What is the Professional Employer Organization?
The Professional Employment Organization in China gives the fastest, most efficient, and cost-effective way of expanding overseas. A lot of people who are only hearing about the PEO for the first time think it could be a scam because the promise sounds too good.
The reason why it can do this is that the PEO brings a lot of value to companies so it can reach global expansion, offering them a high level of flexibility. With the size of China’s economy, a lot of businesses worldwide choose to expand to China because of the opportunities it offers.
Who May Use PEO?
PEOs can be used by companies whether they do or do not have registered a legal entity in China. That means even local Chinese entities can use PEOs, and it is not only for foreign businesses.
For the local Chinese companies, they can use PEO to outsource HR and help with their administrative needs. The local companies will find it more cost-effective to use PEO to hire staff instead of doing it directly. In addition, using a PEO is cheaper than getting the services of a labour lawyer in terms of compliance.
The Professional Employment Organization in China can provide all the facilities that the local entities enjoy, and they also make the process of entering the Chinese market faster. Further, the legal entity in China is expensive, complex, and it consumes time. Most of the time, it is complex, expensive, and time-consuming to establish a new entity in China. Usually, these costs can discourage the dream of having an original opportunity. This could stop companies
Advantages of Professional Employer Organization to a Foreign Company
- It is like having an instant HR/administrative department in China
- Allows immediate expansion in China
- PEO is ideal for testing a fresh market by the reduced costs and lesser risks involved
- You can acquire expertise immediately in the important Chinese labour laws
- The issues regarding winding down and termination receive better handling considering that there are complexly involved in these issues.
How it Does the HR and Administrative Needs Activities
A Professional Employer Organization will be assigned to do all the important HR outsourcing and administrative activities that the foreign investor needs. This depends on the service agreement.
They will form a co-employment relationship. In this kind of business model, the employees are the workforce of the PEO and client. The company will have a ready-made benefit, payroll, HR, compliance infrastructure, and taxation. This way, the foreign company can put all their concentration on running the business and making profit.
The client company can do their part in the HR practices and policies, risk management support, training materials for employees, health insurance coverage, and other benefits. There are a lot of other HR and administrative needs and operations that can be done through a PEO without much effort.
Why You Should be Using PEO
You will use the correct kind of contract:
- For the ones who are not used to recruitment – When it comes to complex recruitment about transnational arrangements, and a contract may seem straightforward. For some people, a valid contract is one that lists important terms and it is signed by both parties. However, recruitment experts have knowledge that goes into choosing a contract, negotiation, drafting, and management. Moreover, it is true that most businesses that plan to expand to China would have to choose if they want a fixed-term, open-ended, or indefinite contract.
- Social Security and Social and Housing Fund Requirements Compliance – Any company in China that has employees must handle their social security and contributions in house funding. Further, China’s social security system is complex different deductions can be taken from different contribution levels in different cities. In order to comply with their legal requirements, companies need to open social security and account for house funding whenever they hire a new employee. If the employee resigns or retires, then their account must be transferred or closed by the company.
The PEO consultants can help with this.