The global market size for professional employer organizations (PEOs) was valued at $53.44 billion in 2020. That figure is set to more than double over the next few years, hitting $106.21 billion by 2028.
But why are businesses around the world turning to PEO services? Because partnering with PEO companies works. A reputable PEO company can be the perfect answer to your HR needs, among other essential business tasks.
But exactly what is a PEO company? How can hiring such a company benefit your business?
Read on to learn more.
What Is a PEO?
A PEO refers to a company that enters into a joint-employment relationship with your business by leasing its employees to you to allow it to manage many of your staff-related responsibilities and liabilities. This relationship allows you to outsource your HR functions, some of which we’ll discuss further in this post.
When you partner with a PEO company, you and the PEO share employment responsibilities. You both sign a contract known as a client service agreement (CSA). The PEO assumes the role of administrative employer, while your company remains the worksite employer.
As the client, you’ll still make hiring and firing decisions. The PEO becomes the legal and tax-related employer.
Reasons to Use a PEO Company
The average PEO company can charge up to 11 percent of your total payroll expenses. However, the benefits you get from the partnership far outweigh any monetary costs, especially if you’re a small employer without enough breadth of HR expertise and system capabilities to conduct certain HR functions well.
Here are six top benefits you get from hiring a PEO.
You Enjoy Smoother International Expansion
Among the main reasons businesses hire PEOs is to help with expansion into international markets. It takes a lot to grow your business overseas, and you need to get things right to achieve your goals.
A global PEO can provide valuable guidance when it comes to such critical factors as recruiting, legal compliance, expected staff benefits, business culture, and much more.
For instance, if you intend to expand your business into Greece, a competent PEO can ensure that you recruit top talent without concerns regarding language and travel barriers.
A PEO Company Can Help with Employee Benefits
The best PEO company goes out of its way to ensure that your business can access a wide array of employee benefits. This is especially the case if you run a smaller business that wouldn’t normally access the same benefits larger corporations offer, including dental and vision insurance coverage for employees.
By aggregating the workers of multiple SMEs, a PEO has greater purchasing power, which enables it to access the same level of benefits giant companies do.
Besides the standard employee benefits that workers expect from their companies, your employees may also access such additional perks as:
- Financial benefits
- Discounts when shopping
- Discounted gym memberships
These benefits have the potential to keep your current employees happy and attract top talent to your organization.
You Stay Compliant
There are lots of areas you need to stay compliant in as an employer. These include payroll and employee tax. Working with a PEO helps ensure that you remain compliant in all of these areas.
It’s especially important to hire an experienced PEO when moving into an international market, where you may not be familiar with the requirements. The right PEO will be familiar with the laws and regulations of the overseas country you’re taking your business to and follow the right procedures to ensure compliance.
You Get to Save Money
There are many ways you can save money when you partner with a PEO. For instance, the right PEO dramatically improves your hiring processes, making them much more efficient. You no longer lose money as a result of poor recruitment processes.
A competent PEO can also eliminate the losses many businesses incur for hiring the wrong candidates. 74 percent of employers admit that they’ve made bad hires at some point. A bad hire costs your company at least 30 percent of the employee’s first-year earnings.
And because a PEO company usually groups your employees with those of other companies, you get to access better employee benefits at a fraction of the cost. These cost savings may add up in the long run.
There’s Greater Risk Protection
Each year, many small businesses are fined for tax and payroll errors that they could easily have avoided. If you’re still a new business owner, you may find it difficult to keep up with tax and payroll requirements. Some entrepreneurs aren’t familiar with the entire process of filing returns.
Things get trickier if you’re planning to move into a new market abroad, where the legislation is most likely different from what you’re used to. Instead of going about things by yourself, it’s less risky to work with a professional PEO. Such a company can help you avoid mistakes that might lead to heavy penalties.
You Get to Focus on Your Core Business
As the owner of a small business, the temptation to wear all the hats at the same time may be great. After all, you want to make sure that everything works perfectly.
But taking on many responsibilities in your business can make it impossible to focus on your core business. Why not let a PEO handle your HR-related functions while you focus on delivering a superior product?
Let a PEO Company Help You Reach the Next Level
As an entrepreneur, you want to make the best decisions on all matters regarding your employees. You want to take advantage of the best employee benefits, stay compliant on HR issues, and focus on your core business. Hiring the right PEO company can help you achieve all of this and even get to save money in the process.
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