Why PEO delivers

for businesses in

Saudi Arabia

Using a PEO is most suitable for

businesses of between 5 to 200

employees

Introduction

Professional employer organisation services, or the

shorter PEO as its usually called, is rapidly heading

towards being the next business trend. As more

companies expand into new markets, it's often a way

for them to improve staff benefits and administrative

processes that they would not be able to otherwise.

PEO also allows companies access to a range of support

services that facilitate business growth, expedite the

hiring process and give an increased access to expert

support.

The core services provided by PEO companies are

general across all services; payroll, HR, recruitment,

but the specialties of each have to change with each

country and understanding the local requirements are

essential to delivering successful services. Companies

need to partner with local providers to ensure that

they are tapping into this expertise and not left in the

dark without information on the local area, its licenses

and regulations and also its cultural standards.

We have seen an increase in the interest in PEO

services in Saudi Arabia as more businesses look to

expand, whether new to the Kingdom or already

established in the country and looking to grow. PEO

allows companies to meet their expansion targets

quickly with reduced risks and increased expertise.

In this white paper, we examine PEO in Saudi Arabia,

the specifics for the country including regulations and

the benefits for companies looking to utilize PEO

services.

The first steps to implementing PEO into your business

is to fully understand its meaning and the potential it

creates for your company. To examine PEO in more

detail allows companies to fully understand its benefits

and make more informed decisions.

The PEO co-employment business model connects your

workforce to a larger employee benefits and

administrative employment company. Using a PEO is

most suitable for businesses of between 5 to 200

employees as the PEO gives access to better benefits

that are usually only available to large companies as

well as provide support from a much larger teams

handling HR, payroll, recruitment, marketing or any

other function.

What is PEO?

Using a PEO is most

suitable for

businesses of

between 5 to 200

employees

The number of services that a PEO will provide has

expanded out to include talent acquisition,

performance management and training as well as the

original services of payroll, tax compliance, healthcare,

employee benefits, and local government compliance.

From an employee management perspective, the PEO is

either large themselves or groups together the

employees of many client companies, creating a large

group that results in the PEO being able to negotiate

better insurance rates and benefits for all in the group.

It also provides small to medium sized businesses with

human resource services, specifically employment or

people management related services.

For HR, PEO is successful as managing staff is almost

never the reason why the company is in business, but

it's an essential element of keeping a business running.

Rather than small companies handling the burden of

people management, distracting them from their

selling their product or service, they are able to

outsource and leave these tasks to an expert.

Marketing, research and development, go to

market strategy and IT support are all newer additions to the PEO

industry but are just as easily outsourced

Other areas such as accounting, payroll, immigration

processing, or other systems based activities, also give

companies multiple benefits from PEO such as getting

access to additional manpower, increased knowledge or

skills and software that may have not been a viable

option before. PEO enables smaller companies to take

advantage of the economies of scale that the larger

organizations have access to, maximizing resources

whilst keeping costs manageable.

Marketing, research and development, go to market

strategy and IT support are all newer additions to the

PEO industry but are just as easily outsourced as the HR

and finance elements of the business. The key element

in all areas is the expertise of the company that the

tasks are being outsourced to.

Outsourcing vs PEO vs Employer of Record

Depending which country or industry you are in, you

will hear a number of different names for what is the

same thing. All of the terms, outsourcing, PEO,

employer of record, is the action of contracting out

tasks from one company to another.

All services allow a company to quickly set up in Saudi

Arabia, establish a team on the ground, hire employees

and run regular payroll cycles without having to legally

establish the company. Employees are hired by the

company that is providing the services, in accordance

with Saudi labour laws and can be onboarded in a much

shorter time, often days for the process to be

completed. Although the person is hired by another

company, they act like an employee of the business

taking the service.

What PEO provides

PEO’s provide a number of human resources services

but is not a manpower provider or a staffing company,

even though it is common for PEO’s to provide

outsourced experts or talent acquisition services. A PEO

exists to provide its clients with services, just like any

other service provider so it does not control the day to

day management or direction of the company it is

providing the services for.

