What is a PEO?
PEO is normally a third party contracted to administer all official employment undertakings. It provides small and midsize businesses with a range of human resources services. Small businesses have access to PEO services based on the business’s needs. An Employer of Record (EOR) company or a Professional Employment Organization (PEO) company is a very useful tool for businesses who are unable to hire employees in another country or do not prefer to hire employees directly. The other common terms to refer to a PEO company includes employee leasing, labor dispatching, talent dispatching or employee outsourcing.
In China, a PEO company is also referred as a Foreign Enterprise Service Company. The services of such companies focus on providing labor dispatching services to companies who do not have any legal presence in China.
Any labor dispatch arrangement in China can be broken down into three main parts:
- Client – The overseas registered company in need of doing business in China.
- Employee – The professional/representative of the client who is to be hired in China on behalf of the foreign client.
- The PEO company/Employee Leasing Company – This is the licensed in-country company which is authorized by the overseas registered client company to hire the client’s employee on its behalf. The PEO operates as the client’s official service provider and supports the client in all administrative tasks in China.
Generally, there is a service agreement signed between the PEO company and the foreign client. There is also a 3 Parties Agreement involved that binds all the above 3 Parties together and specifies the rights and responsibilities of each party.
Important points to know before choosing a PEO
If you’re looking for solutions to your HR arrangement, you are probably somewhat familiar with the PEO structure. You know what a PEO can generally do, but maybe you’re still asking that basic question: Is a PEO right for my company?
There are three important things for considering whether PEO is a suitable one or not.
1. PEO delivers the results that clients require
This is the most important point for considering a PEO. Although service offerings are important, the bottom line is: will the PEO deliver results and value for my company?
Here are several ways that a PEO will add value in addition to improving your HR department.
- Safety and strategic processing
Effective safety procedures can avoid injury, reducing workers’ compensation claims and insurance costs. A good PEO will also help you solve compliance problems and provide strong support on legal part.
- PEO Tools and Resources
PEO companies generally focus on the human resources part of a business. These companies usually have the related software’s, tools and resources in place to make the workflow smoother. Examples of such tools and resources are payroll systems, labor cost calculators, data tracking and analytics tools, Employee engagement and Employee retention strategies etc. Working with a PEO certainly saves on the cost of developing in-house team and purchasing new technology
- Business development
If you’re ready to scale your business, a PEO can provide the support you need to take that next step. No business owner can single-handedly manage everything. A PEO company may be the best solution especially when your labor force is growing.
- One-Stop Service
Some experienced service providers like HROne also assist its foreign clients with associated services like Invoicing Service or Office Space Rental Management Service in China, where they facilitate to provide its clients not only with PEO/Employment but also other services that they may need in China.
2. The PEO culture fits the client company
How does the PEO work with clients? Do they have professional consultant you could contact in case of queries? Do they respond to you on time? In what ways do they communicate and does that match your way of communication? What technology do they use? List all the questions like these is a good idea to check whether the PEO company’s work style will be a good fit for your company.
3. The right price
PEO service structure varies with each company, and there are some different types of cost structures and plan options you can choose from. Itis important to understand how the pricing structure works, and for that you need to see an unbundled quote. Generally, for Talent Dispatching service, companies charge a flat rate per employee per month or a certain percentage of the total payroll amount. However, it is quite common for these companies to also charge a dispatching deposit as they take the employer liability on behalf of the foreign client. This is, of course, over and above the total employer cost.
How HROne can be beneficial to your business
HROne has more than 13 years of robust experience in Chinese Labor Law and is committed to ensure the highest level of compliance standards for our clients. HROne helps you to safely and legally hire employees in China, where a direct employment contract is not desired or feasible or where a company does not have a legal entity in China through Employee Leasing/Talent dispatching Service.
In extension to Mainland China, HROne also provides service in Hong Kong and Taiwan. HROne fulfills all essential responsibilities as that of a legal employer for employee’s termination aspects and also provide legal consultation service.
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