What is a Professional Employer Organization (PEO)?
Business growth is dependent on a few factors. From an employment perspective, economy and human capital are most important. The economic health of a given jurisdiction contributes to enhancing overall conditions to spur educational quality, research, innovation, and more.
At the same time, the innovation factor contributes to enhancing human capital, which ultimately leads to more economic growth in a continuous cycle. Getting into a new labor market requires, then, a focus on economy and innovation.
The case for Tanzania is no different. Economically, Tanzania has shown solid economic progress in recent years, which has contributed to innovation.
Innovation-wise, Tanzania is generating innovation output that outpaces input investment — a promising prospect for international employers.
That is why bringing aboard a professional employer organization (PEO) in Tanzania is crucial. But what is a PEO?
In plain English, a PEO is a party to an employment arrangement with a client organization, or employer, who enters into a co-employment arrangement to co-manage agreed-on employment services.
That said, capturing what is best in any given labor market, including Tanzania, is not always straightforward. While understanding basic labor laws and regulations is important, it may not be enough to get an international employer through the regulatory challenges and financial burdens of doing business in a new country.
A PEO in Tanzania is, as shown shortly, invaluable, not only for capturing the best-in-market value of the labor skill base but also for conducting and growing your business in Tanzania.
What are the benefits of using a PEO in Tanzania?
The business of doing business in Tanzania, as elsewhere, involves a series of regulatory mandates, starting with Tanzania company registration. Then come the more granular details of hiring and managing employees and independent contractors.
Getting PEO services in Tanzania is a wise choice for every international employer for many reasons. Here are some of the most important.
Ensuring compliance with employment laws
Staying compliant with local labor laws is easier said than done.
If you're an international employer just entering the Tanzanian labor market, not only do you have to understand the ins and outs of Tanzania's Employment and Labor Relations Act, but you also should keep tabs on all the tax requirements, both existing and in the pipeline.
Being up to date with tax requirements and labor developments is not something to skimp on or leave until later. Failure to comply with regulatory requirements can leave you with fines and other legal trouble, and it's not good for your business's reputation.
Payroll processing and tax filing
Part of staying compliant with in-country labor laws and tax requirements is proper payroll processing and tax filing. To do so, you as an international employer need to ensure your payroll management process has compliance embedded in every step or procedure.
That means that compensation components (as discussed a bit later) must account for mandated tax withholdings such as Tanzania income tax and corporate tax — both of which require expert knowledge of the Tanzania tax rate and Tanzania corporate tax rate to avoid problems with tax calculations.
Running an international operation involves risks.
From an employment perspective, risk includes such liabilities as employment costs (discussed shortly), employee claims, regulatory requirements, and employee or independent contractor misclassification.
Hedging against employment risks, existing or potential, is a wise move, not only to be better prepared but to avoid the cost and hassle of penalties.
Provision of competitive benefits
International employers entering Tanzania's labor market are presumably doing so in the hopes that their business will be rewarded. As an international employer, you want to maximize the return on your investment in the human capital you attract and retain as part of your business.
A one-size-fits-all benefits package could be a terrible choice in a labor market that is foreign to you. For a skill base that's out of your jurisdiction, your benefits, working perfectly well for your in-jurisdiction talent, may be of little value.
In addition, talent beyond your home labor market may want different, additional arrangements or perks to stay. However, trying to provide "unique" competitive benefits packages is not an option, since you don't want failed experimentation to damage the loyalty of your best workers.
Having an established PEO solves these benefit problems. Not only does a PEO provide you with expert advice on the best benefits package for each worker benefits package, but it also scales your packages to optimize your investment and attract best-in-market talent.
Employment cost mitigation
Managing employment costs can be difficult. Many employers fail to even come close to capping their costs at a manageable limit, especially when operating in jurisdictions with which they are not familiar.
Partnering with an established PEO helps you as an international employer keep labor costs down. And if you're hiring a PEO that understands both your business and local labor markets, then your employment costs are optimized over the long run.
In Tanzania, the recent presidential approval of raising the minimum wage by 25% is a requirement that an established PEO can help you meet so that you can pay your workers fairly and compliantly while your business continues to thrive.
Using Skuad's industry-defining solutions for everything PEO is your gateway to full compliance in Tanzania.
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What are the differences between an EOR and a PEO?
Tapping into a local skill base, international employers have multiple options. Two options, or employment services, are particularly relevant here:
- PEO in Tanzania
- Employer of record in Tanzania
Despite being similar in some ways, a PEO and an EOR ( employer of record) have some fundamental differences:
Hiring in Tanzania with a PEO
Getting a foothold in Tanzania's labor market is much easier with access to the expertise of an established PEO.
Tanzania's population of university graduate students has been rising in recent years, up to 54,810 graduates in 2021. With a business major second (11,452) only to education (14,050) in the number of graduate students, Tanzania's graduates are market-ready.
Using Skuad's unmatched PEO services, you as an international employer will be able to find the right candidates, within your hiring budget and with a guaranteed return on human capital investment.
Payroll in Tanzania is challenging. It’s easy when you use a PEO.
Payroll processing and management are complex enough not to be left to chance or experimentation. For an idea of how much is involved — and at stake — in managing payroll, consider payroll components.
In addition to statutory salaries or wages calculated in the compensation packages of employees or independent contractors, employers need to account for mandatory withholdings such as social insurance, medical insurance, allowances, year-end benefits, and more.
You don't need to spend much time to know how payroll management can spiral out of control as you sort out what to include or not in payroll as taxable and non-taxable components.
Instead, reach out to us at Skuad to streamline your payroll activities automatically, compliantly, and quickly.
What a PEO in Tanzania can and cannot do for you
Outsourcing HR functions under a PEO arrangement isn't a wholesale solution for every single task. A PEO can and cannot do certain activities.
A PEO can:
- Manage payroll, tax filing, and reporting in accordance with local labor and tax laws
- Support hiring and onboarding activities to attract and retain best-in-market talent
- Manage costs and minimize employment risks
A PEO cannot:
- Be an employer's legal representative in managing employment services
- Control an employer's HR function or organization
- Be solely responsible for employing workers
Businesses big and small can find value in partnering with a PEO in Tanzania.
The business of employment is complex, risky, and costly. At this point, you must know how unpredictable the employment process could be in Tanzania if you decide to go solo.
Take no chances with making the most of in-country talent and benefits — partner with a PEO so you know you've got high-quality local skilled workers in Tanzania. Getting help from Skuad saves you all the hassle and wasted resources involved in making employment ends meet.
Skuad is your go-to partner in everything employment in Tanzania. Talk to us at Skuad so we can help grow your business in Tanzania by hiring best-in-market talent.