How Does a PEO Operate to Help Your Business?

The global PEO Service market size is projected to reach $1243.6 million by 2027, up from $511.5 million in 2020. Trends in the way we work and how companies are evolving and expanding mean that this accelerated growth isn’t likely to slow down any time soon. But what exactly is a PEO and why is there such demand for them ?

Simply put, a PEO—or professional employer organization—is a company that handles the administrative and legal tasks surrounding employment on behalf of a company. There are many reasons that this type of organization has become popular in recent times .

First, many people who start their own businesses are entrepreneurs and visionaries not suited to punching in numbers and processing payroll. Outsourcing these types of tasks can save untold amounts of time, money, and stress .

Another reason is that as companies expand into new international markets, formalities, legalities, and paperwork become more complicated. Global PEOs offer a solution to this problem.

But these are just some of the advantages that taking on the services of a PEO offers. To find out more about what exactly a PEO is and the benefits one can offer to your company, read on.

What Is a PEO?

PEO is a company that handles tasks such as payroll, HR, recruitment, and labor compliance on behalf of other businesses. In practice, the PEO is the official employer of their client’s employees and technically leases them out to their clients.

Client companies report their wages under the PEO’s federal employer identification number. The PEO is normally responsible for all employee liability.

PEOs are often used by small or medium businesses looking for a simple way to scale in size without having to handle the administrative tasks that come along with hiring new employees. There are many benefits to this kind of arrangement.

What Tasks Will a PEO Handle for Your Business?

There comes a time for many companies when it becomes clear that outsourcing certain functions is not only a smart idea but a necessary one. PEOs help to take the burden of many different tasks off a company. They do so while offering one point of contact, making the outsourcing process much smoother.

So, what kind of assistance can a PEO offer your business? 

• Workers’ compensation administration
• Payroll administration
• Benefits
• Human Resources
• Drug testing programs
• Unemployment administration
• Compliance
• Recruiting and hiring

Handling these functions takes a huge burden from any business. It is beneficial for businesses that are expanding into different countries. On an international level, everything from tax compliance to labor laws is completely different from one country to the next.

A global PEO, for example, will ensure that an international company is compliant in each and every country it has employees in. Considering the rising popularity of remote work and fully remote companies, this is an invaluable asset for many businesses to rely on.

How Your Business Can Benefit from Working With a PEO

Aside from the aforementioned benefit of having another company assist with a significant chunk of your laborious and often complex administrative work, there are many other advantages working with a PEO can offer.

One big plus for both employers and employees is that working with a PEO will give companies access to employee benefits they may not have otherwise been able to afford. PEOs offer economies of scale for small and medium businesses allowing them to offer their employees better and more comprehensive benefits. This, coupled with professionally handled HR, often has the knock-on effect of better employee retention.

PEOs can also help to save businesses money in many areas. They are often able to negotiate better rates with insurance companies, for example. As well as this, many administrative tasks can be performed more efficiently, which will also lead to cost savings for the employer company.

Finally, one of the biggest advantages a PEO offers—particularly on an international level—is that it offers a simple solution for a company to maintain compliance in all areas in which it operates. This can help avoid infractions and costly legal fees, two common pitfalls of expanding into unknown markets.

The Process and Challenges of Choosing a PEO

With so many crucially important tasks handled by PEOs, you will want to make sure that the one you choose is professional, trustworthy, and reliable. The process of choosing a PEO can, in some cases, be lengthy; however, a decision this big is something that shouldn’t be rushed.

First and foremost, you will need to assess your company to see what its particular needs are. What is its current state, and what is its five-year plan? You will want a PEO that is suited to your needs and able to allow for future growth, as well.

When choosing between different PEOs, it is important to vet each one thoroughly. This can involve in-person meetings, hearing from former clients, and doing your own research. A good PEO should have a positive reputation and positive reviews to back it up.

You will need to make sure that your chosen PEO is certified in the tax laws and regulations of relevant countries and bodies.

Choosing between different PEOs can be difficult, as it is a decision that carries a lot of weight for your business and your employees. Make sure to carefully weigh up the pros and cons of each after your initial assessment, as this will help clarify your decision.

The Best PEO for Your Business

If you feel as though your business could benefit from the services of a PEO, Mercans can help. At Mercans, we’re committed to providing only the best service and solutions to our clients and employees. With over 8,000 clients across 160+ countries, we have the knowledge and experience to serve you in the best way possible—get in touch today to see what we can do for you.