The Role of professional employer organisation in Recruitment and Small-Medium Enterprise Development

Professional Employer Organization is a solution for small and medium-sized businesses if they want to manage recruitment, human resources and administration professionally, systematically, while not needing to hire new or train internal staff themselves. Many experts predict that in the future, PEO services will increasingly develop and reach and support more businesses. Follow the following article to better understand what is professional employer organisation.

1. What is PEO in recruitment?

In effect, a PEO becomes a co-owner in terms of human resources. It establishes an agreement that allows combining employees to help client companies solve all HR administrative work tasks at a lower cost, reducing the burden of actual employee salaries, paperwork, financial sheets and increasing work efficiency.

Professional Employer Organization or PEO is a staffing company that specializes in hiring employees. Specifically, professional employer organisation almost helps the client company “solve” the entire recruitment and personnel management process. They will sign contracts with small and medium-sized businesses, receive specific requests and then help handle some administrative functions such as payroll, tax and employee benefits negotiations, etc.

professional employer organisation

The Strengths Of professional employer organisation In Recruitment HR Shouldn’t Be Ignored

PEO’s customers are usually small and medium enterprises with about 19 – 20 employees. Meanwhile, businesses with less than 10 employees can also cooperate with PEO to save resources. The cost that the client company pays for the PEO is usually calculated as a percentage of the total number of employees.

2. Benefits of cooperating with a staffing company specializing in hiring employees

The decision whether to cooperate with PEO or not depends on many factors: Enterprise size, staff structure, funding,… However, there is a fact that cooperation with PEO brings many benefits for your business.

2.1. Cost savings in handling tasks related to employee benefits

By working with a PEO, employees within the company are grouped with PEO “colleagues” to form a larger team. This means that the professional employer organisation can provide the client company’s employees with more benefits related to insurance, benefits, and more. Furthermore, PEO plays an important role in reducing health insurance and welfare costs for companies. Partnering with PEO allows SMEs to provide their employees with great benefits without overburdening their HR department and internal human resources.

2.2. Save on recruitment costs

Because professional employer organisation will help SMEs manage a lot of paperwork related to employment, recruitment, and provide HR support, companies may not need to hire additional people to handle such tasks. Thus, the company can save costs from posting jobs to screening, interviewing candidates and training new employees.

2.3. Limit risk

In the US, more than 33% of small businesses are penalized each year for making mistakes when handling payroll. In fact, compliance with procedures and policies related to accounting, human resources, and insurance is not simple and prone to errors. Hiring staff with professional qualifications and skills can cost a business more than partnering with a PEO. Not only is it expensive, but you can’t guarantee zero risk. Meanwhile, the staff of the professional employer organisation are really professional and the PEO will be “responsible” if an error occurs accidentally.

professional employer organization services

Benefit using professional employer organisation for small size business

2.4. Save time

Running a small to medium business can be a race against time because there is always so much that a manager has to deal with on his own. Sometimes the time of day is not even enough to get the job done. However, if you partner with a PEO, your burden will be shared, so you can focus on other important tasks.

3. The role of a staffing company specializing in hiring employees

PEO helps SMEs manage different types of employee benefits, such as salary, benefits, claims and other related paperwork. PEO can help handle medical, dental and vision insurance for your employees at an affordable price.

Because small and medium-sized enterprises often have a simple personnel structure, and may face difficulties in actively recruiting, training, and assigning internal staff to manage human resource activities, cooperation with a PEO is one of the most effective options. Through professional employer organisation, you can save time searching for candidates, which can also reduce the risk of hiring the wrong person. Besides, the jobs and tasks that need to be solved will be supported to complete professionally, ensuring quality.

4. The mechanism of action of PEO

The PEO can take care of your recruiting, HR, and administrative responsibilities through a method called “co-employment”. Co-employment is an allocation and contractual sharing of some employer responsibilities between the professional employer organisation and the client. PEO helps small businesses access top benefits, supporting them the most.

The contract between your business and the PEO distributes the employer’s responsibilities. Under that contract, the professional employer organisation as the user of record will handle payroll administration and related tax payments, and provide personnel support and access to benefits and benefits while the public works. The client company is responsible for the day-to-day operations and management of internal employees.

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