PEO provides

companies with:Increased ability to offer

competitive employee benefits

packages

Decreased risk and improved

compliance practices

Access to HR and employment

experts

Improved productivity and

efficiency

Payroll and Commission

Payments

Medical Insurance Talent Acquisition

The services usually covered under PEO are;

Employee Performance

Management

Employee Training Tax Compliance Local Government

Compliance

Talent Acquisition

The PEO can support or design the ideal

recruitment process that meets the

companies short term goals and long term

plans. It will work with companies to

develop job descriptions and either support

hiring manager through the recruitment

process or handle the talent acquisition for

the company depending on the need. The

PEO also looks at the Saudization strategy to

ensure compliance and handles the on-

boarding of new employees.

Medical Insurance

With benefit plans provided by the PEO

company, employees usually have access to

a much wider number of benefits than they

could obtain. This can include medical,

dental and vision cover, life insurance or

personal accident cover and short-term and

long-term disability insurance.

Payroll and Commission Payments

The PEO processes payroll for employees,

including managing the WPS portal and GOSI

contributions, along with payroll records,

compliance, management reports, expenses

and bonuses.

Employee Training

Many PEOs can offer training and employee

development programs mostly through

online platforms although the PEO can

sometimes provide in person or virtual

training seminars, this very much differs

from one company to another.

Employee Performance Management

The PEO supports companies through the

performance appraisals on a monthly,

quarterly or annual basis, this is especially

helpful if the company is new to the region.

In addition, the PEO will also support the

company with the KPI or reward program

including the issuing of bonuses.

The PEO also looks

at the Saudization

strategy to ensure

compliance

They also have an expert support system

without having to invest in a specialized

team or additional tech. This support system

can provide help with all areas of the

employee life cycle, including talent

acquisition, terminating employees, staff

handbooks and training and employee

retention.

A PEO should be able to manage all the HR

jobs that you would usually have to

outsource to multiple service providers,

enabling companies to spend less time

managing various vendors.

Local Government Compliance

The PEO ensures that the company stays up

to date with licence and regulation changes,

visa processing and attestations, Iqamas,

medical insurance and that new hires or

terminations are processed correctly.

The PEO service enables companies to hire

employees and run payroll in Saudi Arabia

whilst people management, including

updates to local employment regulations,

tax and compliance management, are

handled by the PEO company.

Tax Compliance

Supporting the internal finance team, the

PEO helps companies manage your tax

requirements including VAT, transfer

pricing, Zakat and GOSI through record

management, yearly tax filings, payroll

management and bookkeeping services.

Current state of PEO

in Saudi ArabiaPEO is changing both globally and regionally. With new

technologies available, the business models are

evolving from pure cost efficiency to flexible and value

adding. The need for PEO services has been growing in

Saudi Arabia with the new tech transformation giving

considerable opportunities for both providers and

beneficiaries alike.

All Middle Eastern countries are undergoing major

economic transformations and Saudi Arabia is at the

front of pack targeting non-oil growth. Recent

innovations including cloud computing, robotic process

automation and artificial intelligence that have high

added value for PEO are seeing increased interest in

Saudi Arabia as the business transformation value is

widely realized.

With the increased need for new tech around

innovative product or service provision including the

need to be continuously ‘on’ local PEO providers are

now therefore exploring the potential for disruptive

technologies resulting in talent shortages and rising

costs.

Although the UAE is the largest provider of PEO services

in the region, Saudi Arabia only slightly lags behind its

neighbor for industry revenue. In 2018, outsourcing

suppliers in the UAE and KSA earned an estimated US$

2.38 billion mainly in onshore revenues with US$1.38

billion estimated to have been earned by the UAE, with

Saudi Arabia the remaining US$1 billion.

Double digit growth (12-13% CAGR) has been predicted

by analysts over the next few years meaning that UAE

and KSA PEO providers will potentially earn over US$

4.31 billion in annual onshore revenues by the end of

2023.

Saudi Arabia is the second most popular destination for

PEO providers and is also the fastest growing. Almost a

quarter of the MENA region’s shared service centres

and most outsourcing providers are KSA-based, making

Saudi Arabia a significant emerging PEO market.

Combining this with PEO gaining significant recognition

in KSA of its potential as a key non oil industry

alongside the IT, telecom and leisure industries, there

is much room for PEO growth.

Saudi Arabia is the second most

popular destination for PEO

providers and is also the fastest

growing in the region.

