Benefits of converting your freelancers to PEO before April 2022

Convert your Freelancers to PEO Before April 2022

  1. Convert your Freelancers to PEO Before April 2022

Contractors and freelancers have become a common part of a business’s remote work strategy. And while they are useful in their respective style of working, this model of consistently delegating remote work might actually be harmful for both you and the freelancer. The Indian financial year is quickly drawing to a close, and we are here today to persuade you to convert your freelancers to PEO before April 2022.

  1. Benefits of turning freelancers to PEO for the Employer
    1. The Surety of Compliance

Maintaining total compliance with the scope and model of working is solely your responsibility. It is your company that needs to be compliant. This includes proper documentation and regulatory transparency. However, freelancers aren’t technically your employees and they maintain their own ethics, documentation, and code of conduct.

This risk is yours to bear if you choose to trust that your freelancers in India are in proper local compliance. But with the PEO model of remote work, you enjoy total control over employee compliance, as your PEO partner in India handles it on your behalf with full transparency. 

  1. The Reduced Threat of PE (Permanent Establishment)

Technically you cannot hire direct employees in India without registering an entity here. The Permanent Establishment risk comes into picture when a local tax authority (in this case, the Indian Tax Authority) decides that your business has a stable and operational entity in India and therefore you are liable for corporate taxes in India.

If through your freelancers, you are earning revenue in India (for example you hire a marketing freelancer / contractor in India to market your services in India), the tax authority here can deem your business to have a permanent establishment in India.

With the PEO model of remote work, you reduce this risk considerably. 

  1. Disbursing Employee Benefits

If your HR policies have been designed to offer certain employee benefits like travel allowances, insurance coverage etc. you can bring your freelancers also into HR compliance by turning them into PEO employees.

With the PEO model, you can work with your PEO partner in India to disburse all the employee benefits which your company offers as a policy.

  1. Protecting your Intellectual Property

Freelancers are not bound by any law to turn down work from your competitors. You can tighten the screws a little with rigid contracts but there’s always the risk that upon delivering your work, the freelancer goes to work with a rival organization.

This risk of IP vanishes by converting your freelancers to PEO because the resources are now in your sole employment and they cannot accept work simultaneously with a competitor.

  1. Benefits of the PEO model for Freelancers / Contractors
    1. Availing Employee Benefits

As freelancers, resources are always dependent on themselves to create ideal working conditions, provide for internet and other resources, and pay for commuting if they have an office environment. As an employee, though, they can get these facilities as part of the employee benefits, thereby saving costs. They may also benefit from insurance coverage and provident funds.

  1. The Surety of Taxation

Freelancers or contractors are always in a tricky spot to show their incomes from the work they do. There are no fixed income heads and neither is the pay steady. By becoming dedicated employees, they can rest assured that another organization (the PEO organization, not their employer) will handle all the taxation overheads.

  1. Structured Growth

Freelancers have to be very enterprising individuals in order to keep getting work. They have to struggle to get word of mouth by referrals etc. They also have to work on several threads at once…

All of these pains are gone when the resource becomes a PEO employee. This is because they’ve now stepped into a structured growth model with a tangible path to better remuneration and challenges.

  1. Ease of Securing Loans

As we discussed before, pay is not steady for a freelancer. We’re not saying it always declines. Instead, it rises and declines depending on the continuous work. Well, banks don’t look upon such shaky income with a favourable eye. This causes problems with their rating when the time comes to secure a loan.

By becoming a dedicated employee, your PEO partner in India ensures that the resource gets an Indian Employment Letter. This boosts their chances of securing a loan along with a steady salary month on month, year on year.

  1. Why is now the right time to convert your freelancers to PEO?

The Indian Financial Year as you know runs from April to March. If you convert your freelancers to PEO model before the close of the current FY 21-22, your newly converted PEO employees in India will begin their next financial years with a clean slate. The new working model has huge taxation benefits for both you and your employees in India. 

You will also rid yourself of certain risks with this model. For instance, your organizational accounting policies can govern the salary heads while disbursing salaries. With the freelancing / contracting approach, there was only the one pre-decided amount to be paid for the work done and delivered.

Also, with a PEO employee, you can dictate the transparency levels. Otherwise, the onus of maintaining complete transparency was with the freelancer, taking tremendous control out of your hands.

You still have several days before April 2022. Now you have the resources to make an informed decision so consider converting your freelancers to PEO before April 2022 earnestly.

  1. Your PEO Partner in India

If you are sold on the idea that you should rather handle the PEO model of remote work than freelancing / contracting, the next step would be to find the right Professional Employer Organization (PEO) in India.

Our strength as a PEO agency is speedy solutioning with the perfect local compliance. Given the slight time crunch till the FY lasts, you need someone who can quickly deploy the PEO model but with the due local compliance in India.

If you need more information about our PEO services, or the employer responsibilities we undertake, reach out to us and we will revert back in a jiffy.