provide workers’ compensation coverage, administer benefits, withhold and report payroll taxes, and perform other human resources tasks.

PEOs take advantage of many small business employees to negotiate better rates and features for worker benefits. In return, companies benefit from having access to resources such as safety programs, high-quality benefits, and other employee benefits.

PEO pricing typically includes a monthly cost per employee or is based on a percentage of your total payroll costs. As a percentage, a PEO can charge up to 11% of your total payroll expenses.

According to the National Association of Professional Employer Organizations (NAPEO), “the average customer of a NAPEO member company is a company with 19 employees in the workplace.” Additionally, 15.3% of PEO clients have between 10 and 99 employees. Therefore, a company with fewer than 10 workers will not make as much profit as a slightly larger company.

Why use a PEO?

According to NAPEO, small businesses that use a PEO “grow 7% to 9% faster, have 10% to 14% lower employee turnover, and are 50% less likely to fail.” In addition, a PEO provides cost savings of up to 27.3%.

The PEO service is the simplest solution for foreign companies taking their first steps toward expansion in the Middle East. These services allow the company to assemble a small team of workers (in many cases it is only 1 employee) in the destination market and, at the same time, comply with all the legal regulations that regulate employment in the country. In this way, the company can easily focus on its daily operations and free itself from the administrative, accounting, and legal complexities that personnel management requires.

How does the PEO service work?

The structure of the PEO service is very simple. There are usually only three parties:

• The client company: a company abroad that wants to hire a worker. In cases where the company does not know a trusted PEO provider, it turns to a global/GEO PEO company that is responsible for establishing contact with the local provider. The client company will be responsible for providing details of the worker’s profile and their activities so that the local supplier can advise the client regarding the type of possible contract.
• The PEO company: as we mentioned before, this company will be in charge of working on an employment contract that adjusts to the needs of the client and the employee. Other tasks carried out by the PEO are the calculation and payment of payroll, processing of expense reports, operational procedures that the employee needs to carry out their activities in the country (contracting services, travel, etc.).
• The employee: this will be in permanent contact with the client company to coordinate their daily activities. The relationship with the PEO company will be only for necessary operational procedures and labor issues.

Advantages of PEOs

Time and money

The first and most important advantage of using a PEO or an Employer Registration Service provider is that they can save you huge amounts of time and money. Especially if you are a small or medium business, or just looking to hire a few staff members to carry out more specific tasks abroad, the cost and time of forming a legal entity in The Middle East can be quite a bit problematic.

Localized support

Another important problem that can have solution by using the services of a PEO is to navigate and overcome the various niches that are present in each country when it comes to hiring employees. Each country will have different employee benefits that need to be paid for; A PEO will ensure that you meet local legal requirements and reduce mitigation risk.

More time to get the job done

One of the most tangible benefits you will experience from using a PEO service provider is the freedom you will have to directly manage your employees working abroad. With much of the administrative burden taken on by the PEO, you will be able to focus your time and effort on working directly with employees.

A Brief history of PEOs

A PEO is not a new business concept. They have been around for several decades, however, PEOs are becoming more popular every day.

PEOs emerged in the 1980s. However, the concept of ’employee leasing’ has been around since the 1960s. Marvin Selter popularized the model when he hired employees from a doctor’s office in California.

PEOs began in the United States as entities that provided payroll processing services to companies in the 1980s. Subsequently, unresolved issues related to labor compliance arose. As a result, governments tightened their HR and employment laws to protect the interests of employees.

These laws made human resource management increasingly complicated and time-consuming. HR functions within organizations needed to expand, leading to increased costs. Assuming these costs has been especially difficult for SMEs and start-ups, which is why it is increasingly common to outsource administrative and HR functions.

Statistics

Statistics show that business owners without a PEO spend approximately 25% of their time on paperwork related to their employees. Some companies are also popular for spending too much money and time on labor compliance.

Companies that have used a PEO for at least a year have a 50% greater chance of survival. A PEO also mitigates sick leave, between 10 and 14% less per year.

As a result of these advantages, involving a PEO has become an effective solution to reduce costs and ensure compliance with the complicated labor laws that SMEs face.

Today there are more than 150,000 start-ups and SMEs using a PEO. In the UAE only, there are around 800 PEOs

Labor compliance laws are becoming more complicated every day and international expansion is growing every day, so a PEO will be increasingly important in the business model of many companies.

Interested in using a PEO solution in The Middle East?

The Human Resources department is a vital part of any company since its work is carried out alongside the changes that occur and the search for growth while working on the search for quality employees with the necessary requirements.

This area, regardless of the size of the company, must work to increase employee productivity and anticipate any situation that harms the work environment, as well as granting compensation, benefits, keeping employee benefits in order and accordance with the law, and even handle staff layoffs.

For many investors, The Middle East is an ideal jurisdiction. However, many companies have no interest in going through the difficult process of having to set up a new legal entity to start operations. For this reason, a PEO can provide a solution for your business needs.

Our portfolio includes accounting and tax, company formation, due diligence, contracting and PEO, and corporate legal services, while our unrivaled regional presence means we are ideally placed to support multi-jurisdictional market entry and cross-border operations. If you need a PEO company in the Middle East, we are ready to help.

Connect with us to get information about our recruitment, hiring, and PEO services in The Middle East. Contact us and find out how we can help you hire staff in the Middle East.