“The most valuable asset of businesses is people." (Konosuke Matsushita — Founder of PEO - Professional Employer Organization still causes confusion for many people when approaching them. While developing countries like Vietnam often approach problems in a HRM direction, industrialized countries in the world have approached PEO in the late 70s.
1. Difference between PEO - Professional Employer Organization and HRM — Human Resource Management
1.1 PEO - Professional Employer Organization
An outsourcing organization is hired to complete tasks (usually in Human Resources) instead of the companies having to do the hiring themselves. PEO is considered as Co-employment. This is a contractual relationship between the employer and a Professional Employer Organization (PEO). PEO shares the responsibility of candidate sourcing with the employer, also known as their client.
In fulfilling its role, the PEO begins by entering into a contract with the business. Subsequently, it handles various tasks, including recruitment, management, administrative duties, and processing employee benefits such as salaries, taxes, insurance, etc. PEO is particularly well-suited for small and medium-sized businesses with approximately 19-20 employees, enabling them to streamline operations and enhance efficiency while keeping costs at a minimum.
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1.2 HRM — Human Resource Management
Human Resource Management (HRM) is the person responsible for organizing and managing human resources at an enterprise. Based on the development goals of the business at each time, the human resources manager will organize recruitment, management and training activities. A human resource manager must build a team of dedicated, united and long-term employees for the overall development of the unit. From there, it helps increase work productivity and brings strength, boosting business revenue.
The HRM concept emphasizes "Policies that benefit both sides will create commitment to improve organizational economic efficiency & comprehensive development of employees". Employees are now considered the key to a company's success, a special input factor and require company strategies to be tightly linked and revolve around people.
2. Why is Human Resource Management Considered Difficult and Complicated?
As the saying goes, "It is easy to navigate the river and sea; no one uses a ruler to measure people's hearts." Human beings, shaped by natural evolution and cultural development, have become incredibly complex. Each person is unique in appearance and personality, leading to different attitudes, capacities, abilities, hobbies, aspirations, working situations, and motivations. Moreover, humans are not static; they are continually evolving and developing in a dynamic relationship with their environment. The challenge is further compounded by the phenomenon of saying one thing and doing another, where thoughts and actions may not align.
3. Is Human Resource Management Described as Both a Science and an Art?
Scientificity: Human resource management draws on scientific achievements from psychological research, sociology, demography, etc., to formulate appropriate policies for individuals and groups.
Artistry: While scientific principles are necessary, the complex and varied nature of human resource management demands flexibility, often incorporating an "emotional" element. Achieving accurate sentiments requires a profound understanding of people and society, derived from practical experience.
4. Why is Human Resource Management the Responsibility of All Management Levels?
Unlike Personnel Management (PM), Human Resource Management (HRM) is no longer a bureaucratic function confined to the HR department. Achieving employee development goals necessitates collaboration across all management levels—senior, middle, and grassroots. Given the multifaceted nature of human characteristics, involving all three levels ensures the fulfillment of set goals:
Example: Determining the Tet bonus for workers in a garment factory requires coordination at three levels. The senior level establishes the program and allocates funds, the middle level breaks it down into specific plans for factories and workshops, and the grassroots level disseminates information to each employee and gathers individual needs. By involving all levels, HRM ensures fairness and timely support for those in need, ultimately enhancing the efficiency of human resource management and optimizing the company's use of resources.
Professional Employer Organization (PEO services) in Vietnam
5. So should companies partner with a PEO?
When combining recruitment with a PEO, businesses will reduce costs associated with maintaining a separate human resources department. Thanks to the PEO, businesses don't have to establish a complex employee recruitment process, resulting in significantly reduced recruitment expenses. Furthermore, businesses won't incur additional costs for internal training, business process guidance, etc. As a result, both parties will enjoy individual benefits, leading to more efficient operations.
PEO is a human resource management and recruitment solution that is quite suitable for small and medium sized businesses. PEO will help businesses cut costs and avoid unnecessary risks. However, if your business is a large enterprise with many employees, building a separate human resources department is the optimal and more effective solution.
A young business can easily make mistakes that lead to litigation. And recruiting after a "scandal" has occurred will become more difficult than ever. So, if possible, assign employee protection tasks to the PEO.
CONTACT FARO VIETNAM today for human resources recruitment services.
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