Why Startups Should Use a PEO

Challenges of Startups

A startup business, while charged with energy, new ideas, motivation, and excitement, can still fall short of its goals given the challenges of an ultra-competitive business environment. Experts agree one of the primary struggles startups face is attracting top talent.

On the one hand, startups can encounter difficulty hiring people with the skills required to add value to their company and, on the other hand, it can be difficult to find employees that share the founder’s passion.

Another critical consideration is time and financial investment in finding the right people for your organization, which will inevitably take away from other areas of the business. Once you do the math, hiring a new—salaried—employee can cost anywhere from 6 to 9 months’ salary. For an employee making, say, $60,000 annually, that comes out to $30,000 to $45,000 in recruiting and training costs alone. This time spent on recruitment is time the organization is losing not working on the other essential operations. All costs considered, hiring can be a financially arduous and time-consuming process.

For startups looking to expand into the international realm, imagine this process taking place in another country. The complexity, costs, and headache expands by a factor of 3 across the board—conservatively. Most startups simply do not have the manpower, knowledge, resources, or expertise to juggle the challenges of an international venture as well as the associated legal environment governing the new location. This is where a PEO comes in.

Benefits of the PEO

A PEO is a dedicated, professional entity that will shoulder the vast, complex, and elusive ins and outs of an international venture.

Reduce Payroll Burden

PEOs can handle the benefits, payroll calculations, filings, disbursements, and associated acquisitions or terminations of an organization.

Stay Compliant

PEOs are perfect for a short period in another country and will enable young companies to manage the local business law in the hiring and staffing process while focusing on the other key elements of the organization.

Offer Better Benefits

A PEO can offer other critical benefits aside from providing HR services. PEOs possess the resources to offer health insurance and 201(k) plans to any new employees. With their well-developed infrastructure, PEOs can provide benefits a smaller firm could not offer on its own; this makes the startup more attractive to top talent while simultaneously lowering turnover rates.

Reduced Liability

PEOs are also equipped to assume liability by sharing the risk of employment-related legal issues. If the startup happens to run into any legal trouble regarding hiring, staffing, or employment, legal liabilities that might otherwise obliterate a new company are shared or absorbed by a PEO partnership.

Be Ready for the Next Phase of Growth

If your international business venture is successful, hiring and staffing firms are more than equipped to bring your company into the next stage of growth. While still doing the heavy lifting of your HR, accounting, and payroll services, companies like Global Upside can provide your company with end-to-end services and technology when ready to move beyond the PEO model.