Professional Employer Organizations, or PEOs, offer payroll, human resources and employee leasing services that empower companies to hire outside of their home countries without opening a local subsidiary. The benefits of working with a PEO are obvious: they provide expertise your company doesn’t have and keep you compliant when you hire internationally. But choosing to work with a PEO isn’t a decision to take lightly, or without an understanding of Professional Employer Organization pros and cons.
Partnering with the wrong PEO can have serious consequences, including excess fees, fines, and alienated employees. Partnering with the right one can reduce your risks and costs while boosting international employee retention. In this blog, we break down PEO pros and cons and what to look for from your PEO partner!
What Is A PEO?
Why use a PEO? Professional Employer Organizations provide a range of services to companies that make it possible for companies to hire internationally. Developing the expertise to support, hire, and payroll an international team is difficult. Not to mention the challenge of opening a local subsidiary and ensuring that your business stays compliant with local tax and employment laws. Through employee leasing services, PEOs allow companies to opt out of these administrative challenges, instead staying focused on their core business.
PEOs hire your international workers and then lease them back to you to manage their day to day. The PEO becomes your team’s employer of record, taking on the responsibility of timely and accurate payroll and tax deductions, remittances, and records. They keep your company compliant and ensure your employees are taken care of, and for that alone, PEOs are worth it!
PEO Pros and Cons
Working with a PEO offers many advantages to companies, the most important of which is being able to hire in Canada with confidence.
- No Local Subsidiary: One of the most important PEO benefits is that US companies can hire in Canada without opening a local subsidiary and registering to pay taxes. PEOs that offer employee leasing or employer of record services allow you to hire internationally without opening a subsidiary.
- Local Compliance: PEOs provide locally compliant employment contracts and onboarding to ensure that all employer obligations are fulfilled.
- Avoid Fees and Fines: Without a PEO, it’s easy for businesses hiring in Canada for the first time to fall afoul of government fees and fines. PEOs process payroll in full compliance with local tax and employment laws.
- Outsourcing Payroll: By outsourcing payroll to a PEO, businesses can take advantage of their deep local expertise in payroll and human resources, rather than struggling to build that knowledge internally.
- Cost Savings: Delivering the same or better payroll service at a lower price is one of the most important PEO advantages.
Working with a PEO provides many benefits, but there are a few PEO negatives to keep in mind. These disadvantages, though, are by no means universal to all PEOs.
- No or Few Benefits: One of the disadvantages of using a PEO is that you will have limited control over what kind of benefits you offer your employee. Many PEOs have pre-defined plans, and some choose not to offer benefits at all.
- Lack of Local Expertise: PEOs that operate “everywhere” can legally offer employee leasing in multiple countries but may lack in-country staff and expertise.
- No Account Manager: PEOs that offer a “set and forget” payroll service may not offer a dedicated account manager to you or your Canadian worker.
- Contract Minimums and Termination Fees: Some PEOs have complex fee structures designed around monthly minimums or termination fees.
How Canadian Payroll Services Does It Differently
- Local Expertise: Canadian Payroll Services operates in only one country because we are focused on delivering real expertise on Canadian employment and tax laws.
- Dedicated HR Account Managers: Every CPS client and their team is assigned a single, shared point of contact for support. Our account managers are certified HR professionals, not customer service reps or salespeople.
- Certified Payroll Practitioners: CPS offers a managed payroll solution delivered by experienced, certified payroll practitioners who work to keep you compliant.
- Multiple Benefit Plans and Options: CPS offers multiple benefit packages and options for employees and contractors alike. Our packages include health, dental, insurance, flexible spending options, and retirement savings plans.
- No Long-Term Contracts: Unexpected resignations and terminations happen. That’s why CPS contracts are designed to be flexible and severable.
- No Setup or Termination Fee: Filling key roles takes time and not every new hire works out. That’s why CPS doesn’t charge setup or termination fees.
Use A PEO Like Canadian Payroll Services
Why use a PEO? Working with a PEO is a great option for companies looking to hire internationally! PEOs take the confusion out of expanding your team by providing human resources and payroll services most companies struggle to deliver internally, and they reduce your risk of fines and lawsuits by keeping you compliant with local tax and employment laws.
When it comes to PEO services pros and cons, the benefits far outweigh the drawbacks. Although some PEOs offer limited options and lack local expertise, Canadian Payroll Services couldn’t be more different!
If you’d like to learn more about our employee leasing, payroll, and human resources services, get in touch today.