.webp)
Whenever you’re looking for a new partner for your business, you need to carefully weigh your options to find the best one. Working with a professional employer organization (PEO) can be helpful, but only if you choose the PEO best suited to your company’s needs.
There are many factors to consider when comparing PEOs, from pricing to locations. We put together this guide to help you find the best global hiring option for your company.
What is a PEO?
A PEO is a company that provides human resources services to small and mid-size businesses. Under this arrangement, the PEO acts as a co-employer of that company’s employees.
The PEO is responsible for performing HR tasks, such as ensuring compliance with labor laws, administering employee payroll, and handling employee benefits. Put simply, PEOs are outsourced HR departments. Working with a PEO is also a way for employers to outsource some of their legal liability for employees.
Companies can use a PEO in any location, including their base of operations, but they often take advantage of PEOs when hiring internationally. Using a PEO minimizes the compliance risks associated with hiring international workers. Historically, companies looking to expand abroad and hire international employees had to create entities in those locations. Creating a legal entity abroad is complicated, time-consuming, and costly, so it’s not always the best option. PEOs offer a convenient alternative for companies interested in bringing foreign workers on board.
Questions to ask during your search
If you decide to work with a PEO, there are a few questions to consider during your search. There’s no objective way to determine which PEO is the best. Instead, your goal should be determining what will work best for your company’s needs. To do so, you must first understand those needs in detail. Consider questions like:
- Does your company need to reduce the workload of its internal HR department?
- Is your company interested in hiring international workers? If so, in one country or several?
- Is your company worried about labor law compliance risks?
- Does your company want to improve its employee benefits to be more competitive?
Determine the issues that are most important to your business when considering its current size and plans for future growth, as well as the current and anticipated pain points outlined above. For example, your internal HR department may be overrun with work, leaving you concerned about keeping up with all your administrative tasks. In that case, you should prioritize finding a PEO that handles various HR tasks so they can take those tasks off your hands.
How do PEOs benefit corporations?
Typically, it’s companies with 5–500 employees that work with PEOs. Large corporations generally don’t work with these organizations, but they certainly can. Corporations looking for PEOs should find large, established organizations that can handle a substantial workload. Contact PEOs you might want to work with to determine whether they can address your company’s unique needs.
How do PEOs benefit small businesses?
Small businesses have very different needs from large corporations, which extends to what they need from their PEO. Working with a PEO can help them offer employee benefits comparable to the benefits that Fortune 500 companies offer. Small businesses also generally have small HR teams that may struggle with large workloads. A PEO can offer them HR support and expertise they couldn't otherwise access.
A PEO is especially useful for small businesses worried about administering payroll and handling payroll taxes. Many PEOs (if the IRS has certified them) will report and remit payroll taxes on behalf of their partners in addition to processing payroll.
How do PEOs benefit startups?
Startups can also benefit greatly from working with PEOs. Typically, startups have limited resources at their disposal. Working with PEOs gives them immediate access to enterprise-level HR services, saving valuable time and money. Instead of having to worry about time-consuming administrative tasks like managing payroll and employee benefits, the startup team can focus on what they do best—driving the company forward.
Does the location you’re hiring in have a lot of PEO services available?
In some areas, your PEO options may be limited. For example, there may only be a few PEOs—or even just one—in that location. Alternatively, the PEOs in the area may only offer limited services.
If that’s the case, you’ll find it much more difficult to find the best PEO for your company’s needs.
Is the PEO accredited?
The best PEOs are accredited by the Employer Services Assurances Corporation (ESAC). The ESAC provides accreditation to PEOs that meet rigorous operational and financial standards. A very small number of PEOs earn ESAC accreditation, and they represent the best of the best. PEOs can also receive accreditation from the Certification Institute, which evaluates PEOs for ethical business practices and stables finances.
It’s a good sign when a PEO is accredited by one or both agencies. Ask any PEOs you’re considering working with whether they’re accredited.
What are the reviews like?
You should also read the reviews of any PEO you might choose. Trustworthy organizations will happily share references from other companies they’ve worked with. If the reviews are mixed or mostly negative, that’s a sign that you should find a different service provider. Pay close attention to the ratings customers give PEOs and their reasons for liking or disliking the organization.
Understanding PEO services
Don’t assume that all PEOs offer the exact same services. Some offer comprehensive HR services, while others focus specifically on one or two key areas. You need to determine whether the services offered by the PEO match your specific needs.
Compliance
PEOs typically have in-house experts on local labor and tax laws. The PEO will ensure that your business complies with these laws and avoids penalties. These services are invaluable for companies with global teams because it’s difficult to stay on top of laws across many different locations.
Employee onboarding
Onboarding new employees—especially in foreign countries—can be a challenge. Some PEOs will help with the onboarding process. Your PEO may provide a checklist of forms the new employee has to fill out, steps you need to take as the employer, and other key details so you don’t miss anything.
Health insurance
Health insurance is one of the most important benefits companies offer and also one of the most expensive. Many PEOs offer affordable access to high-quality health insurance plans. Working with a PEO means you don't have to worry about losing out on top candidates because your company doesn’t offer competitive health insurance benefits.
Payroll
A key function of PEOs is to process and manage employee payroll. Some PEOs will even manage your company’s local, state, and federal payroll taxes.
Benefits
Because they work with many employers, PEOs can help your company offer premium employee benefits such as dental coverage and retirement benefits at affordable prices. Your PEO will also manage employee enrollment and administer these benefits on your company’s behalf.
Best alternatives to PEOs
Besides using a PEO, there are two other popular global employment solutions for hiring international workers—opening a foreign entity or using a global employment platform, like Oyster.
.webp)
Opening an entity
The traditional route is opening an entity in a foreign country where you want to hire workers. However, if you open an entity, your company will have to worry about dealing with the bureaucratic process. This process can drag on for months and be very costly. You’ll also be responsible for managing compliance with the labor laws in that location. So it’s likely not worth opening an entity just to hire one or two employees from a foreign country.
Global employment platform
Using a global employment platform (GEP) is another alternative to working with a PEO. A global employment platform is a cloud-based software solution that helps companies scale their teams and hire remote workers from anywhere in the world. Your HR team can use the GEP to manage compliance and payroll, onboard new international hires, and tailor your benefits to each location.
Benefits of using a global employment platform
Choosing a global employment platform offers companies many benefits, such as:
- Hiring employees from all over the world
- Easily calculating the cost of engaging talent
- Onboarding new talent with ease
- Offering employee benefits tailored to each location
- Ensuring legal and tax compliance wherever you have global employees
Global employment platforms are especially useful if you want the option of hiring in multiple locations. While you need to set up a new entity or choose a new PEO whenever you hire someone in a new location, you only need one GEP to operate all over the world. A global employment platform is the only solution that allows companies to hire people worldwide through a single platform.
Scale a global team with the support of Oyster’s global employment platform.
About Oyster
Oyster is a global employment platform designed to enable visionary HR leaders to find, engage, pay, manage, develop, and take care of a thriving global workforce. It lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world with reliable, compliant payroll, and great local benefits and perks.
.webp)