Professional Employer Organization (PEO) in India

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What is a Professional Employer Organization (PEO)?

A Professional Employer Organization or a PEO is an employment arrangement, usually referred to as co-employment or HR outsourcing. PEOs simplify the HR needs for organizations by hiring and onboarding employees, administering payroll packages, ensuring compliance, and providing statutory benefits. The Professional Employer Organization operates by entering a joint-employment agreement with an employer, allowing the organization and the PEO to share the responsibilities and liabilities involved in managing the employees. 

For organizations planning to build a remote team, India is a gold mine of business opportunities as it is one of the fastest-growing economies in the world. Having one of the largest populations in the world, with the youth demographic making up more than 65% of the population, India has a rapidly expanding consumer class and a vast talent pool of tech enthusiasts. As a multilingual country known for its supply of global tech talent, the benefits of building an international remote team seem endless.

Aside from India’s complex employment laws, the processes of hiring, managing payroll, and understanding the taxation system can be challenging for organizations planning to build and grow their team in India. However, a PEO can efficiently handle these challenging processes for your organization. 

What are the benefits of using a PEO in India?

By partnering with a Professional Employer Organization in India, you can efficiently build and manage your team in India. Here are a few reasons why many organizations use a PEO in India:

  • Ensuring compliance with the employment laws: PEOs protect organizations from penalties and fines by ensuring that they remain compliant with the Indian compliant laws.
  • Payroll processing and tax filing: One of the primary objectives of a PEO is to enable organizations to manage and process their payroll efficiently. A PEO in India will ensure that the organizations’ employees are paid correctly, and taxes are processed adequately.
  • Risk mitigation: By forming a co-employment relationship with a PEO, organizations reduce the risks associated with managing a team. The PEO ensures that taxes are filed correctly, the organization complies with the Indian employment laws, specific employee-related claims are handled appropriately, and many more.
  • Provision of competitive benefits: The co-employment relationship with a PEO provides the organizations access to high-quality health insurance packages and top-tier employee benefits. 
  • Employment cost mitigation: Partnering with PEO in India will help organizations save money and time by designing an ideal recruitment process and providing strategic HR support.

By utilizing Skuad’s PEO services in India, you can enjoy the benefits of carrying out business operations in India while staying 100% compliant with the local employment laws.

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What are the differences between an EOR and a PEO?

An Employer of Record (EOR) and a Professional Employer Organization (PEO) are employment arrangements that simplify the HR needs for organizations with plans to build remote teams. However, while they provide similar services, they have key differences in their offerings. Deciding the best solution for your organization will require understanding what each of them does. The table below highlights the key differences between an EOR and a PEO.

Acts as the legal employer on behalf of the client organization. Serves as a co-employer with the client organization.
Handles all HR-related functions such as hiring, onboarding, payroll management, benefits provisions, contracts drafting, ensuring compliance, etc. Shares HR responsibilities with the client organization. The PEO ensures the client organization has more control over HR-related functions.
Allows the client organization to expand its workforce to other countries without setting up an entity. Operations are limited to states and countries the client organization is duly registered and can hire employees.
The EOR drafts contracts for employees on behalf of the organization. The client organization handles contract drafting and agreements.

Hiring in India with a PEO

India has an expansive population of over one billion. But beyond the astounding figure is India’s production of 800,000 graduates with a bachelor’s degree in 2020. This large number of annual graduates increases the talent pool from which to hire professionals in India.  In addition to being the second-largest English-speaking country in the world, it's no doubt that India is a magnet for global organizations seeking to recruit professionals, especially tech talent. 

While there are many benefits to hiring in India, building a team or expanding into a new market requires diligence and a thorough understanding of their employment laws regarding hiring. In India, the sheer size of its population is enough for the hiring process to be a tedious task coupled with cultural differences and complex employment laws. 

Therefore, Using Skuad’s PEO services in India will provide a launchpad to building a formidable remote team. The professional employer organization will give a leeway for the organization to begin operations without setting up an entity. The employee onboarding process, workers’ compensation, and adherence to the Indian employment laws will be handled by an Indian PEO like Skuad.

Payroll in India is challenging. It’s easy when you use a PEO.  

While running an organization in India, payroll processing is tedious. However, it is an important process in every organization. There are many essential components of the salary structure in India that need accounting for, which can be overwhelming for any organization singlehandedly managing their payroll processing.

In India’s payroll, the salary has several elements that make up employee compensation. These elements are the Cost to the company (CTC), Net Salary, Gross Salary, deductions, allowances, Form-16, payslips, bonus, one-time payments, etc. 

To process payroll efficiently in India, the core activities include understanding the taxable and non-taxable components of the salary, gathering the data required to run the payroll, and the data needed to validate the payroll. In addition, Indian organizations must adhere to several statutory compliance requirements; otherwise, they face heavy penalties. 

The standard statutory compliance requirements are:

  • Tax deduction at source (TDS)
  • Provident funds and ESI funds
  • Gratuity
  • Professional tax

Due to the complexities and the importance of ensuring compliance with payroll in India, it is best to allow a professional employer organization to manage payroll processing in India. Skuad’s unified platform can streamline and manage payments while automating compliance for your organization. To know more about Skuad payroll management, talk to our payroll experts today.

What a PEO in India can and cannot do for you

Allowing an external body to handle some HR responsibilities for your organization is a big decision to make. Like every big decision, it is normal to be concerned about the extent of control the PEO is likely to have. Therefore, here are a few things a PEO can do for you and what they do not have to worry about.

A PEO can

  • Ensure proper payroll management and processing for your employees. They also ensure taxes are filed properly with no errors.
  • Help with hiring and onboarding of talent to your organization.
  • Assist in reducing the cost of employment and also help in reducing risks associated with compliance with the Indian employment laws.

A PEO cannot

  • Serve as the sole legal employer for your organization.
  • Take full control of your organization.
  • Be solely responsible for hiring and firing of employees.

Businesses big and small can find value in partnering with a PEO.

Having a firm grasp of the local laws and processes involved in hiring and managing payroll is essential to building a successful team in India. Undoubtedly, understanding and implementing these processes to kickstart operations in India can get overwhelming and tedious. Therefore, it is better to work with a trusted professional employer organization (PEO) that can handle the complex processes of building a remote team in India while complying with the Indian employment laws. 

Skuad’s unified platform takes the pain from building remote teams in India and enables organizations to easily manage hiring, onboarding, payments, and compliance with local laws. Book a demo with Skuad today.

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