Outsourcing has been the hot corporate topic for the good part of a decade now. Companies, especially small-scale start-ups, seek business partners who can handle their non-business-oriented needs. Knowledge Process Outsourcing and Business Process Outsourcing are the two branches that continue to spread like a grapevine. The primary purpose of outsourcing is for companies to focus on their immediate objective-profit creation. This allows senior executives to devote their time to operational areas, directly and proportionately affecting overall organization turnover. This, in turn, keeps the employees, stakeholders, investors, and everyone involved content.

One such branch of outsourcing takes the form of a PEO – Professional Employer Organization. PEO agencies enable their clients to cost-effectively outsource managerial duties, including but not limited to Human Resource development, employee benefit programs, compensation, and related aspects, etc. In crude, laymen’s terms, a professional employer serves as an additional employer of their client’s employees. A PEO assumes employee liability to an extent too. As an independent external business, a PEO Firm may be able to cut your expenses on insurance because associate themselves with a bigger, bulk pool of employees including their other partner companies. This may give your organisation added leverage to gain less expensive coverage. Many countries like the USA and Dubai have been seeing massive developments in this field.

How does a PEO work?

First and foremost, it is pivotal to understand the machinery of a PEO. Typically, when an organization works with a PEO agency Dubai or any other country, they are co-employers of its staff and share their responsibilities. This means that the team will work for the parent organization but will work in consonance with the PEO enforced standards and thus, also be accountable to the PEO in question. Your PEO Firm may even help you recruit, hire and train employees.

There are a multitude of contract options at the company’s disposal. Depending on the nature of the selected PEO and the drafted contract, the better part of all HR duties can be outsourced. Sometimes, absolutely all HR duties are outsourced. One example of a PEO-Parent company contract is a co-employment contract. Under co-employment, the parent company holds first-manager status, and the PEO is an executive arm, i.e., a middle management level. Thus, both parties involved have a clearly defined role.

• Organization’s role: The organization is the primary employer of both its constituent employees and the PEO. Thus, the organization has authority over the PEO. It is within the organization’s ambit to keep control over employees’ operational efficiency and day-to-day targets. You are the primary employer, and you maintain authority over the hired PEO. The organization also drafts its internal structure and long-term managerial goals.
• PEO’s role: The Professional Employer Organisation will reign over the specifically mentioned employer obligations that the partner organization chooses. The PEO can be delegated authority to handle administrative tasks and their legal aspects, including but not limited to employee taxes, provident funds, etc. One of the main tasks of a PEO is to dissipate and solve employee disputes, clear any unemployment claims and handle the compensation claims.

Another contract is an ASO. An administrative services outsourcing (ASO) agreement provides the PEO to enter into a partnership with organisations that are not interested in full co-employment standards but want some outsourcing benefits.

A good PEO facilitates a reduction in employee turnover. This, in turn, increases employee loyalty and paves the way to growth, innovation, and expansion. In addition, a PEO allows a true, quality full functioning autonomous HR enabling the parent company limited liability and an overall benefit that attracts fresh talent.

PEOs work with various companies from different industries Many different types of professionals’ benefit from PEO services, including:

• Retail
• Manufacturing
• Wholesale
• Services
• Construction
• Transportation & Utilities
• Agriculture/Forestry/Fishing
• Other (public administration, finance, insurance, real estate, and mining markets).

Advantages of a PEO

There can be significant pros of a PEO, especially for a small-scale employer that may not have the breadth of HR expertise for complex functions such as stipend or the time and resources available to focus on many transactional HR functions.

The burdens a PEO can relieve from HR include the following:

• Employee benefits: A PEO enables access to a diverse range of employee benefit plans at low rates because of their status. These plans will motivate the employees and include consolidated, comprehensive benefits like healthcare, retirement savings, provident fund investment, etc. Experienced PEOs also cover many unconventional benefits like educational assistance and disability expenses.
• Remuneration: PEOs handle necessary details of payroll, including requisite documentation. This arduous task covers everything from taxes to increments to deductions. The PEO will share management reports illustrating the tiniest details with the organization, from pay stubs to accrued incomes. This aids the parent company in efficient record-keeping and maintenance.
• HR administration: PEOs predominantly handle HR and its related aspects. They provide the organization with pre-determined and researched quality standards. Further, they provide liability management, employee refresher training, manuals, verification, and even hire new onboarding. The parent company manages PEOs’ liberty, i.e., they can handle a part of the HR responsibilities or take up the whole department.
• Recruiting: A good PEO can streamline the organization’s hiring process and work with them to develop more robust, more potent job descriptions that add value to the firm. The arduous and trying process of recruitment can be, thus, outsourced. Backed by years of research and experience, a PEO can aid the organisation revise offers.
• Performance management: A PEO keeps performance in check by maintaining it at an optimal level. The PEO checks the output both qualitatively and quantitatively against rigorous, pre-determined standards. Good performance is then rightfully rewarded, and these performers are turned into company assets. PEOs provide personnel development training to work on performance enhancement which will reap returns for the organization in the long run.

Most importantly, your PEO can reduce your liability on all fronts—taxes, paperwork requirements, insurance, and equal opportunity employer (EEO) claims. You can be compliant with all state and federal laws. They bring a lot to the table, which can steer the company in a positive direction.

Conclusion

The boom in the PEO industry is relatively contemporary. This is because companies have now started tapping into this resource mine that will add to their resources and employ existing resources more meaningfully.