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Top 5 Benefits of Using a PEO

HR & Compliance

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Top 5 Benefits of Using a PEO

Are you a business owner looking for solutions to reduce your HR burdens while maintaining legal compliance? Do you want to provide better services and perks to your employees without having to deal with the hassle of administering them yourself? Here comes a Professional Employer Organization (PEO) to help you channel global employee management like a pro.

Using a Professional Employer Organization to outsource HR and related functions is extremely advantageous for companies. They can shoulder HR responsibilities, manage hiring and onboarding, ensure compliance and more.

This article will help you learn more about what a global PEO is, how it works, and what benefits it can provide.

What is a PEO?

A PEO is a specialized service provider that partners with businesses to manage various aspects of their human resources functions. These functions include payroll processing, employee benefits administration, compliance with employment laws, and more.

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How does a PEO Work?

A unique co-employment relationship is established when a business partners with a PEO. In this arrangement, the PEO becomes the employer of record for certain employment-related purposes, while the client company maintains control over its day-to-day operations and strategic decision-making. The client company and the PEO share responsibilities and liabilities, creating a collaborative approach to HR management.

Let's explore the advantages of employing a PEO now that we are clear on what a PEO is and how it functions.

Benefits of Using a PEO

1. Enhanced HR Expertise

PEOs employ seasoned HR professionals who specialize in various facets of human resources, from compliance to benefits administration and payroll management. This expertise translates into efficient HR operations, reducing the risk of costly errors and ensuring compliance with ever-changing labor laws. Moreover, it allows organizations to focus on their core competencies while entrusting HR tasks to experts, ultimately improving overall productivity and employee satisfaction. In summary, the enhanced HR expertise provided by PEOs contributes to smoother HR operations and better business outcomes.

2. Cost Savings

Managing HR functions in-house can be expensive and time-consuming. When you use a PEO, you can benefit from economies of scale. PEOs pool together multiple client companies, which allows them to negotiate better rates for employee benefits such as health insurance, retirement plans, and workers' compensation. As a result, your business can offer competitive benefits packages without breaking the bank.

By outsourcing HR responsibilities to a PEO, you can reduce administrative overhead, such as payroll processing and HR software costs. This translates into significant cost savings for your business.

3. Improved Employee Benefits

Attracting and retaining top talent is crucial for any business's success. PEOs offer access to a wide range of employee benefits that might not be affordable for smaller businesses when procured independently. These perks might include retirement plans, medical insurance, dental and vision coverage, and employee support initiatives.

Your business may establish a more compelling compensation package and keep top talent by offering complete benefits. This, in turn, may raise productivity and staff morale.

4. Time Savings

Time is a precious resource for business owners and HR professionals. Managing HR functions in-house can consume a significant amount of time better spent on strategic initiatives. When you partner with a PEO, you can offload time-consuming HR tasks such as payroll processing, tax filing, and benefits administration.

This time-saving aspect of using a PEO allows your HR team to focus on more strategic and value-added activities, such as employee engagement, and workforce planning. Ultimately, this can improve overall efficiency and productivity within your organization.

5. Risk Mitigation

Legal actions, disciplinary actions, and employee conflicts are all examples of HR-related risks that may negatively impact your company's finances and reputation. PEOs are prepared to assist you in navigating these risks successfully. They maintain robust compliance programs, provide access to HR policies and procedures, and offer guidance on best practices to minimize liabilities.

By partnering with a PEO, your business can better protect itself from costly legal battles and regulatory fines, allowing you to focus on your core business operations with peace of mind.

Why Your Business Needs a PEO

Although hiring a PEO has evident advantages, you could still question if your company actually needs one. The answer is based on your situation and priorities. But there are a few circumstances where working with a PEO might be very beneficial:

Small and Midsized Companies

PEOs are especially helpful for small and midsized businesses since they do not have the resources or knowledge to manage HR duties internally. These enterprises can use a PEO's experience and economies of scale to compete with larger organizations.

