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Sri Lanka PEO: Benefits & Best Services in 2024

VERDICT: The leading Sri Lanka PEO in 2024 is Horizons. With strong talent networks and expert local support, Horizons is well-placed to support your expansion in Sri Lanka. 

Key Takeaways

  • Sri Lanka PEOs provide businesses with streamlined HR and compliance solutions in Sri Lanka.
  • Partnering with a Sri Lankan PEO allows for efficient employee onboarding and operations.
  • The top 5 Sri Lanka PEOs in 2024 are Horizons, Remunance, Skuad, Atlas and Globalization Partners

What are PEO Services in Sri Lanka?

Professional Employer Organizations (PEOs) in Sri Lanka have become key players in assisting companies with workforce management. A Sri Lanka PEO operates by co-employing staff, which means they take on the administrative and compliance tasks of employers. Businesses, both local and international, rely on PEOs for several reasons:

  • Regulatory Compliance: PEOs in Sri Lanka ensure that employment practices comply with local laws, such as the Shop and Office Employees Act No. 19 of 1954, which governs workplace standards. This alleviates the burden on companies to navigate complex legal requirements alone.

  • HR Outsourcing: Companies have the opportunity to outsource their HR tasks, including recruitment, payroll management, HR administration, and employee onboarding, to PEOs in Sri Lanka which helps streamline their operations.

  • Taxation and Payroll: PEO services handle intricate aspects of payroll, such as paystubs, benefits, and taxation for their client companies, ensuring full compliance with the local tax regulations and employment laws.

  • Strategic Focus: By managing time-consuming HR responsibilities and potential recruitment challenges, PEOs enable companies to concentrate on critical business development activities and strategic goals.

Providing a framework of stability and reliability, PEOs in Sri Lanka are vital for companies looking to grow without being overwhelmed by administrative complexities. They are particularly beneficial for overseas businesses seeking to establish a presence in Sri Lanka without setting up a separate legal entity.

Top 5 Sri Lanka PEOs

  1. Horizons: Horizons is a global PEO with strong expertise in supporting businesses to expand into new markets, including Sri Lanka. Horizons offers tailored solutions, including HR, payroll, visas, and recruitment support. Horizons is our choice for No 1 Sri Lanka PEO
  2. Remunance: Remunance is a leading international PEO with strong Sri Lanka expertise. One key benefit of working with Remunance is that they also offer subsidiary incorporation services for companies that need a separate legal personality in Sri Lanka.  
  3. Skuad: Skuad is an international PEO platform with a strong presence in Sri Lanka. Skuad handles everything from hiring and onboarding (including drafting a local employment contract) to running payroll and tax administration. 
  4. Atlas: Atlas PEO services cover payroll, HR, tax, and compliance for businesses looking to expand and hire in Sri Lanka. As the world’s leading Direct EOR, they only hire through subsidiaries that they own, unlike some other PEOs that subcontract.  
  5. Globalization Partners: As a PEO industry leader, Globalization Partners simplifies international hiring through its suite of global HR and payroll solutions.  Their services in Sri Lanka cover HR, payroll, benefits management and recruitment. 

Benefits of Partnering with a Sri Lankan PEO

Partnering with a Professional Employer Organization (PEO) in Sri Lanka allows companies to navigate the complexities of local employment seamlessly and efficiently. The following benefits underscore the strategic advantage of engaging with a Sri Lankan PEO.

1. Compliance with Local Regulations

Sri Lankan PEOs ensure full compliance with local labor laws, tax requirements, and employment regulations. Businesses can rely on the expertise of a Sri Lanka PEO to manage legal complexities and reduce the risk of non-compliance penalties.

2. Streamlined Hiring Processes

A PEO in Sri Lanka notably streamlines the hiring process, offering companies access to a wider talent pool without the hassle of navigating foreign employment procedures. This includes managing interview schedules, handling employment contracts, and ensuring timely onboarding.

3. Cost-Effectiveness

Utilizing a PEO can be highly cost-effective, as it negates the need to establish a legal entity in-country. Businesses can save on setup costs and operational expenses, allowing for a more efficient allocation of resources.

4. Focus on Core Business Functions

Employing a PEO in Sri Lanka allows businesses to retain their focus on core functions and strategic goals. By delegating employment-related tasks to the PEO, companies can concentrate on growth and productivity, entrusting the administrative and HR responsibilities to their local partner.

