FAQs: Professional employment organization

Professional employment organization (PEO) service is one that is often misunderstood. There is often confusion between a PEO and human resource outsourcing (HRO). In this article, we answer the frequently asked questions about PEO to help you understand what is the better option for your organization.

What is professional employment organization (PEO) (or co-employment)?

Professional employment organization (PEO) is when a PEO takes on the hiring, payroll and HR responsibilities of a company’s employees. They will legally be hired by the PEO but the operational and managerial role remains with the company. This gives small and medium sized companies the opportunities to avail employee benefits that are usually only available for larger corporations.

Will partnering with a PEO mean losing control of my business?

No, a PEO will simply take on the legal, financial and human resource functions of having staff. This can include insurance, payroll, career development programs, human resources guidance and workplace safety. The day-to-day and managerial role will still be held by the company.

Will partnershing with a PEO affect my company culture?

No, the PEO will not affect company culture as they are responsible for the administrative, legal and financial aspects of having employees. If anything, the PEO will be able to provide input and advise on strategies to improve the workplace culture through their human resource expertise.

Will a PEO help me stay compliant with the employee regulations?

A PEO will help you minimise the risk associated with being an employer and will work alongside you to ensure that you remain compliant with Saudization, wage protection system (WPS) and GOSI, for example.

What is the difference between PEO and HR outsourcing?

A PEO acts as a co-employer to the company, meaning, your PEO will assume the entire HR process for your company. Whereas with a HR outsourcing (HRO) provider, you have more flexibility to pick and choose the services you would like to receive. A HRO does not legally hire your employees, rather they are more service focused and assist their clients where HR support is required.

Are all PEOs the same?

All PEOs are not the same. They are all similar in their core functions, there are a few differences that provide distinctions in the service offered.

  • Flexibility: some PEOs offer a one-size-fits-all while others customise the service to fit your organization.
  • Partnership: the level of partnership you have with your PEO will differ. Some PEOs will assist you when it comes to making decisions that affect your employees and your bottom line, whilst others purely provide their co-employment service and all other decisions are left to your discretion.
  • Location: your PEO provider may operate locally or regionally, this may affect the opportunities they can offer you.
  • Services: different PEOs offer different services. Companies should evaluate the full spectrum of services available from their PEO before deciding on a provider.