PEO outsourcing is the most cost-effective way to expand your business overseas. PEOs can help you to navigate the challenges of entering new markets while giving you enough flexibility and time to test the market before making a full-fledged investment.
If you’ve been planning to expand your company in India, hiring a PEO service provider is your best bet. This extensive guide will discuss everything you need to know about PEO outsourcing in India. So let’s begin with the basics!
Why Expand Your Business to India?
India is one of the fastest-growing economies in the world. The nominal GDP of India in 2022 is expected to cross $3.25 trillion. The services industry amounts to 54.27% of the GDP, followed by industry (29.34%) and agriculture (16.38%).
Furthermore, the Prime Minister of India, Narendra Modi, envisioned making India a $5 trillion economy by 2025. If it happens, India will become the third-largest economy in the world.
In order to fulfill the aim, the Government of India (GOI) has made several changes to its foreign direct investment (FDI) policies. As a result, it welcomes foreign companies to set up business in India.
Now that was about the economic and political outlook of expanding your business into India.
When it comes to consumers, India is the second-most populous country in the world. Although price plays a crucial role in converting Indian customers, the tide is changing gradually with the increase in the millennial population.
Let's have a look what PEO is?
A PEO is an organization that acts as a co-employer to your employees by managing employee-related responsibilities and liabilities. This means PEO services in India allow you to outsource the human resources functions, such as payroll, employee benefits, compensation, taxes, and compliance.
But, When To Use PEO Services?
PEOs offer better and more affordable benefits to your employees, a win-win situation for you, your employees, and the PEO. Furthermore, they ensure that you understand and follow the Indian labor laws to avoid fines (e.g., max 48-hour workweek, equal remuneration to male and female workers engaged in similar tasks, etc.).
That said, you should use a PEO when you
- Have set up a legal entity in India but don’t want to spend months understanding the complex labor laws.
- Don’t have experts to ensure compliance with necessary laws.
- Want to focus completely on growing your business in India and not deal with government authorities.
- Need an expert (in HR and related laws) to sail through a new market.
Why Use PEO Outsourcing in India?
As per research, companies using PEO Services are 50% less likely to go out of business. Besides, they grow 7-9% faster and have 10-14% lower turnover than those that don’t use PEO outsourcing.
India has old-age labor laws that are highly complicated. Some of them are updated but more complex. Therefore, understanding and adhering to the employment laws in India can be a nightmare for organizations.
A professional employer organization service provider in India will handle all your HR and payroll needs, including onboarding, salaries & compensation, tax deductions & filing, employee health insurance, and other compliance requirements.
In a nutshell, with PEO, all you’ve to do is supervise your employees and promote your business.
Here are some major benefits of PEO outsourcing in India.
Looking someone For Your Business Expansion?
Experienced HR Professionals Working For You
When you hire a professional employer organization in India, you will have expert HRs working for you. They have in-depth knowledge of the local laws and regulations, ensuring you meet all the requirements.
With a PEO like Husys, you and your team can focus on expanding your business in India while we manage all your payroll & HR requirements. Our Global PEO services help you stay compliant, keep accurate payroll records, and manage taxes.
Better Benefits to Your Employees
PEO service providers provide your employees with comprehensive benefits. But, at the same time, they ensure the cost of these benefits is not overwhelming.
PEOs work with numerous small and mid-sized businesses, hiring thousands of employees. As a result, they have better negotiation power with insurance providers.
A reputed PEO will also help employees understand their benefits by providing in-depth resources and enrollment tools. Many PEOs even have a contact center that answers questions regarding employee benefits.
Payroll and Retirement
Hiring a PEO in India can significantly reduce your payroll and accounting costs. You won’t have to put additional resources or invest in tools to calculate and process salaries. At the same time, they ensure corporate taxes are being paid on time.
PEOs contribute towards employees’ retirement plans, i.e., employee provident fund (EPF) in India. Depending on the state laws, they contribute towards ESIC. If an employee’s salary is less than Rs. 21,000 per month, they are eligible to avail benefits of ESIC.
HR Compliance
As mentioned above, labor laws in India are highly complex and ever-changing. Not staying up to date with HR rules and regulations that apply to your business will invite fines and penalties.
A PEO can guide and help you understand the new regulations to avoid non-compliance. This means that with PEO outsourcing, you will have access to trusted advisors who work hand-in-hand with you to help you make appropriate decisions
Protection from Lawsuits
Lawsuits can damage your business’s reputation. However, when you partner with a PEO, they share all the liabilities of employee-related claims, including wrongful termination.
No matter the issue, a reliable PEO can provide you with guidance and resources to mitigate the chances of lawsuits and potentially costly settlements
Recruiting
When you want to expand your business into India, you’d want to hire top-tier talents as per the job description. However, the problem is you might not have the time or bandwidth to hire the right talent.
For instance, placing job ads, interviewing candidates, and conducting background checks could be both costly and time-consuming.
Through a PEO, you get access to experienced recruiters who have in-depth knowledge of the Indian market. This means that you can easily hire top talent for your business while saving money and time.
PEO Outsourcing Means Peace of Mind
As mentioned previously, when you partner with a PEO, you won’t have to worry about recruitment, managing employees’ concerns, and HR administrative tasks.
This means you can get into the market faster without any worries. In addition, you will have much-needed peace of mind to focus on expanding and marketing your company in the country.
Additionally, your employees will have access to a comprehensive benefits package with a PEO. As a result, they’ll be more likely to stay with you for longer.
Besides, when all your HR services are accessed from a single source, you will better understand your human capital investment in India. This will help you create better plans for expansion in the country. Also, your employees will have a single point of contact for their queries.
