The Benefits of Using a Professional Employment Organization

Emily Lombardo - Jan 24 2023
Published in: Global Workforce
| Updated Apr 27 2023
A professional employment organization could be a conduit for attracting and retaining foreign talent while streamlining employee benefits and the immigration process.

Attracting top talent is more important than ever. However, the current conditions for an international relocation to the U.S. are difficult, especially for smaller companies and organizations. Both the green card visa and the H-1B work visa can be difficult to obtain. A professional employment organization (PEO) could be a conduit for attracting and retaining foreign talent while streamlining employee benefits and the immigration process.

Since 2014, the weighted median processing time for all green card applications increased by 80%, and the backlog is predicted to take years to clear. Before the start of the COVID-19 pandemic exacerbated the green card visa backlog more, the Cato Institute estimated that Indian nationals with advanced degrees could be waiting up to 150 years for their green card visas. H-1B visas are capped at a quote of 85,000 per year, but in March 2022, employers submitted 483,927 registrations for H-1B visas. Workers are needed, but with the current limits on the immigration system, companies must look for other options.

A third-party PEO acts as the employer of an individual and takes on the responsibility of tax implications, human resources, payroll, and benefits while the original company handles the employee’s day to day responsibilities. ADP and Paychex are two internationally recognized examples of a PEO. There appear to be benefits associated with using a PEO beyond convenience for small or mid-size organizations, too. Research by economists Laurie Bassi and Dan McMurrer for the National Association of Professional Employer Organizations shows that small or midsized businesses that used a PEO have grown 6% since 2020 (while other businesses declined by 1%) and see a return on investment in cost savings of 27.2%.

PEOs aren’t necessarily right for every business, but a PEO can be used to great effect in two major ways: creating employee benefits packages and simplifying a company or organizations’ immigration procedures for hiring international talent.


Domestic PEOs for HR Benefits and Compliance

This could be used to offer benefits that small or mid-sized companies would not be able to offer their employees because PEOs can be used to offer employees health insurance, dental insurance, workers comp, and other HR-related benefits. PEOs can also be responsible for retirement savings programs and work as the sponsor of a 401(k) retirement program for employees.

PEOs also are responsible for payroll and make sure that the companies they work with are up to date and compliant with the most recent regulations—something that might be not within a HR generalist’s expertise.


International PEOs for Relocation and Immigration

With the current visa backlogs and no improvements in sight, U.S. companies are struggling to bring in the foreign talent they need. A PEO can take on the brunt of an employer’s immigration work. As the PEO would take on all human resource-related responsibilities, they would be responsible for employee’s visa applications, management, and all of the tax implications associated with the move.

The move doesn’t have to be inside the U.S., either. Companies can use international PEOs in order to create a workforce internationally. An international PEOs allow any company to take advantage of a remote workforce and expand globally. An International PEO works as Employer of Record which means, just like a domestic PEO,  they act as the third-party employer for the workforce and take on all employer-related responsibilities. The PEO will be based in the country where the original companies wishes to expand into or start hiring local talent rather than where the company is head quartered. Using a PEO instead of hiring foreign talent as contractors can minimize company liability. As the PEO is a local organization equipped to deal with employees, they also maintain full compliance with international and local labor and tax laws for the employees.

An international PEO can be used almost anywhere in the world and many PEOs advertise help expanding in up to 170 different countries globally. In particular, Canada has been using PEOs to bring in international talent with great success. Research from Statistics Canada shows that migrants to Canada account for approximately 80% of the labor force growth from 2016 to 2021, allowing the country to account for talent shortages. In Canada, using a PEO in conjunction with the Canadian government’s Global Talent Stream means that U.S.-based companies and organizations can keep their foreign employees hired and working from Canada. Canadian work permits can be issued within two weeks of applications, and the path to achieve permanent residency in Canada is considerably easier than the U.S. for foreign talent. The U.S. company also has no requirement to open a satellite office or branch office within Canada in order to take advantage of the global talent stream, as they would be working with a Canadian PEO.