Professional Employer Organization (PEO) Services in Saudi Arabia

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SourceitHR is a PEO offering specialist inbound investment services for companies seeking multi-country operational setup, particularly in the MENA region. Headquartered in Amman, Jordan, with offices in Riyadh, Jeddah, Dubai, Cairo, Beirut and elsewhere in the region, we provide end-to-end legal, tax, human resources, and immigration solutions that enable small to mid-sized companies to establish and grow sustainable and compliant commercial presences. Our highly experienced local teams will help you strategize for long-term and sustainable success, with or without a local entity. Whatever your business goals and wherever you want to go, SourceitHR is your one-stop-shop for market entry solutions and operational support services.

What is a Professional Employer Organization (PEO) in Saudi Arabia?

A professional employer organisation (PEO) is an outsourcing firm that provides services to small and medium-sized businesses. Typically, the PEO offering may include human resource consulting, safety and risk mitigation services, payroll processing, employer payroll tax filing, workers’ compensation insurance, health benefits, employers’ practice and liability insurance, regulatory compliance assistance, workforce management technology, and training and development. The PEO enters into a contractual co-employment agreement with its clientele. Through co-employment, the PEO becomes the employer of record(EoR). As the legal employer, the PEO is responsible for withholding proper taxes, paying unemployment insurance taxes and providing workers’ compensation coverage.

Will partnering with a PEO in Saudi Arabia mean losing control of my business?

You will not lose control when you partner with a PEO. Instead, you will be given the freedom to act as you wish. PEOs simply cut through the confusion and simplify the process. You can have as little or as much control over the elements of your business as you wish. If you don’t want to perform the unpleasant task of letting an employee go, you don’t have to, the PEO can handle it. If you don’t want to make decisions about employee retention programs, no problem. However, if you do, you can. Simply put, PEO’s simply make your business stronger, safer and simpler, and more efficient.

In conclusion, making the choice to partner with a PEO will most certainly not take control of your business out of your hands. Instead, it will do exactly the opposite. In fact, some have described a PEO as an HR easy-button, or human resource easy-button. In general, you can expect help with HR and payroll, benefits, and employment risk control when joining forces with a company like ours at Consolidated Personnel Services. As a business owner, you must consider the value of your time. Are you committing too many hours towards the tasks listed above? If so, what is that time pulling you away from? When you consider these aspects, it’s easy to see how partnering with a PEO can restore control to your hands as a business owner, not remove it.

Will partnering with a PEO in Saudi Arabia affect my company culture?

PEOs can decrease employee turnover by as much as 14%? Hiring and employee retention are two areas that directly affect company culture, and, conveniently, are also two areas that your PEO can help you manage. Your employee benefits package and streamlined HR processes can have a significant impact on your current employees’ satisfaction and new employees’ interest.

From designing orientation and training to overseeing employee reviews, your PEO partnership enriches your employees’ experience while making your company more marketable to new employees who will fit into the unique culture you’ve created.

Will a PEO in Saudi Arabia help me stay compliant with the employee regulations?

The PEO becomes a “co-employer” (expressly recognized by the laws of most states) or administrative employer of the employees and, by doing so, can bring best practices, efficiencies, and savings through aggregation. Most importantly, a PEO can provide guidance that keeps its clients in compliance with the labyrinth of employment laws and regulations, and even has skin in the game. The PEO becomes a “co-employer” (expressly recognized by the laws of most states) or administrative employer of the employees and, by doing so, can bring best practices, efficiencies, and savings through aggregation. Most importantly, a PEO can provide guidance that keeps its clients in compliance with the labyrinth of employment laws and regulations, and even has skin in the game.

Are all PEOs the same?

It is safe to say that the predominant PEO business models have changed markedly in that time.  In the early years of the industry, the relationship between the PEO (or “employee leasing companies”, which was the term most often used a generation ago) was predominantly transactional.  By that, I mean that business owners simply wanted to shed most (if not all) of the employer administrative duties and the PEO seemed like a fine alternative.  And of course, with the economies of scale, PEOs were often able to secure employee benefits insurance coverage at slightly reduced rates.  Typically, one PEO payroll representative would have been assigned as the sole point of client contact.  Interestingly, many PEOs continue to operate under the same model today.

However, as the industry began to mature, a deeper focus on the Human Resource component began to emerge.  Business owners came to recognize that having a fully functional HR department at their disposal was a key component to helping their companies grow and thrive.  And for many PEOs operating today, this is the model emerging as the most popular.  Gone are the days of a single point of contact, as many PEOs provide direct client access to Payroll, Human Resource, and Risk Management professionals. 

Not all PEOs are the same the difference between them is while business models lack true industry-wide consistency, pricing models follow the same pattern.  Some PEOs offer the services in a “bundled” approach.  Generally speaking, pricing is determined by simply applying a percentage mark-up to the gross payroll amount.  This add-on covers all employer taxes, benefit plans, Workers’ Compensation insurance, other related expenses, and the PEO service fee.  This method provides the PEO client with the ability to forecast costs accurately once basic annual payroll costs can be projected.

However, what the bundled approach offers in planning, speaks little to the matter of transparency.  Today a growing number of PEOs are opting for an “unbundled” pricing method and for good reason; this is preferred by most business owners.  The big complaint we hear from clients of PEO’s with bundled pricing is that they do not know the true cost of the PEO relationship.  It’s often confusing and difficult to break out the administration fees, workers compensation fees and benefit costs.  The percentage billed includes so many pieces (some of which are variable and cap) it can be a daunting task to break out the fees.  When clients do take the time and effort to calculate the costs they are often higher than they thought.

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