What is a PEO? What are its advantages and disadvantages?


A professional employer organization (PEO) is an organization that enters into a joint-employment relationship with an employer by leasing employees to the employer, thereby allowing the PEO to share and manage many employee-related responsibilities and liabilities. This allows employers to outsource their human resource functions, such as employee benefits, compensation and payroll administration, workers’ compensation, and employment taxes.

PEOs typically serve as a professional employer of their clients’ employees. The client company reports its wages under the PEO’s federal employer identification number (FEIN), and employee liability shifts to the PEO. Employers gain economies of scale by having more benefits options, sometimes at lower rates.

Depending on the PEO and the contract, a few or all of the HR functions can be outsourced. An administrative services outsourcing (ASO) agreement provides options for companies that are not interested in co-employment but want some of the outsourcing benefits.

There can be significant advantages of a PEO, especially for a small employer that may not have the breadth of HR expertise or systems capabilities for functions such as payroll and HRIS, or the time and resources available to focus on many of the transactional HR functions.

The burdens a PEO can relieve from HR include the following:

  • Benefits administration.
  • Recruiting and hiring.
  • Payroll administration.
  • Unemployment administration.
  • Workers’ compensation administration.
  • Compliance assistance.
  • Drug testing programs.
  • Family and Medical Leave Act administration.

Some of the disadvantages might include the following:

  • Loss of control of essential processes and people.
  • An outside company’s influence on your culture.
  • Diminished value of internal HR department.
  • Lack of control and security over employee paperwork.
  • A loss of institutional knowledge.
  • Security issues with the vendor’s system.
  • Resistance from employees.

What are PEO services and how does it work?

PEO services help you get the peace of mind that comes with the expertise of a full-service HR department.

PEO services take care of HR requirements such as:

Essentially, you’re outsourcing your HR burdens to a third-party but you’re still in control of managing your employee’s job functions.

Related read: Professional Employer Organisation (PEO) in Singapore | Rikvin »

5 ways PEO services can support your business during a pandemic

1. Higher revenue growth and business continuity

A reputable PEO services provider will have systems and processes in place to help its clients maintain business as usual, even during a pandemic.

Although the pandemic is chaotic and may result in lower revenue, PEO services can assist businesses in overcoming any unexpected obstacles that prevent you from paying your employees on time or preventing them from accessing and using their benefits so that you can focus on growing your business.

2. Saves time by eliminating administrative processes

Keeping up with the numerous regulatory iterations is an important aspect of human resources.
In the midst of the COVID-19 pandemic, the Singapore government enacted new legislation to assist employers and employees, such as changing regulations governing second job arrangements.

The Ministry of Manpower (MOM) also implemented Safe Management Measures (SMM) at the workplace and revised their guidelines for salary and leave arrangements in light of the COVID-19 pandemic.

The numerous amendments in employment laws and regulations due to the pandemic, make it hard for business owners to effectively manage their businesses and monitor the changes.

Therefore, PEO services would enable business owners to eliminate the administrative processes of having to monitor the changes in employment laws and regulations.

3. Enables business owners to have 100% focus on their business and customers

The time saved on eliminating administrative processes enables business owners to focus on their business and revenue growth as well as ensuring customer satisfaction during these trying times.

4. Saves money and lower employee turnover

PEO services assist businesses in saving money by implementing better hiring practices that decrease turnover.

Better hiring practices also allow businesses to attract and retain better talent, further reducing employee turnover.

5. Safeguards your employees

PEOs understand the importance of retaining the best talent and reducing employee turnover.

As a co-employer, if you use the services of a PEO, they will be invested in helping you keep your employees safe. In a crisis, this is especially important.

Guide to choosing a reputable PEO in Singapore

If you’re looking for a PEO to help you offload your HR burdens, here’s what you should do to ensure you’re getting a reputable PEO services provider:

  • Examine your workplace to see what kind of human resources and risk management you’ll need.
  • Make sure the PEO can help you achieve your objectives. Meet the individuals who will be assisting you.
  • Ask about previous clients and professional references.

At Rikvin, we can provide you with the essential PEO services and help scale your business even amid the ongoing pandemic. Contact us to learn more.What is a professional employer organisation (PEO), and what does it do?

A Professional Employer Organisation (PEO) is a corporation that provides businesses with outsourced services.A company may, for example, hire a PEO to help with management responsibilities including benefits administration, hiring, and payroll.

       Can small businesses engage PEO services?

  • Yes, with a PEO service, small businesses may quickly access staff resources and have HR specialists manage their employees for a fraction of the expense of hiring their own HR team.

How can PEO services help businesses during COVID?

  • Amid COVID-19, PEO services can help your business in these key areas:
  • Higher revenue growth and business continuity
    • Eliminate administrative burden
    • Enable business owners to have 100% focus on clients and business growth
    • Save money and lower employee turnover
    • Safeguard your employees

What is not covered under PEO services?

  • Day-to-day management of the team
    The co-employment structure of a PEO allows for a variety of activities to be delegated; however, the day-to-day operations of the company remain largely your responsibility, particularly the management of your team and their operations.
    • Legal and tax advisory
      While PEOs assist with a variety of HR-related tasks, as a business owner, you must still be informed of all applicable regulations and compliance requirements that apply to your company and employees.


complementarity assessment framework


With effect from 1 September 2023, all employers intending to hire foreigners on Employment Pass in Singapore are required to meet the new qualification known