What is a Professional Employer Organization (PEO)?
International employers face a dilemma when entering a new labor market: whether to go solo or outsource HR functions. Taking a plunge into Croatia's labor market is no different.
Still, Croatia — just like any country — has unique labor market characteristics. That is why a PEO in Croatia makes perfect sense.
But what's a PEO?
A PEO is an organization whose main business is providing employment services to employers. By outsourcing one or more HR functions to a PEO, an employer gets free of so much of their administrative and regulatory burden and also improves employment practice by bringing in an expert on local labor laws.
Croatia, an increasingly digital-nomad-friendly country, has improved on human capital rapidly in recent years, scoring above the European and Central Asian regions and even slightly higher above comparable scores in high-income countries.
This promising land of high-skilled employees and contractors can generate maximized value and return on human capital, but not when employers are not particularly familiar with the ways things work in Croatia.
Hiring a PEO to capture human capital value is not only rewarding HR-wise. It also helps you grow your business in Croatia with the best-in-class employees and contractors that an established PEO can sort out.
What are the benefits of using a PEO in Croatia?
International employers approach PEOs for different reasons. Here are the most common reasons — and benefits — for using a PEO in Croatia and elsewhere:
Ensuring compliance with employment laws
Staying compliant with in-country labor laws and regulations is mandatory, but nonetheless, many international employers fail to do so.
By bringing aboard a PEO, you as an international employer can continue doing business in Croatia while also managing a wide range of compliance requirements, including but not limited to Croatia income tax, Croatia tax rate on personal income, and Croatia corporate tax rate.
Payroll processing and tax filing
PEO services in Croatia come in every size and type.
Whatever professional employer organization in Croatia you opt in for, a PEO is best positioned to manage payroll as well as file and report taxes compliantly.
If you're an international employer uninitiated in local laws and ways of hiring, a PEO makes your life easier.
Unlike when you hire employees and independent contractors alone, co-employing workers not only provides you with employment insights you may not have had otherwise but also mitigates employment risks by, for example, optimizing costs.
Provision of competitive benefits
In addition to basic statutory benefits in Croatia, a PEO is capable of designing not only competitive benefits for each employee and independent contractor and in each jurisdiction but also crafting unique and creative packages to attract and retain high-skilled workers.
Employment cost mitigation
Labor costs in Croatia have increased by 2.3% recently — with no signs of leveling soon.
This situation, not particularly pleasant to employers, needs expert intervention to mitigate the growing risks of employment costs running out of control.
With a PEO backing you up, you as an international employer have not only a more cost-effective employment practice but also a more optimized HR process and, ultimately, a more agile HR strategy.
Using Skuad's integrated PEO services, you can leave all your employment concerns behind and also make compliance embedded in each HR activity you or your PEO perform.
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What are the differences between an EOR and a PEO?
The need to simplify HR operations is a constant for each international employer.
To do so, employers have many options, but for current purposes, two options stand out:
- Hiring an employer of record (EOR) in Croatia
- Hiring a PEO in Croatia
These options, while overlapping in some HR functions or activities outsourced by employers, diverge in some critical ways, as shown below.
Hiring in Croatia with a PEO
For international employers, Croatia is a holy grail of skill base, emerging talent stars, and confirmed return on human capital.
Growing enrollment in higher education year on year, being a world top performer in TOEFL scores, and having 24.92% of the population under 25 years old are all winning factors to landing quality employees and independent contractors in Croatia.
This wide pool of high-skilled and well-educated workers needs to be housed properly and carefully into the right employment slots. While having a wider pool of qualified workers to hire from is a good start, only optimum hiring practices are likely to maximize returns on capital investment.
The due diligence of hiring and paying employees and independent contractors requires going well beyond identifying and attracting talent into smart placements and optimum job roles. To know where, when, and how to hire best-in-market employees and independent contractors, you will benefit from the help of an established and capable PEO.
Using Skuad's unmatched PEO services allows you as an international employer to get world-class HR operations that span a full spectrum of compensation, payroll management, invoicing, and more.
Payroll in Croatia is challenging. It’s easy when you use a PEO.
The payroll management process can spiral out of control in regard to finances, admin, and compliance.
In addition to basic statutory calculations for salaries and wages according to set pay scales, payroll gets much more complicated when accounting for taxable and non-taxable compensation components.
After calculating basic salaries or wages (for employees) and commissions or fees (for independent contractors), employers need to sort in and out which compensation components such as social insurance, VAT, withholdings, and more are applicable to each worker class and for which components of compensation if so.
Moreover, requirements in tax reporting methods or vehicles — such as electronic filing and returning of VAT — add more layers of complexity to payroll management, complicating these tasks for international employers still figuring out a way out of basic compliance matters.
Again, this is why a PEO matters.
Using Skuad's unified and integrated HR platform not only streamlines your HR operation but also makes compliance a matter of automation.
Reach out to us at Skuad and get your HR operation in Croatia up and running now.
What a PEO can and cannot do for you
Like any employment service, a PEO can do only certain functions for you when you decide to engage international employees and independent contractors in Croatia.
Here is a short but not an exhaustive presentation of what a PEO can and cannot do for you:
A PEO can:
- Run your payroll operations end-to-end smoothly and compliantly
- Acquire and retain talent to maximize returns on capital investment
- Optimize employment costs and minimize risks associated with compliance
A PEO cannot:
- Represent an employer as a legal employment service
- Control HR operations in full
- Be held liable — alone — for performing different HR functions and activities under service agreements
Businesses big and small can find value in partnering with a PEO in Croatia.
Taking a plunge into Croatia's skill pool is an endeavor you as an international employer should be well prepared for.
First, you need a firm hold on what labor laws and regulations you should comply with. This requires, in turn, in-depth knowledge of in-country laws and fine-print compliance matters — a feat well beyond many employers.
To complicate matters more, building a diverse, distributed team of remote workers may require additional compliance understanding and expertise that's out of reach for even some PEOs. That is why you should only trust a well-established PEO to handle your HR operations, end-to-end and compliantly.
The range of expertise and local labor market experience PEOs bring on is invaluable to any international employers taking their shot in an out-of-jurisdiction market.
At Skuad, our combination of in-country local labor expertise and industry-defining PEO solution provides international employers with unmatched employment service end-to-end. Take no risks. Instead, book us to walk you through everything about our employment service so you can focus on more strategic business matters.