A PEO (Professional Employment Organisation) is a third-party service commonly used in the USA, where employment requirements can vary significantly between states and employee health and medical benefits must be provided.
For smaller companies, meeting all these different rules and offering benefits is too complicated to tackle on their own, and so they will contract the services of a PEO.
An IPEO (International Professional Employment Organisation) works similarly but as a global employment solution. It supports organisations in hiring employees efficiently, compliantly and seamlessly anywhere in the world, without them having to set up a foreign legal entity.
Rather than assuming the full legal employment role, a PEO company co-employs the worker alongside you. The PEO takes responsibility for the administration of the payroll, benefits, and HR support — leaving you to direct the daily tasks of the employees and focus on the key priorities that impact the business.
The PEO model offers several benefits and advantages, among them:
- Flexibility: PEOs allow clients to hire full-time employees (not contractors) risk free without having to set up a legal entity in the state or country they are looking to operate in.
- Local knowledge: Using a PEO allows employers to get a firm handle on all local laws and regulatory requirements, placing the compliance requirements and international payroll solutions in the capable hands of the local organization.
- Cost: PEO’s can save you some cost by allowing employers to hire local workers without going through the expense and hassle of setting up a local office. PEO’s will charge a fee for their services to your company and these costs can vary by PEO.
- Time: A PEO gives employers an opportunity to put workers with the relevant skills in place in a fraction of the time it takes to hire through more traditional means.