PhilippinesAre you looking to build and manage a team of employees in the Philippines? A Professional Employer Organization (PEO) can support you, relieving your staff of some of their most time-consuming HR tasks.
With a PEO, you can outsource a significant portion of the heavy lifting in your HR processes and get help with payroll processing, benefits administration, and compliance management, allowing you to focus more on your core business operations.
However, PEO services are not without their limitations — first and foremost, you can’t use them in areas where you don’t have an established entity. And this is where alternatives like an Employer of Record (EOR) come into play.
In this guide, we’ll explore PEO services before looking at the differences between a Professional Employer Organization and an Employer of Record to help you find the right solution for your needs.
What is a PEO (Professional Employer Organization)?
A Professional Employer Organization (PEO) is a specialized outsourcing firm that provides comprehensive HR services to your company.
Unlike traditional HR outsourcing, a PEO enters into a co-employment relationship with you. The PEO becomes the employer of record for tax and insurance purposes, while the client retains control over day-to-day operations and strategic decisions.
PEOs offer a wide range of HR services, including:
- Payroll administration
- Benefits administration
- Employee onboarding
- Performance management
- International payments
- Tax filings
- Unemployment insurance
- Workers’ compensation
Benefits of using a PEO in the Philippines
Here we look at the major benefits of using a PEO.
Streamlined HR
PEOs take over your payroll, benefits administration, onboarding, and compliance, freeing you from repetitive paperwork and administrative hassles.
HR compliance
PEOs ensure employee records and HR documentation comply with all relevant employment laws and labor regulations.
Employee onboarding
A PEO can help onboard new employees, facilitate new hire orientation, and introduce new hires to your workplace culture, policies, and procedures.
Benefits
PEOs often pool together multiple clients to negotiate health insurance, retirement plans, and other employee benefits.
Challenges and limitations of PEOs in the Philippines
While a PEO can simplify your HR functions, several challenges can arise with regard to legal responsibility because your company can still be held liable for employment-related issues.
PEOs may not always be upfront about potential cost add-ons, which can affect your budget. concerning
Here are some of the challenges you need to be aware of:
Compliance and legal responsibilities
Although PEOs help manage compliance, your company still holds some liability for employment-related issues. Misunderstandings regarding shared legal responsibilities can create ambiguities and potential legal complications.
For example, if a PEO fails to remit the correct taxes or adhere to specific labor laws, your company could be held accountable, resulting in financial penalties and legal issues that could potentially harm your company’s reputation.
Management and control concerns
Sharing decision-making authority on HR matters with a PEO can slow down processes and limit your ability to take specific actions swiftly. For example, if you decide to roll out a new system for performance review, you would need to coordinate with the PEO to ensure it aligns with their existing processes.
Cost factors
The lack of transparency during initial discussions can leave you unaware of these additional costs and impact your budget and overall financial planning.
Alternatives to PEO: Introduction to Employer of Record (EOR)
While a PEO might be suitable for some businesses, many companies prefer partnering with an Employer of Record (want to expand their operations or workforce in the Philippines.
Partnering with an EOR could be necessary if you plan to expand into a country without an established legal entity. EORs can provide tailored solutions for navigating diverse international landscapes, complex labor laws, and regulatory frameworks.
What is an EOR?
An Employer of Record (EOR) is a global workforce management service that is the official employer for your workforce in a foreign country. The EOR takes on legal, administrative, and compliance duties on your behalf, including payroll processing, tax withholding, benefits administration, and adhering to each country’s labor laws.
The EOR bears the legal responsibilities and liabilities of employment in each host country, while your company maintains control over your company’s strategic direction and your employees’ daily activities. This structure allows your business to enter new international markets without establishing local legal entities or navigating complex regulatory landscapes.
Why consider an EOR in the Philippines
There are several key advantages to choosing an EOR over a PEO. Consider these factors when deciding which option best suits your company’s needs.