The PEO arrangement provides a business with a

number of competitive advantages and allows them to

set their company up with a shorter time frame and

with reduced risk. Depending on the support required

the company gains access to a number of areas that

benefit from the local knowledge that the provider has.

The company not only can gain access to broader

employee benefit options but also to expertise on GOSI,

Zakat, the Wage Protection System (WPS) Iqamas and

visas. They can also access consulting and advice on

matters such as Saudization and its related compliance

benefits, hiring strategies, country specific talent

acquisition and corporate immigration.

How PEO helps companies

in Saudi Arabia

For any government related matters, the GRO or

government relations officer needs to be a Saudi

national, this is not always readily filled position for

companies new to the Kingdom, the PEO is easily able

to provide GRO support so that the company gets

access to the information it needs.

There are many benefits to having a PEO business

model in place which can be have a positive effect on

both the employer and employee.

PEO Clients Grow Faster

Companies using PEO spend less for more employee

benefits, services and expertise. The benefits and

services provide competitive improvements for

businesses including more ability to attract and retain

talent. By removing the HR management elements that

they are not experts at, companies are able to

concentrate on their core business and this focus

results in improved growth.

PEO employees are happier

The employees of companies using PEO services have

more access to benefits, improving their working

environment having the knock on effect of making

them more efficient and with increased productivity.

Why use a PEO?

Employees

Staff training, handbooks and

guidance

Expert employment supportAccess to comprehensive employee

benefits previously not available

Improved payroll services More efficient claim processing

Employee support for talent

attraction and retainment

Business Owners

Improved benefits for employeesExpert assistance with local

legislations (Tax, Zakat, GOSI)

Access to experienced HR

professionals

Professional support with HR

compliance issues, corporate

immigration, visas and Iqamas

Areas that create improvement for

business and employees

Next steps

Once a company has decided to partner

with a PEO, there are a number of

elements to ensure that they are the

right fit for that company’s size, goals,

and needs.

Expertise

Although an obvious one, the expertise

required to successfully consult, advise

and provide services for companies new

to Saudi Arabia is extensive. Situations

around corporate immigration,

Saudization and payroll are often

complex and local knowledge is

essential to ensure the company does

not end up in a negative situation or

facing unexpected invoices.

Partnering with a PEO is how smaller companies are able to offer more

competitive benefits, but if the PEO provider is not offering anything additional

then companies are wasting their budgets. By comparing the packages, it

ensures no resources are wasted.

Benefit plan options

Next steps

Another obvious area but setting out clear SLAs for what is expected from each party

will ensure that there are no misunderstandings about what will be performed. By

meeting with the account manager either in person or a video call, companies can ask

what the service process is and how it is handled, that then lets them plan out

internal processes.

Customer service standards

Technology

Often the PEO gives access to platform

or systems not available to the

company previously, however not every

system integrates with existing ones so

companies need to check for

compatibility in software and processes

to avoid costly clashes.

Get the PEO to provide you the details

about their clients and referrals, you

can also look for reviews online.

References

PEOs give businesses access to the Saudi market in an

effective and timely manner whilst also providing

benefits usually only available to larger businesses.

With the ever increasing interest in Saudi Arabia, the

number of companies requiring PEO services will also

increase having the knock on effect of more PEO

providers being established.

Companies will have more choice in the provider they

choose but they will also need to ensure the quality of

service as with any industry growth, lower quality

companies will increase also. Thorough research and

due diligence will protect against unexpected issues,

fines and costs and ensure a smooth business process.

Conclusion

Contact

Moon Tower 3rd Floor, 7586

King Fahd Branch Road - Ar

Rahmaniyah, Riyadh

Phone: +966 11 411 1127

Saudi Arabia

Office 3601

Jumeirah Business Centre 1

Cluster G

Jumeirah Lake Towers

Dubai

Phone : +971 4 450 8208

United Arab Emirates

Innova Pearl No 17, First Floor

5th Block Koramangala Industrial

Layout, Bangalore, Karnataka

560095

Phone: +91 080 43944873

India

4th Floor Holden House

57 Rathbone Place

W1T 1JU, London

Phone : +44 203 603 6516

United Kingdom

info@proven-sa.com

proven-sa.com