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Advantages And Disadvantages Of A Professional Employer Organization


The upsurge rise in technology, coupled with the recent trend of innovation and creativity in the global market has greatly impacted the availability of jobs today. Although the rate of unemployment is not drastically decreasing, some jobs can’t just be managed by workers from a particular establishment. Thus, businesses around the world are said to be leasing out or outsourcing over three hundred thousand job positions every year.

Over the years, outsourcing has seemed to be one of the best ways companies get their works executed by skilled talents. As good as outsourcing, working with independent contractors, or hiring talents overseas may be, it is not an easy task that can be managed. Although staffing agencies and employers of record are trying their best, Global Professional Employer Organization (PEO) like WeHireGlobally provides you with the best and most secured services.

Well, since there is nothing that has pros that do not have cons, PEOs also have their advantages and downside. In this article, we’ll walk you through the description, perks, and some flaws of a PEO.

What is a PEO?

A PEO is known as a professional employer organization. It is an international organization that specializes in the onboarding of talents, mitigating risks, ensuring compliance, and help in the correct distribution of benefits for businesses overseas.

PEOs are engaged as co-employer for the company and they manage the employee’s obligations with you. Nevertheless, you have total control over other employee’s responsibilities like time of resumption, conduct at the workplace, company’s policies, etc. PEOs even assist in risk mitigation and compliance. And yes, they differ from staffing agencies whose only obligation to your company is simply to onboard talents and leave the rest to you.

The Pros of Working with a Professional Employer Organization

Due to the extensive benefits of a professional employer organization, several companies across the world have made it their first choice while seeking an employment organization to engage in. In this section, we’ll briefly highlight some of the outstanding features of the PEO.

  1. PEOs do not have full control over your company’s employees. Working with a PEO still gives you direct control over your employees. The PEO only manages part of the company’s HR duties with regards to the co-employment, compliance, and payroll duties. All other responsibilities belong to you.
  2. Unlike other employment organizations like staffing agencies, Professional employers of record largely provide you with the options of who you can hire, and who you cannot.
  3. Your employees are your employees, even if PEOs share some of the obligations with you. You have the right to decide the company’s promotion schedule, employees that are eligible to be compensated, vacation plans, etc.
  4. One of the PEO major responsibilities is the administrative management of the hired employees’ payroll taxes. With their expertise, you should rest assured of getting the best and right team onboard.
  5. When expanding to other locations like from the US to Ecuador, PEOs save you from the stress of establishing a foreign subsidiary and unnecessary registrations since they already have an existing framework with which you can work within that location.
  6. PEOs will even save you from the complications regarding workers’ comp and benefits. They give you access to the needed and relevant worker’s compensation insurance, work bonuses, and benefits, etc
  7. PEOs help with proper and 100% risk mitigation, and legal and payroll compliance.
  8. With PEO, you don’t need to update yourself with the time-to-time change in policies and regulation. PEOs are always updated with all legal and financial (taxes) obligations and regulations.

Expertise in New Markets

A professional employer organization’s expertise in foreign countries and the global market is one of the organization’s biggest advantages. For companies and businesses with global expansion plans, engaging the services of a global PEO is one of the most important decisions that can be made. This is because of the extensive availability of PEO experts across the globe. These experts are well versed with the culture, regulations, legislations, languages, etc of the new market. Their vast experience in the new market gives any company engaging their services a strong edge in the new markets.

Since they have experts and already registered establishments in the foreign markets, they will help you with legal and payroll compliances. They will make adherence and adjustment with the operating laws and regulations an easy task for you. Thus, you will be free from unnecessary penalties and lawsuits.

PEOs make your growth and expansion in the new market a quick activity since they understand the new market more than you do. They help you with a detailed market and competitor analysis, the right marketing strategies, quick integration and acceptance, etc.

The Drawbacks of Working with a PEO

Almost all good things have their disadvantages, and yes, PEO is not an exception. For startups with very small teams, engaging the services of a professional employer organization may be a wrong and needless decision, which describes one of the organization’s main disadvantages. Since PEOs are just co-employer at your company, they tend to bring confusion and disruption in HR management in the company. This is because PEOs are not designed to take full control of your HR responsibilities, they only help with the onboarding of talents, ensuring that the talents comply with the provided regulations and that they are being retained in the company. PEOs still expect you to handle some extra HR practices since their services aren’t having those coverages. A staffing agency may well be the right choice for small businesses with small teams.

With PEOs, you are not completely free of some risks and liabilities like team management. Even with a professional employer organization, you are still in charge of your employees. If you have the responsibility of delegating tasks to them, ensuring that they comply with the company’s workplace policies and regulations, proper payment of staff salaries, etc.

While engaging the services of a professional employer organization, be reminded that you still have the final say on who you want to work with, that is, you are in charge of making hiring decisions for your company.  PEOs help with the sourcing and onboarding process, not the selection and interviewing process. Employment organizations like staffing agencies will handle hiring decisions for you while you just choose from the list of talents they’ve hired.

Ultimately, PEOs are best used by companies with global expansion plans. Operating with a PEO in your home country might not be a good decision for you to make. Working with a professional employer organization that has little or no knowledge and experience in a certain market or economy can adversely affect your company. Furthermore, PEO charges might be of great concern to small businesses that can’t afford the cost of managing their HR team and a PEO.

Is a PEO the Right Choice?

While going through the perks of PEOs, you might have started making some decisions on how to engage the services of a PEO. However, you might be having a rethink right now after going through the downsides of the organization. Well, you don’t have to be confused since we are here to give you clarity and simplicity.

PEO will be the right choice for your business if you plan on expanding your business into other locations or countries. This is because of their established experience and availability in those locations. Companies that struggle with tax and payroll management, legal compliances, and/or other HR functions can engage the service of a PEO. Also, with PEOs, you still have larger control over your employees. Big organizations and vast growing businesses in the world are working with PEOs due to their amazing perks. So, make your decision now.

The Right HR Help for Your Business

Having read this article, we hope some or all of your questions about professional organizations have been answered. If you need a global PEO with an excellent job success rate and high-risk mitigation to work with, then consider working with WeHireGlobally. WeHireGlobally has coverage in 150+ countries across the globe and they have one of the best employers of record solutions globally.