What Can You Expect With PEO Service Providers in India?
Professional employer organizations offer a wide range of services. It also depends on the package you choose.
Here are some essential services that you can expect from your PEO.
Employee Benefits
- Medical, dental, and vision coverage
- Life Insurance
- Employee Provident Fund
- Personal Accident Insurance
- Short-term and Long-term Disability Insurance
- Commuter Benefits
- Educational Assistance
- Training and Development
Compliance with local laws
- Correctly reporting, collecting, and depositing taxes to state and central government
- EPF and ESIC requirements
- Management of employee-related claims
Payroll processing
- Paying employees on time
- Keeping payroll record
- Payroll management reports
HR Administration
- Assistance with job descriptions
- Onboarding employees
- Termination assistance
- Leave management
- Employee relations support
- Liability management training
- Employee verification
Performance management support
- Conduct employee performance appraisals
- Compensation resources and tools
- Understanding of average pay and appraisals in India
- Reward and recognition program design
- Incentives structure
Tip: Before hiring a PEO service provider, inquire about their services and if they charge an additional fee for add-on services.
Do you think Choosing PEO Service is a critical decision in the business expansion?
What a PEO Doesn’t Do?
While we’ve covered the benefits and services of professional employer organizations, it is worth looking at what they don’t offer (so you know what to expect and what not to).
PEOs don’t control what your employees do
Although PEOs are the official employers, they only manage employees’ payroll and HR responsibilities. However, you control their job and day-to-day responsibilities.
If you are not satisfied with any of your employees’ performance, you can discuss it with your PEO partner, and they’ll help you find the perfect replacement (as specified in your contract).
A PEO doesn’t replace your internal staff
Even when you expand into India and hire local employees, you’d want some of your permanent employees to overlook the operations. Therefore, it is worth mentioning that PEOs don’t replace your internal employees.
Instead, they help you hire local employees legally. They also provide complementary expertise, such as helping comply with local laws, administering workplace policies, and helping adapt to local culture.
Understanding the Co-employment Model
To understand how PEO outsourcing works in India, you need to understand the co-employment model.
Co-employment refers to a contractual relationship in which a company and a professional employer organization share specific employment responsibilities. As a result, co-employment reduces the costs and liabilities of an employer, especially when you’re a foreign entity.
As your co-employer, the PEO will provide information about state and central laws that might impact your business. They will also guide you on meeting those requirements to prevent legal issues.
Things to Keep In Mind When Hiring a PEO in India
There are numerous PEOs in India. To choose the right PEO service provider for your business, you need to do your homework. The first step is to determine your needs, so you know exactly what services you want before you start shortlisting companies.
Once you’ve defined your requirements, here are some questions and ideas to help you narrow down your search for PEO.
- As your business in India grows, will the PEO be able to grow with you?
- What is the contract structure and cancellation policy? Will the PEO charge a penalty if you cancel the contract?
- How experienced the HR professionals in the PEO are?
- Does the PEO have experience working with companies in your industry?
- How do they charge? Do they charge a flat fee per employee or a percentage of the total payroll?
- What kind of services will the PEO provide? Do they have customer support available?
- Does the PEO have positive reviews and testimonials?
- Has the PEO received awards and accreditations?
PEO Outsourcing vs. Other Options
There are numerous businesses that are often confused with PEOs. Here are some of them
PEO vs. HRO
HRO (Human Resource Outsourcing) is an external organization that manages your human resource functions. Although HROs manage HR and benefits-related options, you can choose the benefits independently. However, you will not get shared liability reassurance or the guidance that a PEO can provide
PEO vs. ASO
ASO (Administrative Services Organization) is a firm that offers services similar to that of a PEO. However, they handle tax and insurance fillings on your company’s tax ID and not on theirs.
PEO Outsourcing in India FAQs
Still not clear if PEO outsourcing in India is the right choice for you? Here are answers to some frequently asked questions about PEO services.
What is PEO Outsourcing?
A PEO or professional employer organization is a type of human resource outsourcing in which the service provider takes all the HR-related and payroll tasks. They also help you recruit the best talent as per your requirements. PEO outsourcing helps international companies expand their business quickly and inexpensively.
What does a PEO offer?
PEOs offer a wide range of services, including HR, payroll, insurance, benefits, and risk management, to foreign companies seeking business expansion in India. However, depending on the PEO and your plan, the exact services will differ. Therefore, it is a good idea to confirm the services before you hire a PEO.
Should you hire a PEO or simply outsource your HR?
When you outsource your HR services, the vendor will handle all the administrative tasks. However, you’re still responsible for all the outsourced work. Unlike PEO, where you work on a co-employment model, in outsourcing, the vendor won’t share employee-related risks.
How does co-employment work?
In co-employment, the PEO becomes the employer of record, handling payroll, taxes, and all other human resources-related tasks. You, the client, will control the employees’ day-to-day operations. The most significant benefit of the co-employment model is that you don’t have any employee-related risks, such as wrongful termination.
Is PEO outsourcing in India worth it?
Yes, PEO outsourcing in India is worth your investment. First, they help you with setting up your entity in the country quickly. Second, you can get started with your operations and find better talent, thanks to experienced recruiters.
We have seen that the trend of outsourcing continues to grow, and companies like yours are looking for new opportunities to streamline processes and increase efficiency. At Husys, we understand how important your business processes are, and how critical it is for you to identify the right PEO to partner with. We are excited to help, and we want to hear from you.
If you are looking to outsource or simply want to learn more about how to improve your business processes, please get in touch with us today at reach@husys.com or +91 7204012636. We would love to discuss your needs, and help to hire the right talents and establish your business without any entity in India.