Statutory Requirements for PEOs in Sri Lanka

In Sri Lanka, PEOs must navigate a complex landscape of statutory regulations. Compliance with local employment laws, taxation policies, and the acquisition of necessary registrations and licenses are critical to lawful operation.

1. Employment Laws

Professional Employer Organizations operating in Sri Lanka must strictly adhere to the country’s employment laws. This includes observing regulations related to minimum wage, overtime compensation, public holiday entitlements, and mandated leave, such as annual, casual, and medical leave. PEOs are required to ensure that the contracts they manage follow the Shop and Office Employees Act and the Wages Board Ordinance, key legislations that govern working conditions.

2. Taxation Policies

When it comes to taxation policies, PEOs in Sri Lanka must manage and withhold personal income taxes in accordance with the Inland Revenue Department’s guidelines. This entails accurate computation of Pay As You Earn (PAYE) tax and timely submission of employee tax returns. Additionally, it is crucial for PEOs to stay current with any amendments or updates in the tax laws to avoid penal consequences.

3. Required Registrations and Licenses

PEOs must obtain all the necessary registrations and licenses to operate legally. This includes registering with the Registrar of Companies and obtaining a tax identification number (TIN). They might also need to seek specific industry-related approvals depending on the sector they cater to. Failure to secure these registrations could result in legal implications and hamper the PEO’s ability to offer services within Sri Lanka.

How to Choose a PEO in Sri Lanka

Selecting a Professional Employer Organization (PEO) in Sri Lanka requires careful consideration of the provider’s local expertise, legal knowledge, and the flexibility of their service offerings to ensure a successful partnership.

1. Assessment of Credibility and Expertise

When choosing a PEO in Sri Lanka, one must assess the provider’s reputation and track record. It is crucial to verify their experience in international PEO services and their ability to navigate the complexities of the Sri Lankan market. Looking at client testimonials and case studies can provide insights into their capability and reliability.

2. Understanding of Sri Lankan Employment Laws

A competent PEO must demonstrate a thorough understanding of Sri Lankan employment laws. They should be adept at managing compliance with local labor regulations, including the Shop and Office Employees Act, to mitigate legal risks. Their expertise should extend to handling work schedules, holidays, and leave entitlements with proficiency.

3. Customizable Service Offerings

Each business has unique needs; therefore, a PEO in Sri Lanka should offer customizable services. A strong PEO will provide scalable solutions ranging from payroll and tax administration to talent acquisition and HR support. These tailored services should align with the company’s specific requirements, allowing for seamless integration into existing operations.

PEO vs EOR (Employer of Record) in Sri Lanka

In Sri Lanka, businesses looking to grow their presence can benefit from understanding the roles of PEOs and EORs, which are instrumental for managing human resources and payroll functions.

1. Defining PEO and EOR

PEO (Professional Employer Organization) and EOR (Employer of Record) serve as third-party human resources solutions. A PEO forms a co-employment arrangement with a company, sharing responsibility for employees. Conversely, an EOR becomes the legal employer for tax purposes and is responsible for all compliance aspects in Sri Lanka.

2. Key Differences

  1. Employment Relationship:

    • PEOs establish a co-employment structure, meaning the original company retains some employee management tasks.
    • EORs take on the full legal responsibility for employees, making them the official employer on record.
  2. Scope of Services:

    • PEO services can be more comprehensive, including benefits administration, payroll, and regulatory compliance.
    • EORs focus on legal compliance, such as tax filings and visa applications, which is crucial for foreign companies without a legal entity in Sri Lanka.

3. Choosing Between PEO and EOR

Deciding whether to use a PEO or an EOR in Sri Lanka depends on a company’s size, the extent of its operations, and its willingness to handle employment tasks. Small to medium-sized businesses may prefer a PEO for its broad HR offerings, while companies needing to quickly onboard employees might opt for an EOR for its turnkey legal and administrative solutions.

Onboarding Employees with a Sri Lankan PEO

When a company partners with a PEO in Sri Lanka, it can streamline the onboarding process for new hires by managing contractual obligations and payroll functions efficiently.

