Professional Employer Organizations: Allies in Crises (2025 Update)

Expanding your business into a new country brings exciting opportunities. However, you will also need to understand local employment laws. There will also be some navigating complex tax regulations.

Overall, managing a workforce in a foreign market can quickly become overwhelming. Plus, there’s the added task of offering competitive benefits to keep the top talent working for you and not local competition. Lastly, you should ensure your HR practices comply with local standards—all of which demand time, resources, and expertise.

That’s where a Professional Employer Organization (PEO) can make a significant difference. Acting as a co-employer, a PEO partners with you to handle key HR functions. They can manage everything from payroll processing to employee benefits management. This allows you to focus on the core operations of your business, while the PEO takes care of the intricate details.

Let's dive into what a PEO does, the benefits and drawbacks of working with one, and how it can be the ally you need during challenging times.

What is a PEO?

A Professional Employer Organization (PEO) establishes a co-employment relationship with your business. As mentioned, they provide HR services like payroll, employee benefits, and tax administration.

With a PEO, you can co-manage employee-related tasks while retaining control over your team’s daily activities. Beyond HR assistance, a PEO can help you secure better deals on healthcare and employee benefits, saving your business money.

What are the pros and cons of a PEO?

Working with a PEO can simplify managing HR tasks and offer cost-effective solutions for your business. Let’s dive into some of the key benefits you can expect when partnering with a PEO.

Shared responsibility

A PEO shares your risk and liability on tasks like payroll, benefits administration, and tax reporting. This arrangement allows you to focus on your business while the PEO handles critical HR duties.

Lower benefit rates

Since PEOs usually manage benefits for many businesses, they can get better rates for health insurance and other benefits. Overall, a PEO can helpi you lower costs and offer competitive packages.

Payroll processing assistance

PEOs can streamline payroll processing for your team, reducing paperwork and improving efficiency. They will handle payroll processing, but you still provide the necessary data and control payroll details.

Reduced costs

Hiring a PEO can reduce the need for more HR staff, lowering overhead costs. The fees for PEO services are generally more affordable than hiring in-house HR teams for these tasks.

Access to HR services

PEOs offer HR services like recruiting, training, and onboarding. These services can be especially valuable for small businesses looking to grow. They always seek to attract and retain top talent, but they don't always have the means to expand their HR department.

Drawbacks of a PEO

While PEOs offer significant benefits, they can also introduce new challenges to your operations. Understanding these drawbacks can help you make an informed decision about whether a PEO is right for your business.

Less control over HR decisions

With a PEO, you share control over employee management. This arrangement may affect team dynamics if employees feel distanced from the core company culture or operations.

Higher costs as you grow

PEO pricing can vary and may increase as your business grows. PEOs typically charge based on a percentage of payroll or a flat fee, which can add up depending on your employee count and payroll size.

Benefits of co-managing with PEOs

Partnering with a PEO can provide unique advantages, particularly if you’re a small business with limited HR resources. Here’s how co-managing with a PEO can support your business growth.

Great for small HR teams

PEOs can be an excellent fit for small businesses without a dedicated HR team. It can offer guidance on business development and market survival. By co-managing HR tasks, you can save time and focus on scaling your business.

Mitigating economic risks

During uncertain times, PEOs help you navigate economic challenges and regulatory changes. For instance, PEOs provided guidance on the Paycheck Protection Program (PPP). This can be beneficial help for businesses stuggling with applications and approval chances.

Payroll and benefits expertise

PEOs bring deep expertise in payroll and benefits administration. It can help you avoid costly mistakes and improve employee satisfaction. They can also assist in the process of recruiting and onboarding. All these can reduce hiring expenses and ensure compliance with regulations.

PEO drawbacks

Though PEOs offer large benefits, there are some challenges to consider. Before partnering with a PEO, check how well their approach aligns with your company’s values and goals.

Impact on company culture

Your company’s vision for employee experience may differ from the PEO’s approach. Open communication with your PEO partner can help address any concerns. You want to discuss all the aspects of the company culture you want to establish and ensure a seamless employee experience.

Ensuring the right PEO fit

Choosing the right PEO involves thorough research. Look for a PEO that not only aligns with your company values but is accredited and understands your industry. This ensures that your PEO partnership is both productive and aligned with your business goals.

Moving forward

Overall, a PEO partnership can provide valuable HR support and reduce costs. It can also help your business manage risks, especially in challenging times. While there may be some limitations, effective communication and alignment with a trusted PEO can strengthen your HR operations and contribute to your business’s success.

FAQ

What does a Professional Employer Organization do?

A PEO provides HR services like payroll, benefits, and compliance support to businesses, making it easier to manage employees and navigate complex regulations.

What do international PEOs do?

International PEOs help businesses hire and manage employees in other countries, allowing them to operate without setting up a local entity.

How much do PEOs charge?

PEOs typically charge based on your payroll or a flat fee per employee, which can range from $900 to $1,500 per employee each year.