Rapidly Growing Companies

Managing HR tasks can become overwhelming if your business is experiencing rapid growth. A PEO can help you efficiently scale your HR functions, ensuring your HR infrastructure can support your expansion.

Complex HR Needs

Businesses operating in highly regulated industries or those with complex HR requirements, such as international expansion, can benefit from the expertise of a PEO who specializes in managing intricate HR challenges.

Cost-conscious Companies

Cost-saving is a significant driver for many businesses considering a PEO. A PEO can be an ideal solution if you're looking to reduce HR-related expenses while maintaining or improving employee benefits.

PEO vs. EOR - The Difference

It's essential to distinguish between a PEO and an Employer of Record (EOR) to make an informed decision for your business. While both services provide HR-related support, they operate differently:

PEO (Professional Employer Organization): As previously mentioned, a PEO establishes a co-employment relationship with client companies, sharing HR responsibilities and liabilities. Global PEOs are ideal for businesses seeking comprehensive HR management that goes beyond borders.

EOR (Employer of Record): An EOR, on the other hand, takes on the legal employer role for your employees. This means they handle payroll, taxes, and compliance on your behalf, but you retain full control over day-to-day operations and strategic decisions. Skuad EOR solutions are suitable for businesses looking for international expansion or a global workforce.

Choosing between a PEO and an EOR depends on your business's specific needs and goals.

How to Choose the Right PEO for Your Business

Making the best PEO choice for your company is an important decision that needs considerable thought. You can use these guidelines to select the ideal PEO for your business:

Determine Your Needs: Identify the unique HR requirements you have, such as those for managing employee relations, processing payroll, and administering benefits. Understanding your requirements will help you find a PEO with the right expertise.

Research PEOs: Conduct thorough research on different PEO providers. Consider factors such as their track record, industry experience, client testimonials, and the range of services they offer.

Compare Costs: Request detailed cost proposals from multiple PEOs. Analyze the fees associated with their services and the potential cost savings they can provide.

Check References: Reach out to current clients of the PEOs you're considering to gather first-hand feedback about their experiences. This can provide valuable insights into the quality of service and customer satisfaction.

Review Contracts Thoroughly: Carefully read the contract terms and conditions before concluding any agreements. Make sure the contract is in line with your expectations and company goals.

Consult with Financial and Legal Counsel: To further understand the legal ramifications and financial obligations of working with a PEO, it is advised that you speak with legal and financial professionals.

Selecting the best PEO is a key first step towards optimizing your HR processes or employee onboarding and gaining access to a PEO's advantages for your company. Take the time to evaluate your needs, research potential providers, and make an informed decision that aligns with your business goals and objectives.

Manage Your Global Team with Skuad

Managing a global workforce can be complex if your business operates on a global scale or plans to expand internationally. Fortunately, global PEO platforms like Skuad can simplify the process. 

Skuad offers a unified platform that lets you hire, onboard, and pay employees in over 160 countries. By handling the legal and administrative aspects of HR, Skuad allows you to focus on your core business objectives. Skuad ensures 100 % compliance, reduces risks, and streamlines your global HR and payroll operations. Get in touch with our experts today!


What are the three types of PEO?

Based on the range of services they offer, PEOs often fall into one of three categories:

What is the difference between HRM and PEO?

HRM (Human Resource Management) refers to the internal HR department or team within a company that manages HR functions in-house. PEOs (Professional Employer Organization) are external service providers that partner with businesses to manage various HR functions.

Is PEO the same as staffing?

No, PEOs and staffing agencies are distinct entities, each serving different purposes. PEOs provide comprehensive HR services, including payroll processing, and more. Staffing agencies specialize in recruiting and placing temporary or permanent employees with client companies.

About the author

Catalina Wang is a Human Resource Consultant. She manages recruitment, onboarding, and contract administration staffing for many organizations and remote teams. She’s passionate about efficient HR management and the impact of tech on hiring practices.

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