Portable Employer of Record is a term referring to a category of companies that help freelancers and independent consultants manage their businesses. A PER acts as an umbrella employer for self-employed professionals, in return for a small percentage fee on revenues earned.
As more workers take on independent work arrangements, they are faced with many challenges in self-management of their businesses, including issues like taxation, compliance with government rules and regulations, and issues such as invoicing, collection, and benefits administration.
PERs are a natural solution to meet the needs of this new independent worker segment, which today is growing rapidly and is anticipated to be 23 million strong in the next five years.
PERs function in many forms. Some simply help independent workers pay themselves under a W-2 structure. Others have morphed into more sophisticated business process outsourcing vehicles, helping independent consultancies grow by supporting back-office needs, including paying team members, working in teams, and invoicing globally, as well as ensuring the necessary vendor compliance to do big business as an independent professional. The primary benefit of a PER is compliance aspects of running a small consulting firm or solo practice. Another key benefit of a PER is time freed from administrative tasks that take away from billable time for independent workers. In each arena of independent business management, daily challenges can take hours, even days, of a consultant's valuable billable time.
How to Evaluate a PER
Independent workers should carefully evaluate companies offering back-office services including pure payroll and beyond, against a host of criteria.
The Pros and Cons of Using a PER:
Successful independent business owners and the ever-growing population of busy freelancers can all benefit from the support of a company helping to manage their back-office, freeing time to bill more projects. However, there are pros and cons to carefully consider before taking on a PER relationship.
A percentage of billings are taken, reducing a portion of income
Does not necessarily remove the burden of paying self-employment taxes, though offsets are available
Requires prompt and appropriate payment of taxes against all earned income
Does not usually allow an independent business corporate structure (there are exceptions)
Requires some form of steady work/income to offset any purchased benefits (e.g. retirement, health, dental)
Requires strict adherence to expense management and processing rules, creating oversight of expense management
If you are considering independent work, using a PER or similar business management organization can take many of the difficult initial steps out of the process, leaving you time to grow and market your practice. And established independent consulting practices often reach a point when "graduating" to a PER or broader business process outsourcing solution makes sense to help reduce overhead time on non-billable tasks.
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