1. Employee Contracts Management

A Sri Lankan PEO simplifies the creation of employee contracts that comply with local labor laws. They ensure that contracts cover all necessary terms including job description, compensation, and length of employment. By managing these contracts, the PEO provides a layer of security both for the local employee and the international company they work for.

For instance, a Sri Lanka PEO & Employer of Record service is integral in hiring and managing employees in compliance with the specific legal requirements of Sri Lanka, which includes the stipulation of probationary periods that vary depending on the employee’s role.

2. Payroll and Benefits Administration

A PEO also provides comprehensive payroll services, which involve calculating wages, withholding taxes, and ensuring timely payment to employees. This includes administering mandatory local benefits to ensure total compliance with Sri Lankan labor regulations.

For instance, companies can rely on a PEO for fast onboarding in Sri Lanka, including the handling of all necessary benefits and contributions that must be provided to employees according to local law.

Risks and Considerations

When engaging with a Professional Employer Organization in Sri Lanka, businesses must be diligent in their understanding of the associated risks and considerations. This includes recognizing cultural nuances, the impact of exchange rate fluctuations, and the effects of the political environment.

1. Cultural Considerations

Sri Lanka has a rich cultural tapestry that influences business practices. Organizations must respect local customs and hierarchical structures prevalent in Sri Lankan businesses. Failure to do so could lead to misunderstandings and a deterioration in professional relationships. It’s imperative that international companies work with a PEO that is culturally adept and can navigate the subtleties of the local business etiquette.

2. Exchange Rate Fluctuations

The Sri Lankan Rupee (LKR) is subject to fluctuations influenced by global and local economic conditions. Such volatility can impact the cost-effectiveness of outsourcing to a PEO. Contracts and payment agreements should be framed with attention to potential exchange rate risks, taking into account the currency risk that could affect payroll and other financial obligations.

3. Political Landscape

The political environment in Sri Lanka can affect the stability of business operations. Legislative changes and regulatory updates may arise due to shifts in the political landscape, and a PEO must stay on top of these changes to ensure compliance. Businesses should be aware of the current political climate and work with a PEO that has a thorough understanding of local laws to mitigate the risk of non-compliance.

Future Trends in PEO Services

The landscape of Professional Employer Organizations (PEOs) is rapidly evolving, driven by technological innovations and changes in the regulatory framework.

1. Technological Advancements

Technological advancements are pivotal in shaping the future of PEO services. PEOs are integrating sophisticated HR technologies such as artificial intelligence (AI), machine learning, and data analytics to enhance their service offerings. By harnessing technology, they aim to improve operational efficiency and deliver personalized services. This not only allows for better data-driven decision-making but also streamlines HR processes, making them more responsive to the dynamic needs of businesses.

2. Evolving Regulatory Environment

As the regulatory landscape changes globally, PEOs must stay ahead of new laws and compliance requirements to effectively support their clients. Emerging regulations are likely to influence how PEOs operate, especially in areas like data protection, labor laws, and health insurance. PEOs that can navigate this complex environment provide tremendous value by ensuring compliance and mitigating legal risks for businesses, thus reaffirming their role as indispensable strategic partners.

Hiring in Sri Lanka through PEO Solutions

Traditionally, international companies hiring in Sri Lanka would need to set up a local subsidiary to become a local employer and be compliant with labor and tax regulations. With a PEO solution, global companies can now hire in Sri Lanka at a fraction of the cost — saving up to 85 percent on the cost of Sri Lanka hire. 

If looking to choose a Sri Lanka PEO partner, we would strongly recommend Horizons, Remunance, Skuad, Atlas or Globalization Partners as your local hiring partner. 

FAQ

A Sri Lanka PEO provides a fast and efficient way for foreign companies to hire and onboard employees in Sri Lanka setting up a legal entity. They take care of all HR-related activities, including payroll and benefits administration, enabling client companies to focus on their primary business activities. 

Sri Lanka PEOs manage employee benefits administration in line with local regulations and cultural expectations. They can also negotiate with local providers to achieve health insurance and other benefits that are better than the statutory minimum

Travis is a global business development advisor. He has spent the last 14 years supporting business establishment and development in North America, Southeast Asia, and throughout the world. With multiple degrees from the University of Oregon, Travis currently splits his time between the US, and Bali, Indonesia. At RemotePad, Travis writes about remote work, hiring internationally and PEO/EOR business models.

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