What Is A PEO? (And Do I Need One?)

If you’ve ever thought about hiring outside of your home country, you’ve likely heard of a PEO. Which raises a whole new set of questions. In this short article, you’ll learn what a PEO is—and whether or not you need one to make international hires.

March 15, 2023

Key takeaways:

  • A Professional Employer Organization (PEO) acts as the employer of record for its client companies' employees, providing HR functions and compliance services.
  • Using a PEO can provide benefits such as access to a wider range of benefits options and a streamlined HR process, but may also come with drawbacks, like higher costs and reduced control over HR functions.
  • When deciding whether to work with a PEO, you should weigh the benefits and drawbacks and consider the specific needs of their business, as well as any relevant compliance considerations.
What is a PEO?

A PEO is a company that acts as the employer of record for its client companies' employees. This means that the PEO assumes responsibility for HR functions, such as payroll, benefits administration, and compliance with labor laws.

If you’re hiring people, this can be helpful: having a PEO to take care of HR & compliance abroad can make your life easier. But, it’s not always that simple…

There are some serious drawbacks to working with a PEO. For one, PEOs are expensive. In some cases, you might be paying nearly as much to your PEO as you’re paying to the contractor or employee you want to hire. And, because you have less control over the logistics, you can’t always control how HR-related processes go.

For example, the cost of using a PEO can be higher than hiring an independent contractor or full-time employee, especially when taking into account the fees charged by the PEO. Additionally, some employers may find that the level of control over HR functions is reduced when working with a PEO, which can be a concern for companies that prefer to manage these functions in-house.

In some cases, using a PEO may not be the best choice for employers. For example, if an employer is looking for a high degree of control over HR functions or if cost is a major concern, a PEO may not be the best option. In these cases, the employer may be better served by hiring an independent contractor or full-time employee.

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If you’re hiring contractors, you’re probably spending too much time on their payroll, contracts, and tax documents. Which is why we built Panther, which saves you 90% the time you spend on contractor paperwork each month. It eliminates the need for a PEO—and it’s a hell of a lot cheaper.

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