RussiaA PEO is a great way to unburden your team from HR functions. They handle payroll, onboarding, benefits management, and more while you retain control and share liability.
However, it’s important to note that you can’t use a PEO if you don’t already have an entity set up. And that’s where an Employer of Record comes in, allowing you to hire, onboard, and manage staff without a local office.
In this article, we look at the difference between Professional Employer Organization and Employer of Record so you can find the best solution for your needs.
What is a PEO (Professional Employer Organization)?
A Professional Employer Organization or PEO is a company that takes over some HR functions of businesses and co-employs their people. Here are some of the tasks it handles:
- Payroll processing
- Tax filings
- Employee benefits administration
- Unemployment insurance
- Compliance management
- Workers’ compensation
Benefits of using a PEO in Russia
Businesses with employees in Russia can benefit from using a PEO rather than attempting to take on all aspects of HR. Here’s how:
Compliance with labor laws
By partnering with a PEO service, your HR team no longer has to navigate the intricacies associated with complying with labor laws, tax laws, and more. They will take care of most compliance-related functions being co-employers to your workforce in Russia.
Efficient processes
The PEO will manage or automate time-consuming tasks like payroll and benefits administration, leaving your HR managers to focus on more strategic work.
Benefits
PEOs pool together multiple clients to get better rates for health insurance, retirement plans, and other employee benefits.
Employee onboarding
A PEO can help you onboard new employees and introduce them to your culture, policies, and procedures.
Challenges and limitations of PEOs in Russia
You can’t use a PEO in Russia unless you already have an entity established… But the limitations don’t stop there. Read on to discover which other challenges you might face when working with a PEO.
Compliance and legal complexities
Aspects like wage laws, working hours, and safety standards are considered shared between you and the PEO. So, if they make a mistake, you may end up facing penalties. Meanwhile, disagreements about shared responsibilities can lead to ambiguities and potential legal complications.
Management and control issues
Since your company shares operational control with the PEO, decision-making can be slowed down. For example, if you decide to bring out a new performance review system, you would need to coordinate with the PEO to ensure it aligns with their existing processes.
Cost considerations
PEOs often charge a considerable fee for their services, which can be either a percentage of your employee payroll or a flat fee per employee. Their services may also carry hidden costs like charges for additional HR support.
Alternatives to PEO: Introduction to Employer of Record (EOR)
An EOR is an excellent solution If you want to hire in Russia but don’t want to set up a local entity. Here’s a closer look at how they work.
What is an EOR?
An Employer of Record, or EOR, is a company that acts as the legal employer for your employees. You retain control over business operations and their day-to-day work but don’t have to worry about hiring in a compliant way or managing PR tasks such as benefits administration and payroll.
The main difference between an EOR and a PEO is in the amount of responsibility taken by the service. A PEO joins in a co-employment agreement with your business. Together, you share the responsibilities and risks of employee management. An EOR, on the other hand, becomes the legal employer. They handle all aspects and are also responsible for payroll, benefits, taxes, and local labor laws.
With a PEO, you must create an entity in the new country, whereas an EOR takes the stress from you.
Why consider an EOR in Russia?
With an EOR partner, you can hire in Russia without having to establish a subsidiary there. This can help you cut costs, avoid risks, test new markets, and access a wider talent pool. Here we look at some of the other major benefits.
Reduced compliance woes
EORs take the burden of compliance with Russian labor and tax laws off your shoulders. EORs in Russia boast teams of legal and HR experts who track regulatory updates and key them into your business.
Simplified management
The roles and responsibilities of an EOR are clearly spelled out. This prevents miscommunication and misalignment. You know what you need to oversee and that you’ll maintain control of your operations and employees day-to-day.
Transparent pricing
With an EOR, you always know what you are paying for and why you’re paying it, without having to deal with hidden fees or confusing wordage. Learn how Mindvalley, an edtech company, used Multiplier to hire workers in six countries, scaling without unexpected costs.
Deciding between a PEO and an EOR
While PEOs and EORs provide very similar services, they are different entities. The main factor in making a choice between the two is location. Are you in the same country as your employees? Or do you want to expand and employ anywhere in the world? Here we explore some other factors to consider.
When to choose a PEO
Work with a PEO to onboard and manage employees if you:
- Want extra control over your HR function as you scale. When you work with a PEO, you’re still responsible for managing HR tasks.
- Are looking for extensive, local support. A PEO’s comprehensive ongoing HR support can help you manage your team’s workload.
- Want to be the legal employer of your team and have a local entity in Russia.
When to choose an EOR
An EOR is a better choice if you want to expand and hire in regions outside your border without setting up a local entity in that region. Here are some more reasons why you might prefer the services of an EOR over a PEO:
- Quick market entry. An EOR can handle all the legal and administrative tasks, allowing you to hire and onboard employees without setting up legal entities.
- Retain operational control but outsource HR administration. Choose an EOR if you want to outsource responsibility for time-consuming tasks like payroll, benefits, and compliance.
- Complex labor laws. EORs are experts in local employment laws in every country where their services are available. This ensures your people are employed compliantly and that you mitigate the risk of penalties and legal disputes.
- To stand by a set budget. EORs offer clear and predictable pricing models for payroll, benefits, and compliance services. This can help with accurate cost projections and budgeting.
- To scale up or down in a new market. EORs can help you scale operations quickly If you plan to expand your workforce or your presence in different countries and markets.
- Risk mitigation. EORs assume legal responsibility for employment-related risks. This provides protection against potential liabilities and compliance issues.
How Multiplier can help
Multiplier makes compliance in Russia easy and risk-free with an all-in-one global platform that allows companies to ensure seamless onboarding, payroll, benefits, and taxes for employees around the world.
Once you choose a candidate, Multiplier will help you onboard them, handling HR tasks, including payroll. We will ensure compliance with local laws, leaving you free from legalities associated with hiring and retention in Russia.
You can start creating custom employment contracts and managing the entire workforce directly through the Multiplier platform. With just a single click, you can also set up payments in Russian Roubles to pay your employees.
Learn more about our EOR services in Russia here.
PEO vs EOR in Russia
PEO services allow your company to join in a partnership to handle HR-related functions within your business. However, if you plan to expand globally, an EOR is a better solution.
Multiplier allows you to hire across the globe, streamlining payroll, benefits, compliance, and more to save you time as you scale.
Book a demo with our experts to learn more.