An EOR assumes full compliance responsibility
An EOR is the legal employer of your employees for tax and compliance purposes. It handles all employment-related legal responsibilities, including adherence to local labor and tax laws, obtaining work permits, and ensuring regulatory compliance in any country where you have employees.
Clear and simple management structure
Your company retains control over employees’ day-to-day management and supervision, including defining roles, assigning job duties, and conducting performance evaluations. The EOR handles the legal and administrative aspects of employment.
Transparent cost structure with no hidden fees
EORs generally charge a straightforward monthly fee per employee for payroll processing, benefits administration, compliance management, and related services. In some cases, EORs may charge a percentage of each employee’s salary, but the flat fee model is far more common and offers more predictable costs.
Discover how Mindvalley, an edtech company, used Multiplier to hire workers in six countries, scaling without unexpected costs.
Deciding between PEO and EOR
Whether a PEO or an EOR is right for your business depends on your needs and circumstances. Here are some things to consider:
When to choose a PEO
Consider selecting a PEO if you:
- Want significant control over your business operations. With a PEO, you maintain control over hiring, firing, managing employees, setting workplace policies, managing performance, and shaping company culture.
- Need HR support. A PEO is suitable if you need comprehensive ongoing HR support to manage your increased HR workloads and remain compliant with employment laws as your business grows.
- Already have a registered entity. A PEO might be a good choice if your business is already registered in the countries where your employees are located.
When to choose an EOR
An EOR might be more suitable for your business if you want:
- Swift market entry. Suppose you need to enter new markets swiftly. In that case, an EOR can manage all legal and administrative tasks, enabling your company to start operations without setting up local entities in unfamiliar regions.
- Operational control with outsourced administration. If you want to control your operations while outsourcing administrative functions like payroll, benefits, and HR compliance, an EOR allows you to focus on strategic business decisions and employee management.
- Limited internal HR resources. If your company lacks the internal resources or expertise to handle the intricacies of global HR and compliance, an EOR provides a scalable solution that reduces your administrative burden.
- Navigating complex labor laws. Operating in countries with complex labor laws and regulatory frameworks can be challenging. EORs are adept at minimizing the risk of penalties and legal disputes because they are experts in local employment laws, ensuring compliance.
- Predictable costs. If you want to ensure predictable financial planning and budgeting costs, EOR services offer transparent pricing models. These models provide accurate cost projections and minimize unexpected expenses.
- Flexible workforce management. If you expect unpredictable or changing workforce needs or plan to expand into multiple countries simultaneously, an EOR provides the flexibility to quickly scale operations to support changing market demands and agile business growth.
- Risk mitigation. Suppose your company wants to minimize legal and financial risks associated with an international workforce. EORs assume legal responsibility for employment-related risks and offer robust protection against potential liabilities and compliance issues.
How Multiplier can help
Multiplier offers a comprehensive EOR solution to streamline the global employment process if you’re looking to expand into the Philippines.
When you don’t have established local entities in the countries where you want to grow, Multiplier’s single, user-friendly interface can help manage all aspects of employment, fully compliant with local labor and tax laws
We’re adept at navigating the complexities and risks of cross-border employment and comply with all local regulations to ensure adherence to country-specific labor and tax laws.
When you need competitive benefits packages that comply with regional regulations and meet your employees’ needs, Multiplier provides standard benefits across borders but allows customization to suit employee preferences.
Partner with Multiplier: Your alternative to PEOs in the Phillippines
If your company has a lean HR staff, a PEO provides a strategic advantage by enhancing your HR efficiency, reducing administrative burdens, and supporting sustainable business growth through effective workforce management solutions.
However, suppose you plan to expand internationally and lack a legal entity in the location(s) where you want to expand. In that case, Multiplier’s scalable and compliant EOR solution can empower your business to grow compliantly and confidently anywhere in the world and free your HR resources to focus on strategic planning and business growth.
PEOs and EORs can be extremely beneficial to your organization, but an EOR can help you expand into different countries without the compliance worries you might have with a PEO.
Book a demo with our experts to learn how Multiplier can assist with your global employment needs!
